The minimum wage topic is being written every year now and there doesn’t seem to be a respite anytime soon. This issue is a vote driver and as much as it pains the restaurant operator, legislators are playing to their audience – the voters that are affected by wage increases, our employees – not the operators.

Last year, we discussed and saw the minimum wage measure (AB10) come to fruition – this is the law that we are currently operating under. Starting July 1st, AB10 raises the minimum wage to $9.00 an hour and $10.00 an hour in 2016. AB10 was a compromise with union leaders in California by Governor Brown, but the automatic annual increases based on CPI were removed.

SB935 is a new version of the old material. It outlines the minimum wage increases as follows:
2015: $11.00      2016: $12.00      2017: $13.00      2018: Indexing upward
This measure is dangerous because it is not well thought out in regards to the challenges currently facing the restaurant industry which includes: higher taxes under proposition 30, increased workers compensation rates, loss of federal unemployment insurance credits, increased energy costs and the implementation of ACA. But the most disturbing part of this measure is the indexing in 2018. Allowing the minimum wage to increase automatically by the CPI index takes the control completely out of the legislator’s hands. In a lot of circumstances that’s exactly what any citizen would want based on our government’s ineffectiveness – but in this case, it is really a mistake. How will we know what the economic situation will be in 2018? We didn’t see the recession coming until Banks and Real Estate Company’s started to fail; in fact, the economic outlook forecasts for 2009 were really brilliant and showed significant increase in growth and GDP.

SB935 proposes to raise the statewide minimum wage to $13.00. State Senator Mark Leno (D-San Francisco) is the author of the bill and believes that the previous measure did not go far enough to answer the questions about minimum wage increases in California. The CRA members led the effort to convince the assembly committee to veto against the $5.00 minimum wage increase. The majority of the committee agreed that it was irresponsible to propose such a steep monetary hike without first testing the waters. Because of the efforts of the CRA Lobby Day and direct contact with the legislative offices, it was decided that the committee should reconvene after the current increase takes effect and further analysis can be done on the economic changes.

The question of paying our employees a fair wage will continue to be a discussion in our industry. The future of the minimum wage will settle out around $15.00 in the next couple of years. Many will gasp and say that cannot happen but it will happen and we will have to find a way to increase our prices and decrease our expenses to ensure we can stay in business.

The beneficiary of these types of wage increases, of course, is the front of the house employees that receive tips. Although the glory days of unreported tips have passed and tipped employees no longer get away with untaxed income, does anyone really feel good about a food server getting another raise? The very employees that these minimum wage increases are meant to help continue to get the short end of…well, you can finish that. Meanwhile, the tipped employees get more money while the back of the house watch them count out their money every night. As an industry, we need to stand up and take a position on freezing any future wage increases for tipped employees. This wage inequity in our workforce has gone on for far too long and as one of four states that do not have tip credits against wages, we need to unite and stop the madness.

About the Author

Jean Hagan, PrincipalJean Hagan
Restaurant, Hospitality
Jean has owned, operated, and consulted in the restaurant industry for more than 30 years. During that time, she worked with a well-known national chain; owned a food and beverage company that operated multiple restaurants, bars, and event spaces in the Squaw Valley area; and became the president, CEO, CFO, and shareholder of one of the highest-grossing restaurants in California. Today, Jean is Principal and leads the Restaurant Operations Consulting practice at KROST. » Full Bio