The raising minimum wage rate has had a major impact on many service industries across the country, and restaurants are no exception. The topic is a political hot potato, and it’s one that has been tossed around for many years now.
Advocates for a higher minimum wage promise a more productive and healthy workforce that is motivated to perform. Opponents say a lower minimum wage lets entry-level and young workers gain experience and that raising it will hurt businesses.
Those who are for increasing minimum wage rates argue that anything less than $15 an hour is not a livable wage. They claim workers earning less will have to take government subsidies just to survive. But, opponents take on a different stance, pointing out that forcing a business to pay more doesn’t just make more money appear in their budget. This means a higher minimum wage could force a business to hire fewer people and have them work less hours.
This brings up the important point that, oftentimes, it’s not about a business’ unwillingness to pay workers more—it’s a financial inability to do so. In these situations, a higher minimum wage will only harm small, medium, and local businesses. That will end up hurting communities in other ways, even though advocates for a higher minimum wage have helping communities and workers as their primary focus.
Regardless, we are not here to debate the pros and cons. The purpose of this article is to help you understand how a higher minimum wage requirement can effect your restaurant’s operations. Whether or not such a law is in effect in your area yet or not, it is already active in many places and on the horizon in many others. That means preparing for it is important.
One consideration that both sides need to make is that machines are capable (and already in the process of) taking many entry-level jobs away from humans. In the restaurant industry, automation is already taking away jobs with self-serve kiosks in QRS (Quick Service Restaurants).
It is reasonably believed that upping minimum wage requirements will only further encourage restaurants to pursue the implementation of such automation. Data is still murky as far as automation’s impact on the industry, but as the economic cycle rounds to an end, cause and effect will begin to become clearer.
Another potential impact of an increased minimum wage rate is an overall lower number of restaurants. Currently, there is an abundance of marginally profitable chains operating in the industry. Low interest rates and financial engineering are currently keeping them alive. For two decades, the restaurant industry has been on an unprecedented run—and it’s due for a reset. Increasing cost pressure will have a big impact in this regard.
Finally, the elimination of tipping is another thing to look to on the horizon. For instance, many restaurants now default to a 20% service fee divided amongst all staff. Advocates of this movement claim that all back-of-house and front-of-house staff contribute to increasing sales, so they will all perform better with increased per-ticket sales.
These are just a few of the changes we expect to see. We will follow up in a few years and see how accurate and transferable these items are to other cities and states that adopt an increase in the minimum wage.
