Restaurant Recession Hits NYC Following $15 Minimum Wage

Discussion in 'Political Opinions & Beliefs' started by ProgressivePower, Jul 2, 2019.

  1. ProgressivePower

    ProgressivePower Active Member

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    "Restaurant Recession" Hits NYC Following $15 Minimum Wage

    (https://fee.org/articles/restaurant-recession-hits-nyc-following-15-minimum-wage/)

    This will be a rough year for full-service NYC restaurants as they try to navigate a future with significant economic headwinds and significantly higher labor costs from the city’s $15-an-hour minimum wage.
    Friday, February 22, 2019
    [​IMG]
    Image Credit: Wikimedia Commons | CC BY 2.0
    [​IMG]

    Mark J. Perry
    Economics Minimum Wage Economic Education Costs Supply Chain RestaurantsJobs Labor Market
    [​IMG]

    An article in the New York Eater (“Restaurateurs Are Scrambling to Cut Service and Raise Prices After Minimum Wage Hike“) highlights some of the suffering New York City’s full-service restaurants are experiencing following the December 31, 2018 hike in the city’s minimum wage to $15 an hour, which is 15.4% higher than the $13 minimum wage a year earlier and 36.4% higher than the $11 an hour two years ago. For example, Rosa Mexicana operates four restaurants in Manhattan and estimates the $15 mandated wage will increase their labor costs by $600,000 this year. Here’s a slice:

    Now, across the city, restaurant owners and operators are reworking their budgets and operations to come up with those extra funds. Some restaurants, like Rosa Mexicano, are changing scheduling. Other restaurateurs are cutting hours and staffers, raising menu prices, and otherwise nixing costs wherever they can.

    And though the new regulations are intended to benefit employees, some restaurateurs and staffers say that take home pay ends up being less due to fewer hours — or that employees face more work because there are fewer staffers per shift. "The bottom line is, we have to reduce the number of hours we spend,” says Chris Westcott, Rosa Mexicano’s president and CEO. “And unfortunately that means that, in many cases, employees are earning less even though they’re making more.”

    In a survey conducted by New York City Hospitality Alliance late last year, about 75% of the more than 300 respondents operating full-service restaurants reported they’ll reduce employee hours this year because of the new wage increases, while 47% said they’ll eliminate jobs in 2019.

    Note also that the survey also reported that “76.50% of respondents report reducing employee hours and 36.30% eliminated jobs in 2018 in response to mandated wage increases.” Those staff reductions are showing up in the NYC full-service restaurant employee series from the BLS, see chart above. December 2018 restaurant jobs were down by almost 3,000 (and by 1.64%) from the previous December, and the 2.5% annual decline in March 2018 was the worst annual decline since the sharp collapse in restaurant jobs following 9/11 in 2001.

    As the chart shows, it usually takes an economic recession to cause year-over-year job losses at NYC’s full-service restaurants, so it’s likely that this is a “restaurant recession” tied to the annual series of minimum wage hikes that brought the city’s minimum wage to $15 an hour at the end of last year. And the NYC restaurant recession is happening even as the national economy hums along in the 117th month of the second-longest economic expansion in history and just short of the 120-month record expansion from March 1991 to March 2001.

    Here’s more of the article:

    “There’s a lot of concern and anxiety happening within the city’s restaurant industry,” says Andrew Rigie, executive director of the restaurant advocacy group. Most restaurant owners want to pay employees more, he says, but are challenged by “the financial realities of running a restaurant in New York City.” Merelyn Bucio, a server at a restaurant in Soho that she declined to name, says her hours were cut and her workload increased when wage rates rose. Server assistants and bussers now work fewer shifts, so she and other servers take on side work like polishing silverware and glasses. “We have large sections, and there are large groups, so it’s more difficult,” she says. “You need your server assistant in order to give guests a better experience.”

    At Lalito, a small restaurant in Chinatown, they used to roster two servers on the floor, but post wage increases, there’s only one, who is armed with a handheld POS (point of sale) system, according to co-owner Mateusz Lilpop. Having fewer people working was the only way for him to reduce costs, he says. Since the hike, labor costs at Lalito have risen about 10 percent — from 30 to 35 percent to 40 to 45 percent of sales, he says.

    These changes get passed onto the diner, some restaurateurs argue. Service can suffer due to fewer people on the floor, or more and more restaurateurs will explore the fast-casual format over full-service ones. Some restaurants are also raising prices for customers. According to the NYC Hospitality Alliance’s survey, close to 90 percent of respondents expect to raise menu prices this year. Lalito’s menu prices have increased by 10 to 15 percent. Lilpop says, and it’s not just the cost of paying his staff driving prices up — it’s a ripple effect from New York-based food purveyors’ own labor cost increases.

    “If you have a farmer that has employees that are picking fruit, he has to increase his labor costs, which means he has to increase his fruit prices,” Lilpop says. “I have to buy that fruit from him at a higher rate, and it goes down the chain.”

