Restaurant Survey Concludes Wage Hikes Will Cost Jobs, Reduce Benefits, Increase Prices
NOVEMBER 1, 2006. Consumers are almost assured to pay higher prices in restaurants following an increase in the minimum wage, while employees could see jobs eliminated or their hours greatly reduced. These are the actions that restaurant operators said they would be forced to take following an increase in the minimum wage, according to a new nationwide survey of 600 operators by the National Restaurant Association. The survey results are published as voters in six states including Arizona, Colorado, Missouri, Montana, Nevada and Ohio will decide whether to raise their respective minimum wage.
'Restaurant budgets are similar to family budgets, they operate on a very slim margin,' said Hudson Riehle, senior vice president of Research and Information Services for the National Restaurant Association. 'When they are hit with increased costs they have to make painful decisions. Unfortunately, in the case of a minimum wage hike, everyone pays.'
The October 2006 survey looked at the potential impact of a $7.25 federal minimum wage, phased in over 30 months. While wage hikes in the six ballot initiative states range from $1.00 to $1.70 above the current $5.15 per hour in the first year, every state will be indexed to inflation every year beyond that. Each of these six states could see a minimum wage, and similar economic impact, at or higher than $7.25 per hour within a few years.
In general, the largest impact of the potential wage hike would be seen in the quick service, family dining and casual dining segments, with fine dining experiencing a comparatively smaller impact. The survey results found:
--Forty-one percent of family dining and casual restaurant operators said they would cut jobs.
--Two out of five family dining and casual dining operators said they would postpone plans for new hiring.
--Three out of 10 quick service, family dining and casual dining operators said they would cut employee benefits.
--Nearly 9 out of 10 of all restaurants indicated that they would raise menu prices; ninety-eight percent of quick service restaurants reported the same.
--Roughly one-half of the quick service, family dining and casual dining segments stated that they would reduce the number of employee hours worked.
'Whether the minimum wage is raised at the federal or state level, you can't ignore the laws of economics-prices go up and job opportunities go down,' said National Restaurant Association Vice President for State Relations Tom Foulkes. 'On Election Day, voters will be deciding on the most aggressive wage hikes ever proposed. They should strongly consider these harsh effects before saying yes to a minimum wage hike in their state.'
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