Skip to comments.Bars, Restaurants Could See 280 Percent Increase in Costs With Minimum Wage Ballot Proposal
Posted on 03/03/2014 10:20:22 AM PST by MichCapCon
A group working to substantially increase Michigan's minimum wage says doing so would not likely lead to job losses or higher prices. But restaurant and bar owners disagree.
The coalition, Raise Michigan, is working to increase the minimum wage for all workers from $7.40 to $10.10 per hour over a period of three years. Currently, all Michigan workers are required by law to make at least $7.40 per hour, but tipped workers are allowed to be paid a base wage of $2.65 provided their tips take them over the minimum. If they do not, their employer is required to make up the difference.
Going from $2.65 per hour to $10.10 is a 280 percent increase for some employees, which restaurant managers say would be hard to take.
Paola Mendivil is a general manager and server at her family's restaurant, El Granjero Mexican Grill in Grand Rapids.
"[Some] tipped employees will obviously be happy about it, but there will be a negative impact," Mendivil said. "We might have less employees or reduce the hours they work [to] a part-time schedule."
Scott Parkhurst, an operating partner with Restaurant Partners Inc., which runs 17 businesses including the Omelette Shoppe in Traverse City and Boone's Prime Time Pub in Sutton's Bay, said the average wage of their tipped employees is closer to $15 per hour than $10.
"This [hike] would be potentially devastating to the industry," Parkhust said. "It would definitely discourage new business growth. There are a lot of people who wouldn't survive. The margins are already so thin."
He said he thinks restaurants would be more likely to change their business model, becoming buffets or adapting in ways that require less staff.
Frank Houston, head of the Restaurant Opportunity Center-Michigan (ROC), is helping run the ballot campaign to increase the minimum wage and he disagrees that there would be much of a negative effect. He said the tipped hourly wage would be raised 85 cents a year to transition the cost to businesses.
"We understand it's a dramatic change for how [bars and restaurants] traditionally pay employees," Houston said. "[But] when other states did this, they did not see a dramatic dip in small businesses or a dramatic [increase] in unemployment."
Houston said this is "not unprecedented" and pointed to other states that do not make exceptions for tipped workers. He said it is problematic for tipped workers to have to go back to their employers when they make under the legislated minimum.
Tim Barr, the owner of Art's Tavern in Glen Arbor, said he thinks the proposal would put restaurants and bars on a more level playing field, but would lead to an increase in prices.
"We would strive to keep the employees we have, as we have the right amount of employees for the business we have," he said. "If there is a business downturn because of the need to increase the price on menu items, we would most likely have to decrease the amount of employees we employ year round."
Among the states with the highest mandated wage floor, Oregon and Washington do not allow exceptions to their laws for tipped workers while Vermont, Connecticut, New Jersey and Illinois do. Only seven states do not make exceptions for tipped workers.
If the ballot proposal were to pass, Michigan would have the highest minimum wage in the nation.
According to the Bureau of Labor Statistics, the average pay of tipped workers is about $10 per hour nationally and $9.50 in Michigan. The National Restaurant Association says this amount "greatly underestimates" the actual earnings of servers, which their survey data shows to be $16 per hour for entry-level workers to $22 per hour for experienced servers.
Previously, employees were asked their wages excluding tips by the BLS, said Katie Laning Niebaum, director of communications and media relations with the association. This was changed a few years ago when the survey began asking for both wages and tips.
"[T]he [government] data has never reflected an uptick in the numbers that would be expected with this change in the survey methodology," she said. "[T]he BLS field economists are aware of this situation, and they are currently working on a solution."
The ballot proposal language for Raise Michigan was accepted Wednesday by the state Board of Canvassers. The group will have to collect 258,088 signatures by May 28 to place the proposal on the November ballot.
A working paper from professors Joseph Sabia of San Diego State University and Richard Burkhauser from Cornell University suggests that increasing the minimum wage is a poor way to deal with the problem of poverty.
Analyzing Census data, the professors show that, "Under 15 percent of workers who would be affected by a $10.10 federal minimum wage live in poor households. Nearly two-thirds live in households with incomes of over two times the poverty line and approximately 40 percent live in households with incomes over three times the poverty line."
The same applies to Michigan, Sabia said.
"In contrast to the myth that a common minimum wage worker is a poor single mother head-of-household struggling to make ends meet, the typical minimum wage worker is actually a second- or third-earner in their 20s from a non-poor household," Sabia said. "Thus, the increase in the minimum wage in Michigan is unlikely to appreciably affect poverty because most poor individuals will not be affected by it."
Sabia added that the consensus of the economic literature suggests that every 10 percent increase in the minimum wage is associated with a 1 percent to 3 percent decline in low-skilled workers.
"This could suggest that the 36.5 percent increase in the minimum wage (from $7.40 an hour to $10.10 an hour) in Michigan would reduce low-skilled employment by approximately 4 to 12 percent," he said.
Just abolish the minimum wage for tipped employees and make them pay the normal minimum wage too
What is a ‘bar’? What is a ‘restaurant’? I seem to remember something like that but haven’t been inside one for years. I cannot afford it.
tipped workers are allowed to be paid a base wage of $2.65 provided their tips take them over the minimum. If they do not, their employer is required to make up the difference.”
...Good Lord! Penalize the employer because business is bad?! Or because the server isn’t so courteous or prompt?
The liberal restaurant owner in Ann Arbor who wants to raise the minimum wage isn’t supporting it out of love for his fellow man. He’s supporting it because he knows it will drive competition out of business.
