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Increase in minimum wage costs consumers a dime a day

Demonstrators protesting what they say are low wages and improper treatment for fast-food workers stand near a McDonald's restaurant in downtown Seattle. (Elaine Thompson/AP file photo)

What will happen to the food service industry if the minimum wage is raised to $15 an hour depends entirely on who’s answering the question.

“The $15 an hour minimum wage would – I’ll tell you right now frankly, and I’m not exaggerating – it would put us out of business. It would absolutely put us out of business,” Brett Habernicht, owner of a Quiznos sub shop said in an earlier interview with KIRO Radio’s Dori Monson.

“Once that happens, there’s loans that somehow need to be paid back. There’s personal guarantees on those loans that need to be paid back. And then nobody’s got a job,” Habernicht says.

Or, businesses will see an improvement in their staff, productivity and profitability at a minimal cost to consumers.

“Even if employers passed on 100 percent of the increase, that would cost customers a dime a day,” says Saru Jayaraman, director of the Food Labor Research Center at UC-Berkeley. “It would cost the average American household 10 cents more – that’s total food bought outside the household, grocery stores and restaurants – if the minimum wage were to go up.”

A growing movement among fast food workers to demand higher wages is expected to gain momentum Thursday as strikes and protests against the country’s biggest restaurant chains take place in Seattle and about 30 other major cities.

Low-wage workers at fast food restaurants like McDonald’s and retailers such as Macy’s are gearing up for a nationwide strike just before Labor Day weekend.

Some striking workers want the right to unionize; others want the pay increase to $15 an hour. That’s an increase from Washington’s $9.19 an hour, and the national minimum wage of $7.25.

Those supporting the wage increase argue it would reduce employee turnover, increase productivity and ultimately increase profits.

“In an industry that experiences a 300 percent turnover rate, any opportunity to reduce turnover and keep valuable employees would definitely save retraining and rehiring costs,” says Jayaraman.

“Businesses who invest in their workers – you have one in Seattle with Joe Fugere who owns Tutta Bella Pizza Company – those restaurants pay a livable wage above $15 an hour and provide opportunities for advancement and they’re growing,” she says.

The image a lot of people have of high school or college students flipping burgers to make extra money and work their way through college isn’t accurate anymore, she says.

“A majority of these workers do have some college education. So the idea that these are uneducated, low-skilled teenagers is not matched by the empirical data which shows these are largely adults,” says Jayaraman.

“In our economy these are the jobs that are increasingly out there for everybody. Sixty percent of this industry is above age 24 and the median age is in the mid 30s.”

The idea of raising the minimum wage wouldn’t seem “ludicrous,” she says, if restaurant and service pay had kept up with inflation over the years. She blames “the other NRA” for keeping wages low.

She claims the National Restaurant Association has struck numerous behind-closed-doors deals with Congress and various state legislatures to keep the minimum wage as low as it is.

But a restaurant chain owner, who testified before Congress on behalf of the restaurant association, says at a time when many businesses are struggling to keep their doors open, “mandating wage increases will only hurt those employees which this proposal seeks to help.”

“The restaurant industry is dominated by small businesses – more than seven in 10 eating and drinking establishments are single-unit operations,” says Melvin Sickler who owns several Auntie Anne’s Pretzels and Cinnabon franchises.

He says food and labor costs are the two most significant line items for restaurants and only a “small minority” of restaurants would be able to handle a $15 per hour minimum wage.


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