Restaurants Warn Fast-Tracked Wage Increase Would Cost Jobs, Stall Recovery

This article written by Danny Klein with FSR Magazine.

When it comes to minimum wage and the always-testy $15 debate, there’s a solid consensus among restaurants regarding one fact in particular: Menu prices will rise if rates do. But would that be enough to absorb higher labor costs during a COVID-19 recovery stretch? The National Restaurant Association isn’t so sure.

On Tuesday, the Association released findings from a nationwide survey of operators large and small. It questioned the potential impact of the Raise the Wage Act of 2021, and what it might do to restaurants trying to claw out of the pandemic pit.

The sentiment, as far as the Association is concerned, is it’s the wrong bill at the wrong time. The Association sent a letter to congressional leaders Tuesday urging the measure’s removal from the $1.9 trillion stimulus plan currently being discussed by lawmakers.

“Passage of this bill this year would lead to job losses and higher use of labor-reducing equipment and technology,” Sean Kennedy, executive vice president for Public Affairs for the Association, said in a statement.

The Raise the Wage Act proposes an increase of the federal minimum wage from $7.25 to $15 an hour over the next five years. While many states have lifted rates in recent years, the federal figure hasn’t budged since 2009. The Raise the Wage Act starts at $9.50 (it also hikes the tipped wage from $2.13 to $4.95) before lifting every year through 2025, when it would then index the minimum wage to median wages.

Also, it promises to eliminate a separate minimum wage for tipped workers. The Association said tipped servers make between $19–$25 per hour under the current tipped credit model, suggesting this would actually hurt, not help workers.

Federal law requires employees earn at least the federal minimum wage, or the higher state or local number in 28 states and 55 municipalities. If the combination of the base wage and earned tips does not total the required minimum wage, the employer must pay the tipped employee more to make up the difference.

The Association believes if the tip credit is sliced, many restaurants would simply terminate tipping, raise prices to cover higher wages, and move to an hourly wage-only system. Tipped employees would likely earn less than they currently do, the Association said…

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