NY fast-food joints explain why Cuomo’s wage hike will kill jobs
Author: Michael Saltsman
Publication Date: June 2015
Newspaper: New York Post
Topics: Minimum Wage
Tomorrow in Buffalo, Gov. Cuomo’s hand-picked wage board will hold the first of four hearings on whether to recommend a new minimum wage for the fast-food industry.
All three board members are already on record supporting a wage hike, and the cynical take is that these hearings are nothing more than a formality.
But the results of a new survey of more than 900 self-identified fast-food operators in the state indicate a minimum wage of $15 an hour — the amount recommended to the wage board by the state’s labor unions — would cost jobs.
Workers’ hours, meanwhile, could be cut in an effort to offset the mandate, thus negating its central purpose anyway.
Public hearings aren’t an ideal venue for business owners to express their opinions.
Unions might have trouble picking up new members, but they’re uniquely talented at packing a hearing room, and recent history suggests they don’t hesitate to intimidate their opponents.
In Los Angeles County, for instance, the Daily Breeze reported that business owners were scared to show up at public forums on a proposed wage hike after being heckled at earlier events. In Seattle, one labor-backed group organized a boycott of business owners skeptical of a $15 minimum wage.
To circumvent any possible intimidation, and to give voice to operators who can’t attend the hearings, my organization, the Employment Policies Institute, launched a survey of hundreds of fast-food businesses in New York.
The survey may not be perfect: The results aren’t representative of the state as a whole, and the wage board might identify fast-food businesses differently than the owners identify themselves. Still, it’s a meaningful snapshot.
More than 10,000 state restaurants were contacted, and the final survey includes responses from 924 that identified as fast-food locations in the state’s major metropolitan areas.
In a New York Times op-ed announcing his wage board, Cuomo pointed to over $500 billion in worldwide revenue earned by fast-food restaurants as proof the industry can afford an increase.
Of course, the governor surely knows, an organization isn’t judged by the money it brings in, but rather what’s left over after paying expenses.
The governor’s own budget projects that the state will take in more than $140 billion in receipts in fiscal-year 2015, but the vast majority of that money has to cover the state’s obligations and expenses.
The New York businesses surveyed here weren’t awash in cash. More than 80 percent of them had 50 or fewer employees; over half have 15 or fewer employees.
Two-thirds of surveyed businesses that were able to supply their profit margin from the prior year put it at 2 percent or less; over 80 percent reported that their profit margin was a typical 4 percent or less.
Cuomo dismissed the possibility of significant consequences for fast-food businesses. But the survey results suggest otherwise.
As might be expected, 70 percent of surveyed businesses said they were “very likely” to raise prices to offset the cost of a minimum-wage increase to $15 an hour.
But price increases aren’t a panacea, particularly in markets where customers can’t afford to pay more. Nearly 50 percent of survey respondents — that’s 447 fast-food restaurants — said they’d reduce employees’ hours or staffing levels before (or in addition to) raising prices.
In what might be most concerning to Cuomo, more than one in five surveyed business — about 22 percent — said they’d likely close in response to a $15 wage mandate.
Some of these businesses are also competing across state lines. Twelve percent of the businesses surveyed said they were located near the boundary with Pennsylvania, where the minimum wage is $7.25 — less than half of the $15 figure that labor unions are advocating for in New York.
The governor has fashioned himself a champion of small businesses, calling them an “engine of opportunity” for the state.
But even as he proposes tax cuts and investment funds to help some favored small businesses grow, he’s encouraged an unelected three-person board to enact a new mandate that could crush others.
It might be good politics for Cuomo, but it’s bad policy for the state’s job-creators and the people they employ.