How Increased Minimum Wages Have Affected the Restaurant Industry

The fight for increased minimum wage has been raging across the country for quite a while, and doesn’t appear to be stopping any time soon. Led by fast food workers demanding $15 per hour as a minimum wage, the fight focuses on the rising cost of living across the country. Supporters of increasing the minimum wage argue that it can stimulate the economy, decrease taxpayer dependence on government assistance programs, and reduce income inequality. However, opponents of increasing the minimum wage say that it eliminates jobs and hurts small businesses.

Although food and beverage businesses are strongly affected by higher minimum wages, they are not the only ones. Bank of America has been steadily increasing their internal minimum wage, and recently announced that company minimum wage will reach $20 by 2021. Retail giant Target has also been increasing company minimums in an effort to attract and retain quality employees.

The restaurant industry employs a large portion of minimum wage workers, and restaurants are being forced to make some major changes to accommodate the rising cost of labor. The majority (71%) of food and beverage businesses have made changes to their menus, increasing prices and reducing portions to try and control costs. Sixty four percent of restaurants surveyed said they coped with increased labor costs by reducing employee hours, and 43 percent eliminated jobs altogether. One restaurant chain eliminated the bus boy position, asking servers to cover those responsibilities. For some restaurants, closing their doors completely has been the only answer.

California, the District of Columbia, Illinois, Massachusetts, New Jersey, and New York have all approved a $15 minimum wage. Other states have implemented programs to gradually increase the minimum wage over the next several years. Higher minimum wages aren’t resulting in greater employee retention, however. Turnover within the restaurant industry is a problem; one industry survey said 50 percent of operators nationwide are experiencing annual turnover rates of 50 percent or more. This has a direct impact on the cost of training as new employees learn the ropes, and it’s costing some restaurant owners regular customers, as customer service suffers. With higher minimum wages, restaurant owners must reevaluate every financial aspect of their business – the cost of labor, food, equipment, utilities, rent, and other operational costs.

At Gilkey Restaurant Consulting, we offer our clients the professional restaurant management recruitment services that will help ensure your business can weather industry changes and remain profitable. Our experienced staff brings a unique depth of industry knowledge and experience to every project and will help you ensure quality in every aspect of your business. Contact us today and learn how our consultants can help you achieve results that exceed your expectations.