Seattle restaurants are warning that the looming hike in the city’s minimum wage to $15 an hour could soon force them to cut back their staffs and raise prices.
For an industry with a slim profit margin to start with, the wage hike could have a profound effect, even as supporters say it will benefit the economy in the long run.
The increase, up from $9.32 an hour, is set to be phased in starting April 1. The initial minimum wage will be $11 an hour. Employers with 500 or fewer workers must increase their pay to $15 an hour by January 2019. Larger employers, having 501 or more workers, have just two years to raise their worker compensation to $15.
Many owners are concerned over what the changes will mean for business.
“It will be difficult to staff the front of the house as well as we have before,” Brendan McGill, the chef and owner of the Hitchcock Restaurant Group, told FoxNews.com.
Although McGill supports the minimum wage increase, he noted that, “less people will be fighting over each other to fill up your water.”
The Seattle Restaurant Alliance worked with a mayoral task force from the beginning in an attempt to find a compromise benefiting both restaurants and workers, Anthony Anton, CEO of the Washington Restaurant Association, told FoxNews.com. However, his association did not support the final outcome and is now warning about the impact.
The looming wage hike ensures the model for how local restaurants operate is going to change. It used to be that 36 percent of profits go to labor, with 30 percent for food and 30 percent for any other expenses. This leaves about a 4 percent profit margin for most restaurants. With such a big wage hike, restaurant owners are looking for new ways to keep that profit. This means looking at raising prices, having fewer employees, using automated ordering systems, changing tipping models, and more, Anton said.
“It won’t be one thing. This is too big a change to have a silver bullet,” Anton said.
In a survey conducted in 2014 by the Washington Restaurant Association, the top four responses of what restaurants predict they would have to do were: raise prices, lay off employees, reduce employee hours or close their business entirely.
Anton predicts the Seattle restaurant industry may experiment heavily with the newer automated ordering systems as well, but it is still too early to tell what will ultimately work.
The 15Now movement, however, is in full support of raising the minimum wage to $15 an hour. Ty Moore, the 15Now national organizer, told FoxNews.com that “15Now had a central role in initiating and organizing the grassroots pressure campaign in Seattle.”
The movement really took off in Seattle after the 2013 campaign and election of Kshama Sawant to the Seattle City Council as a “socialist alternative” candidate. 15Now’s prediction, according to Moore, is that any job losses that do happen will be more than compensated for by job gains because they are putting more wages in workers’ pockets. These sorts of changes were seen in San Francisco where they led the way in city-wide wage increases, according to Moore.
When asked if 15Now thinks the new increase could negatively affect small businesses, Moore pointed to the provision where smaller businesses have two extra years to increase their wage to $15 for each employee.
In September, Seattle Mayor Ed Murray proposed a new division of the Seattle Office of Civil Rights -- called the Office of Labor Standards – to focus on educating the community about new requirements including the minimum wage rules, paid sick leave and other worker policies. A senior policy analyst told FoxNews.com that the Seattle Office for Civil Rights has been receiving hundreds of calls from employers in the Seattle area who are eager to comply and learn more about the wage increase ordinance.