Its nice that he can pay his employees $15 and hour and I support his right to do so but he needs to keep is liberal mouth shut about how others run their businesses. I wonder how long his high paid employees will be happy making the new minimum wage that rose to their level.
I’ll be standing on the sidewalk laughing at him as his employees start demanding $20 or $25 per hour.
“...provided their tips take them over the minimum. If they do not, their employer is required to make up the difference”
What in the world could prevent them from under-reporting?
That’s what I always wondered. I mean, if you work hard to get 20% more than the minimum wage, the and the person at a higher position gets paid 40% of the minimum wage, and so on, won’t everyone else on the chain just demand they get paid the same amount in proportion to minimum wage?
A planned and regulated economy. It’s more fun.
D.C. crowd doesn’t care about cost....
Their restaurant tab is on the taxpayer....
Get rid of tipping. Give them 7.25 an hour and see how happy they are. In Europe and Asia they don’t tip and actually it is better and the long run it is cheaper for the dinners.
I know many here blow their top at any mention of a minimum wage but i have pretty legit question. I have certainly become a more critical reader than in the past.
“According to the Bureau of Labor Statistics, the average pay of tipped workers is about $10 per hour nationally and $9.50 in Michigan. The National Restaurant Association says this amount “greatly underestimates” the actual earnings of servers, which their survey data shows to be $16 per hour for entry-level workers to $22 per hour for experienced servers.”
How many hours do they make those averages? Is it just the dinner crew for an average of 3 hours a weeknight? Do they make 40-50 an hour in peak and far less other hours? Hard to trust anyone because anyone can make any number look different than it is.
I’ve been known to give $15 and $20 tips to pizza delivery people.
Myy libtard sisters love it and its pretty good, but the owner is scamming The public. Maybe they should pass a law capping sammiches to $7 and see how he likes it.
“We might have less employees or reduce the hours they work [to] a part-time schedule.”
It is now cheaper to buy clothes than to make them. And the cost of a meal at a restaurant is not competitive with making your own meal, but it is close enough for people to make the choice on a fairly regular basis. If the cost of wages goes up 280%, what impact will that have on restaurants and bars? It is already pretty much their highest expense.
Imagine if it only doubled the price of a meal. Would you still eat regularly at your favorite lunch place if the price went from $7.99 to $15.99?
I strongly believe this minimum wage push is to force price inflation to help the country monetize the debt.
Certainly not...Penalize the employee because the food is lousy and too expensive...
In the past when I worked as a server at restaurants, the register kept track of the food totals that each worker did. For example, server A may have served $400 in food that evening while server B may have done $285 in business, server C may have done $365 in business. If the average tipping rate is 15%, then server A should have earned $60, server B should have earned $42.75 etc.
Total up the hourly wage earned for the shift, add in the tip they SHOULD have earned and look at the total. If the worker earned a total of more than min. wage, then the employer doesn’t have to make up the difference.
It doesn’t matter what the server ACTUALLY earned, only what s/he should have earned.
In some places that I’ve worked, the manager would then extract the (in this case) 15% of the tip total, and you were required to relinquish that amount to the bus people..despite the fact that their hourly wage was more than yours, AND you couldn’t write off the expense from your own taxes. Nor did it matter that you may live in a depressed area and NOBODY ever earned the full 15% tip on the total food sales.
There are some people who do not tip, nor do they feel obligated to pay wages for the employer. Some people are just cheap and look for even the slightest excuse not to tip. Maybe they didn’t like the shape of your butt under your uniform, or you didn’t jiggle in the ‘right’ places, or you brought the beverages with the meal instead of after the meal, or whatever.
There are people who run you around wanting you to do extras for them..above and beyond good service, and not tip you for that extra running.
Many people don’t stop and think that the tip is part of the meal service experience, and so they don’t plan for it. They could order a slightly less expensive dish so that the money is there for that tip, but they often don’t. Everybody wants McDonalds service (fast and free, not necessarily good) not stopping to think that there’s a reason why a hamburger and fries costs 10 bucks now, while the local sit down store has burgers and fries for $6.95. The McDonalds employer has to pay ful min wage while the sit down only pays $2.25 an hour, and sometimes less even in this day and age.
Waiting tables is the hardest job I ever did, and I sure didn’t appreciate the bus people stealing tips, and then having to fork over 15% of what little I managed to earn in tips, over to those who stole more than half of everybodies tips.
How did I figure it was more than just a suspicion? Easy. Try working with only half your usual tables, no bus people and quadrupling your tip income, while wait persons in a different area working WITH bus people walked out with $20 each for the entire evening in a 5 star place.
Yet another scam is when the customer puts the tip on a credit card, and the wait person has to pay a percentage of that tip, to the restaurant owner simply beause it’s on a card. And you don’t get to write THAT expense off your taxes either, but the restaurant owner sure does!
Raising the min wage isn’t going to cure any of the issues wait people must endure, but the hit piece above is NOT accurate.
All one has to do is just cut in to the profits of the greedy evil business owner. I read that on a liberal blog.
Liberals will destroy every industry in the US, it seems. More justification for feeding politicians to alligators when the revolution finally comes.
First off thank you for the answer to a subject you obviously know more about that you’d like to. From your answer i take it there’s no ready answer to my question about the numbers they put into the article which surprises me not in the least. Good jobs are difficult to come by these days as dismissive as many here get here regardless. The entire entry level for students argument holds little water when there are no better jobs. Hopefully we’ll hit some sort of equilibrium again in the future with more jobs in greater variety so more people working in so called entry level jobs can have the chance to better themselves.
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