As most of you have heard in the news recently – there is another minimum wage increase approaching a vote in Sacramento. I think it is important to note that trying to lobby for not raising the minimum wage is a lost cause. The minimum wage is going to increase – the impact that the restaurant industry has is to try and shape the method by which the increase is applied. Below are some details about how the minimum wage increase will impact the restaurant industry.

Through countless seminars, conferences and written materials, it is pretty safe to say that the economy is recovering and will most likely continue to do so. The difference between this recession and those in the past is the amount of time it is going to take to reach full recovery. Those estimates range from five to eight years, translated – it’s going to take a long time. If you are looking at a chart, it is the one with the long axis and little tiny grid boxes clicking up very slowly over time. This situation sends a pain through the chest of a restaurant operator thinking about the increasing payroll expense as we climb out of this hole.

Assemblyman Luis Alejo, a Democrat from Salinas has brought (several times) AB 10 to the California Assembly for consideration. AB 10 increases existing California minimum wage to $9.25 over the next three years starting January 1st, 2014. Yes, that’s the same date that the restaurant industry is also expected to take on the burden and expenses of a quasi-national health program.

The most disturbing adjustment in Alejo’s bill is what happens in 2017; the minimum wage becomes attached to the California CPI Index and automatically starts to increase on an annual basis- with no legislative vote. Allowing this to proceed would cripple the restaurant industry. The idea of taking the ability to consider minimum wage increase away from representatives voted into office, and not allowing them to take other economic conditions into consideration – well, it makes no sense.

California still has the highest unemployment rate in the nation at 9.8% – and there is documented proof that increases in the minimum wage increase unemployment – not what the recovery needs at this stage. Increase in commodities, food, fuel, and other operational costs is already squeezing the margins to the maximum. We lost 16,000 restaurants in the state between 2009 through 2012; this type of legislative action will make that number seem like the good old days.

Forty-three states in the nation allow restaurants a tip credit against minimum wage – but not in California; the impact of a minimum wage increase here has no relief for the operator. I think everyone agrees that an individual that works a forty hour work week should be able to afford certain necessities and that is a debate that needs to take place. As the second largest private-sector employer in California, the restaurant owners and operators need to be part of that debate.

Contact the California Restaurant Association and become a member so your voice can be heard. Oh and just in case you want to let Assemblyman Alejo know your thoughts:

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