News and Commentary

San Francisco, You’ve Got Company: NY Restaurants Closing Because Of Minimum Wage Hikes

San Francisco is not the only place where restaurants are closing because of the hike in the minimum wage; now it’s hitting New York with a vengeance, too. According to The New York Post, the state of New York lost 1,000 restaurants last year; jobs as cooks, servers and dishwashers only increased by 1.4%, far less than the 4.4% rate of growth exhibited between 2010 to 2015, according to the Employment Policies Institute.

In New York City, where restaurants are forced to pay their employees $12 an hour, $1 more than other employers, job growth was 3.4% in 2016 as opposed to 7% from 2010 to 2015. It’s even worse in 2017; the growth has only been 2%. Among full-service restaurants, growth has only risen 1.3%; the last five years it was 6.5%.

In 2016, New York started minimum wage increases to ultimately raise the hourly rate to $15 by 2019. As the Post notes, “On Dec. 31, 2015, the minimum wage for tipped restaurant employees rose by 50 percent, from $5 an hour to $7.50 an hour. For fast food workers, it rose by as much as 20 percent, from $8.75 to $10.50 depending on business size and location.”

Andrew Schnipper, who owns five Schnipper’s Quality Kitchens in Manhattan, told the Post, “It’s a miserable business at the moment. Most restaurateurs are far less profitable than they were a year ago.”

As Crain’s New York Business reported earlier this month:

Paying minimum-wage workers at restaurants isn’t as simple as writing them bigger checks. Restaurant revenue comes from customer bills. When menu prices go up, those bills rise even more because the cost of the tax and tip also swell. But the tips end up in the pockets of only front-of house workers, who make $33,430 to cooks’ $28,390 on average, Department of Labor data show. At high-end restaurants, waitstaff might earn $80,000 to $100,000. … Shrinking margins strike fear in the heart of restaurateurs, who say they might survive the jump to $11 per hour but perhaps not the ones to $13 and $15. Executives at restaurant groups fret that they will have less money for employee training and new ventures.