    A few economic lessons here.

    1. A reduction in restaurant staffing that results in a decline in customer service (e.g., longer wait times, less attentive wait staff, etc.) is equivalent to a price increase for customers.
    2. The increases in the city minimum wage to $15 an hour, in addition to directly increasing labor costs for restaurants, also affects the labor costs of companies that supply food, liquor, restaurant supplies, menus, etc. and causes a ripple effect of indirect higher operational costs throughout the entire restaurant supply chain as described above.
    3. Even for workers who keep their jobs, a higher minimum wage per hour doesn’t necessarily translate into higher weekly earnings, if the reduction in hours is greater than the increase in hourly wages. For example, 40 hours per week at $13 an hour generates higher weekly pre-tax earnings ($520) than 33 hours per week at the higher $15 an hour ($495).
    Prediction: This will be a rough year for full-service NYC restaurants as they try to navigate a future with significant economic headwinds and significantly higher labor costs from the city’s $15 an hour minimum wage.
     
    Last edited: Jul 2, 2019
  2. ProgressivePower

    ProgressivePower Active Member

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    New York City Experienced Worst Decline in Restaurant Jobs since 9/11 After $15 Minimum Wage Win

    (https://fee.org/articles/new-york-c...ant-jobs-since-911-after-15-minimum-wage-win/)


    New economic research suggests their latest experiment is not going as planned.
    Thursday, February 28, 2019
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    [​IMG]

    Jon Miltimore
    Economics Minimum Wage Economic Education New York City Labor CostsRegulation
    The Big Apple’s fast-food industry, The New York Times recently reported, has long served as a laboratory for progressive politicians and the nation’s labor machine.

    But new economic research suggests their latest experiment is not going as planned.

    Data show that following the labor movement’s “Fight for $15” victory, which imposed steep annual increases in mandatory wages for workers, New York City experienced its sharpest decline in restaurant jobs in nearly 20 years.

    [​IMG]

    Tight Profit Margins
    Restaurants tend to operate on famously low profit margins, typically 2 to 6 percent. So a 40 percent mandatory wage increase over a two-year period is not trivial.

    In response to the minimum wage hikes, New York City restaurants did what businesses tend to do when labor costs rise: they increased prices and reduced labor staff and hours.

    For example, Lalito’s, a popular restaurant on Bayard Street, recently raised its menu prices 10-15 percent, Eater New York reports.

    A New York City Hospitality Alliance survey also showed that three out of four full-service restaurants said they planned to reduce employee hours. Nearly half of those surveyed said they planned to eliminate some job positions in 2019.

    [​IMG]

    In response, New York City council members are trying to shield restaurant employees from “unfair” firings. Labor lawyer Michael J. Lotito, whose firm represents the restaurant industry, told The Times that a “just cause” firing provision for fast food employers “would be a first in the country.”

    Regardless of whether or not the firings are “fair,” the data are clear: restaurant workers are losing jobs.

    The "Restaurant Recession"
    Recently published data from the American Enterprise Institute, a right-leaning Washington, DC, think tank, show that full-service restaurant employment declined for the first time in a decade in 2018. That year also saw the sharpest month-to-month annual decline since the attacks of 9/11.

    “December 2018 restaurant jobs were down by almost 3,000 (and by 1.64%) from the previous December,” wrote economist Mark Perry, “and the 2.5% annual decline in March 2018 was the worst annual decline since the sharp collapse in restaurant jobs following 9/11 in 2001.”

    [​IMG]

    Perry says this “restaurant recession” is likely the result of the series of mandatory wage hikes that brought the city’s minimum wage to $15 an hour.

    New York’s experience is noteworthy since numerous states have passed or are in the process of passing a $15 pay floor. Illinois and New Jersey recently passed laws mandating a $15 minimum wage—they will be phased in over several years, similar to New York’s law—joining California, Massachusetts, and of course New York. The Maryland House of Delegates advanced a $15 pay floor by voice vote Wednesday. The District of Columbia and some cities, including Seattle and Minneapolis, have also passed $15 minimum wage laws.

    Considering the latest results of New York’s $15 minimum wage experiment, lawmakers and activists should consider Mary Shelley’s great moral lesson: beware the monsters we create ourselves.
     
    Last edited: Jul 2, 2019
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  3. 61falcon

    61falcon Well-Known Member

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    Except those are not the minimums for tipped wait staff!!
    !1 or more staff it is $10.00 cash pay and $5.00 Tip Credit
    !0 or less it is $9.00 cash pay and $4.50 Tip Credit
     
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  4. Reiver

    Reiver Well-Known Member

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    The living wage should lead to structural changes in the economy. While the minimum wage is focused on minimising underpayment created through monopsonistic power, the living wage analysis accepts that there are existing jobs reflecting skewed labour demand towards low wage employment (often of course made worse through corporate welfare). Ironically, the bigger the disemployment effects from the living wage, the more structurally flawed the economy.
     
