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Business Observer Friday, Jan. 3, 2020 4 months ago

Minimum wage debate: Right time or bad math?

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The minimum wage issue delivers maximum stress for business owners — especially in retail and hospitality.

Supporter: Same scare tactics as last time

In the 2004 election, 71% of Florida's voters passed a constitutional amendment to raise Florida's minimum wage by $1 per hour — a 19% increase — and then adjust each year onward based on inflation.

Leading up to the 2004 election, Florida's governor publicly opposed the amendment, and business associations across the state claimed it would be disastrous for Florida's economy. The Florida Retail Federation said, "Jobs will be lost — devastating our strong economy." The Orlando Chamber of Commerce predicted that "many good Florida jobs will be shipped overseas" if the minimum wage was increased. The president of Enterprise Florida claimed the rise could result in a decline in health benefits coverage.

All of those arguments proved to be wrong. Florida has had one of the fastest-growing economies in the country over the past decade.

The most common argument against the wage increase was that it would result in businesses cutting costs by laying off employees. Professors at the University of Chicago and Florida International University authored a study, The Florida Minimum Wage After One Year, which overwhelmingly disproved this claim. They found that Florida's unemployment rate steadily declined in the year after the new wage took effect. Florida's economy performed better in the year after the new minimum wage than it did in the year before voters changed the law. Additionally, the report found that in the nine months following the raise, there was an approximately 18% decline in the average number of unemployment claims per month, in comparison to the same period the year before. Since that wage increase in 2005, Florida's unemployment rate has consistently dropped and today is near a historic low.

Another common argument we heard in 2004 and expect to hear in 2020 is low-wage earners will be worse off because if they are not laid off, they will likely get their hours cut and receive lower wages than they did before the wage increase. The same study found this argument not to be factual either. In the quarters immediately following the new minimum wage, unemployment dropped while the average wages increased. Despite the raised wages, Florida remained a low-wage state with wages substantially below the national average. The study found that the new minimum wage increased earnings of those at the very bottom of the wage scale, but it did not increase wages for workers earning several dollars an hour above the new minimum.

Courtesy. Ben Pollara.

Similar to the amendment that voters passed 15 years ago, the 2020 amendment makes modest increases in wages in a way that helps low-income workers and doesn't hurt small businesses or the broader economy. The Fair Wage Amendment raises Florida's minimum wage — by slightly more than $1 an hour, initially — to $10 per hour in 2021, then increases the hourly pay by $1 per hour each year until it reaches $15 per hour in 2026. After 2026, Florida's minimum wage would increase with the rate of inflation, just like the state's constitution currently requires. The amendment will help reverse growing inequality and ensure that Florida's 200,000 minimum wage workers can earn a fair wage.

As voters begin to hear the same scare tactics as last time, remember the truth: A modest increase in the minimum wage doesn't hurt the economy or kill jobs; it just provides a little more financial security to Florida's lowest wage earners. It ensures that all Floridians can earn a living wage and have dignity in a hard day's work. Support Florida's economy and the low-wage workers by voting yes on Amendment 2 in the 2020 general election.

Ben Pollara is a Democratic political consultant and senior advisor to Florida for a Fair Wage. A partner at Miami-based public affairs and political fundraising firm Converge GPS, Pollara is a senior strategist for Florida Agriculture Commissioner Nikki Fried. He also ran the successful campaign to legalize medical marijuana in Florida.

Opposition: The math doesn’t work

Next November, Floridians will likely have the opportunity to vote on a proposed amendment to the state’s constitution that will increase our minimum wage to $15 an hour by 2026. On the surface, this proposal seems great. After all, who doesn’t want to make more money? But the bottom line is this increase will kill Florida’s restaurants, and as the state’s hospitality industry accounts for one-quarter of Florida’s budget, we need to look at the math of this proposal. Restaurant profits are quite literally pennies on the dollar, so there is not enough profit for us to absorb this increase without making significant changes to the way we run our business.

I am not opposed to a minimum wage or even to an increase from the current minimum wage, but $15 an hour is simply unaffordable. The overwhelming majority of business owners are not large corporations, and we cannot afford a 77% increase in our labor costs. If a $15/hour minimum wage is enacted in Florida, restaurants statewide will be looking at ways to keep their doors open and their staff employed. No owner or manager I know wants to implement any of these changes, but we care about our team, and we care about our guests, so we will fight to find ways to continue to provide jobs and service to our communities. Here are just a few of the anticipated changes you can expect to see if a $15/hour minimum wage passes.

• We will have to cut staff and/or hours. In order to begin to address the increased labor expense, we will look to find ways to reduce labor costs. This means evaluating all staff and the hours they work. If we cannot offset enough of the increase by reducing the number of hours our team works, we’ll have to look at cutting entire positions. Unfortunately, the newest staff will be the ones most likely to get laid off, and our newest employees tend to be our younger employees — teens working after school and on the weekends and college students working their way to a degree.

Courtesy. James Walker

• We will be reluctant to hire teens or students. Many teens and students get their first jobs in hospitality, and they learn invaluable life skills like accountability and how to work with others. However, this population is unproven in the workplace and frequently have few of the soft skills required for any employment. Managers and owners simply will not pay $15/hour for an inexperienced worker. Instead, they will seek seasoned professionals.

• We will explore automation. Technological advances in the restaurant industry have made machines that can mix salads, slice tomatoes, cook French fries and more. Restaurants will invest in technology that allows for one cook with these machines to do the work of two cooks. Further, restaurants will replace front-of-the-house staff like servers and bartenders with kiosks. This is already happening in cities like New York where the minimum wage is $15 an hour. This automation will help keep labor costs down by reducing the number of employees needed.

• We will increase menu prices. Although the current proposal is presented as a gradual increase, the fact of the matter is that this amendment calls for 15%, 18%, 20% increases in wages year-over-year. In order to try to make up for that and to keep our doors open, we will have to increase our menu prices. We take a big gulp when we have to increase prices by 3%. To increase by 15% is simply unheard of.

Further, many of our guests are retirees on fixed incomes. They simply will be unable to afford to eat out if we increase our prices that much.

• We will use pre-made foods. Today, our guests enjoy dishes that were made in-house by our kitchen team. If we begin using pre-made or pre-prepped food, we can eliminate the labor costs associated with kitchen staff who arrive early to cut vegetables, make dressings and desserts from scratch and hand-cut steaks. This move will cut hours for current employees, cut entire positions from the kitchen and compromise the high-quality dishes that those dining out currently enjoy.

• We will begin tip-sharing. In addition to the changes made above, we will move all employees to the $15/hour minimum wage and implement tip-sharing. Our servers will be required to tip-out other employees to ensure more equitable pay. Currently, servers gets to take home 100% of their tips. If the $15 minimum wage goes through, the servers will have to start to share their tips with the rest of the restaurant staff. I believe this will reduce the amount of take-home pay for the servers that will not be made up by the increase of the minimum wage.

I am one of five Village Inn franchisees with restaurants in Florida, but we have franchisees in other cities and states that have implemented a $15/hour minimum wage, and I’ve seen what it does to those restaurants and their employees. The job loss is real, the price increases are real, and the struggle to stay in business is absolutely real. So while a $15/hour an hour minimum wage might sound good, the truth is that the math simply doesn’t work.

James Walker is a Village Inn franchisee, based in Tampa.

 

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