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Jeffrey Schofield: Don’t believe false promises on $15 minimum wage

A $15/hour minimum wage will hurt the people it’s supposed to help.

A $15/hour minimum wage grabs attention.

It promises to address exploitative wages, to lift the impoverished into the middle class, and to fight income inequality.

And for warmhearted, well-meaning citizens like you and me, these are good things.

There is only one problem: these are false promises. A $15/hour minimum wage will hurt its beneficiaries more than it will help them.

Full disclosure: my wife and I own a profitable, single-location restaurant with about 30 employees, and so you might think we are biased against a $15/hour minimum wage on principle.

If you think that, you are wrong.

We sincerely care about our team. We want them to thrive. Our full-time servers earn $50k-$60k annually after tips. The kitchen earns between $10-12 per hour, but overtime allows most to earn about $40k per year. These are not exploitative wages.

As proposed and without other business adjustments, annual income for our servers will jump to about $60k-$75k, and the kitchen will see about $55k.

As business owners, we would support a $15/hour minimum wage if it did not hurt the team or put the business at risk. Unfortunately, though, there is just not enough money in our business to afford the increase in labor costs.

In order to keep the business open and our staff employed, we will be forced to adapt in ways that will ultimately hurt our team. Here are the changes that a $15/hour minimum wage would force upon our business:

Overtime will be prohibited.

$22.50 for overtime will just be unaffordable. With 12 hours of operation daily, most full-time employees will only be permitted three 12-hour days per week. Employees will make more per hour but will make about 20 percent less per week. To avoid an income reduction, they will probably take a second job, if they can even find one. They will be challenged to juggle the scheduling demands of two employers, and they will lose valuable time commuting between jobs.

We will hire more (mostly part-time) employees.

Assuming the economy does not falter, we will need to cover the lost overtime labor. Part-time employees will afford us more flexibility to cover peak hours and to avoid overtime risks. Fewer full-time positions will be available for those who want them.

We will move to a tip-included pricing model.

Dining room employees already earn more than our kitchen team, and the current proposal will make it worse. To fix this, we will increase our menu prices to include tips. Customers will then be discouraged from tipping further. Servers will receive a wage above the $15/hour minimum but less than the $25-$35/hour they make now. The difference will be redirected to back-of-house labor costs. Servers will lose all rewards they receive for outstanding service.

We will aggressively cut hours during slow shifts.

Today, server income varies according to sales, and we have enough profit to play it safe by not sending our team home too early. After these changes, though, we will be forced to cut shifts earlier and more often, putting further income pressure on employees who will already be earning less.

We will increase prices even further.

Our modeling indicates the above measures will hold back about half of the cost increases. The remaining costs are more than our entire profit. So, we will need to raise prices further. Unfortunately, customer visits may just decline proportionally, resulting in lower sales and a shrinking labor force.

We will delay opening new locations.

We are currently searching for our second location, but the uncertainty of how successful we will adapt to the new business environment of a $15/hour minimum wage gives us pause. We cannot contribute to a growing economy if we are not certain we can make money.

Admittedly, this entire commentary is an anecdote of a single business, but I assure you our business is not unique. Thousands of others look just like us, and we are all going to face the hard choices I have outlined here if a $15/hour minimum wage happens.

If you still want a $15/hour minimum wage, the truth is, the sky will not fall. Demand for good food will survive this change, and those restaurants with a good head for business will find a way to adapt and survive, and so will the employees.

The question is, though, will it be worth the trade-offs?

___

Jeffrey Schofield is the founder, owner and CEO of Blue Orchid Thai Cuisine in Jacksonville, as well as a member of the Florida Restaurant & Lodging Association.

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