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  5. ProgressivePower

    ProgressivePower Active Member

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    I am unsure whether or not there should be a minimum wage or not, as yes underpayment is a real thing, but this can be mitigated with broad union expansion, which albeit does have consequences, but maybe not as much as a set minimum standard. What is the case though is if the minimum wage ceased to exist, you would see more people enter the labor force.
     
  6. Reiver

    Reiver Well-Known Member

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    The problem with unions is that they can imply confirm wage norms. Also, where underpayment is the highest, union bargaining power tends to be the weakest.

    I don't agree. Underpayment created by monopsonistic power (i.e. where firms have wage making power) has been proved to increase unemployment. The minimum wage, by reducing this form of market failure, ironically provides for more mutually beneficial 'employer-employee' exchange.
     
  7. ProgressivePower

    ProgressivePower Active Member

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    With the minimum wage out of existence, you would see more people enter the labor force at wages that their skills are proportionate too. I don't believe that firms would lower wage rates significantly, because as you stated many wouldn't want to work at such low wage rates, but people that are being priced out of a job, will get jobs. As many economists state, a low wage is better than no wage for low skilled workers, who are being priced out of a job.
     
    Last edited: Jul 2, 2019
  8. Jimmy79

    Jimmy79 Banned

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    What's a living wage?
     
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  9. KAMALAYKA

    KAMALAYKA Banned

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    If you can't afford to run a business unless you pay your employees peanuts, you don't deserve to be in business. It's no different than a business saving money by hiring cheap illegals suddenly forced to pay legal wages.

    Boo-f*cking-hoo.
     
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  10. KAMALAYKA

    KAMALAYKA Banned

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    It means you work full-time and don't have to worry about food or healthcare or shelter.
     
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  11. 557

    557 Well-Known Member

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    More.
     
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  12. logical1

    logical1 Well-Known Member Past Donor

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    Everything democrats get involved in turns to crap, pure and simple, every time!!!!!
     
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  13. kriman

    kriman Well-Known Member Past Donor

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    If you aren't in business, you have no employees.
     
  14. ronv

    ronv Well-Known Member

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    It really doesn't matter. They are all being replaced by point of sales automation.
    [​IMG]
     
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  15. Jimmy79

    Jimmy79 Banned

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    Damn. I want one of those jobs. Anyone know of someone offering a job like this?

    Is this like a company town situation? If you work for the company you get a free house, free clinic, and free food?
     
  16. Spim

    Spim Well-Known Member Past Donor

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    I maybe eat out twice a month for dinner, twice a week lunch.

    If prices rise I'll just eat less lunches.

    I like cooking at home
     
    Last edited: Jul 3, 2019
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  17. gamewell45

    gamewell45 Well-Known Member Past Donor

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    It's those little details that make a big difference.
     
  18. gamewell45

    gamewell45 Well-Known Member Past Donor

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    I don't eat in NYC; way too many roaches in the restaurants. I always brown bagged it when I was working. Much cheaper and roach-free.
     
  19. BleedingHeadKen

    BleedingHeadKen Well-Known Member Past Donor

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    Do you also agree that if no one wants to hire you for the lowest wage, that you don't deserve to have a job?
     
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  20. gamewell45

    gamewell45 Well-Known Member Past Donor

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    If you aren't in business that means that someone else filled the void left by your former business.
     
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  21. FreshAir

    FreshAir Well-Known Member Past Donor

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    the recession is coming as most of the money in this country is going into the hands of the mega rich and less of it to the working class

    the min wage has fallen behind inflation and I think it will be too little too late to stop it - should of been raised little by little over the years to keep up
     
    Last edited: Jul 3, 2019
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  22. FreshAir

    FreshAir Well-Known Member Past Donor

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    agree...

    or it means consumers have less money and some businesses suffered as people tightened their belts

    we need a President and Congress that works for the working class again - the country is sick of the rights tax cuts for the rich, trickle down is not working
     
    Last edited: Jul 3, 2019
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  23. rcfoolinca288

    rcfoolinca288 Well-Known Member Past Donor

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    hmm...how are those checks from SS coming along? You are taking advantage of a "crappy" program. What about Medicare? hmm??
     
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  24. rcfoolinca288

    rcfoolinca288 Well-Known Member Past Donor

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    If you aren't in business, then you are working for somebody else. Then ********* and moan why your boss is paying you substandard wages. ;)
     
  25. Reiver

    Reiver Well-Known Member

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    You haven't based that on the economics, either the labour economic theory or the empirical evidence. We certainly would expect wage reductions (as firms increase the economic rent made available through wage making power). And we would also expect that to reduce employment. You can check that yourself with a simple supply and demand diagram. If firms face an upward sloping labour supply curve, profit maximization will lead to a reduction in employment and wage.
     

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