NRA, One Fair Wage release dueling studies on minimum wage policy

Dive Brief:

The National Restaurant Association surveyed 2,000 restaurant operators between Feb. 2 and Feb. 9 about how the Raise the Wage Act, which would increase the federal minimum wage to $15 and eliminate the tipped wage by 2027, would impact their businesses. A majority reported that a $15 minimum wage would force them to cut jobs (84%), reduce employee hours (84%), cut benefits (75%), hike menu prices (98%), and add labor-saving technology (65%).
One Fair Wage released a study this week in response to the NRA's objections to the Raise the Wage Act. The study found that the seven states (California, Oregon, Washington, Nevada, Montana, Minnesota and Arkansas), which have eliminated the subminimum wage had nearly the same rate of decline in open hospitality businesses (-49.9%) as states with the subminimum wage (-49.4%) on average from January 2020 and January 2021. It also found the five states with the highest hospitality business declines have the subminimum wage.
These reports reflect the sharp divide within the restaurant industry over whether raising restaurant employee pay and abolishing the tip credit is necessary to stabilize income for employees and ensure equity or if it will cripple the recovering industry.

Dive Insight:

Earlier this month, the Senate approved an amendment to the budget resolution for President Joe Biden's $1.9 trillion COVID-19 relief package that bars Congress from increasing the federal minimum wage to $15 per hour during the pandemic. But this still leaves room for legislators to increase the wage in phases, which has kept industry debate over the issue simmering.

Eighty-two percent of the operators surveyed for the NRA study said the initial planned increase to the minimum wage ($7.25 to $9.50 in 2021) and tipped wage ($2.13 to $4.95 in 2021) would hinder their recovery. Only 2% of this survey group reported wage increases would have a positive impact on their ability to bounce back from the pandemic.

But One Fair Wage's report shows that four out of seven of the states that provide tipped employees a full minimum wage with tips on top have experienced smaller declines in open hospitality businesses than the median rate of decline nationwide. The organization suggests this may be because, in part, workers in those states have enough spending power to continue supporting small hospitality businesses in their areas during the pandemic.

"Because a higher minimum wage lifts up lower-income households — although some middle-income households benefit, too — it is likely to have a stronger effect than many — possibly even most — other recession response measures state and local policymakers might consider," Dave Cooper, senior economic analyst at the Economic Policy Institute, said in One Fair Wage's report.

But NRA wrote to Congress on Tuesday arguing that the Raise the Wage Act is "the wrong bill at the wrong time" for the restaurant industry, stating that its survey findings "make it crystal clear that the restaurant industry and our workforce will suffer from a fast-tracked wage increase and elimination of the tip credit. Restaurant jobs will be critical to every local community recovering from the pandemic, but the Raise the Wage Act will negate the stimulative impact of a worthy plan."

Major restaurant chains have shared their views on the subject of minimum increases as well. TGI Fridays CEO Ray Blanchette told CNBC in January that eliminating the tipped minimum wage would result in fewer hours for workers and higher menu prices for diners, as well as a major earning gap between waitstaff and kitchen employees. McDonald's CEO Chris Kempczinski, however, told investors during its Q4 earnings call that the chain is doing "just fine" in the 29 states that have raised the federal minimum wages. McDonald's wage hikes in these markets haven't led to closures, job cuts or higher rates of automation, either, according to a four-year study by economists.