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“Restaurant Recession” Hits NYC Following $15 Minimum Wage

This will be a rough year for full-service NYC restaurants as they try to navigate a future with significant economic headwinds and significantly higher labor costs from the city’s $15 an hour minimum wage.

An article in the New York Eater (“Restaurateurs Are Scrambling to Cut Service and Raise Prices After Minimum Wage Hike“) highlights some of the suffering New York City’s full-service restaurants are experiencing following the December 31, 2018 hike in the city’s minimum wage to $15 an hour, which is 15.4% higher than the $13 minimum wage a year earlier and 36.4% higher than the $11 an hour two years ago. For example, Rosa Mexicana operates four restaurants in Manhattan and estimates the $15 mandated wage will increase their labor costs by $600,000 this year. Here’s a slice:

Now, across the city, restaurant owners and operators are reworking their budgets and operations to come up with those extra funds. Some restaurants, like Rosa Mexicano, are changing scheduling. Other restaurateurs are cutting hours and staffers, raising menu prices, and otherwise nixing costs wherever they can.

And though the new regulations are intended to benefit employees, some restaurateurs and staffers say that take home pay ends up being less due to fewer hours — or that employees face more work because there are fewer staffers per shift. “The bottom line is, we have to reduce the number of hours we spend,” says Chris Westcott, Rosa Mexicano’s president and CEO. “And unfortunately that means that, in many cases, employees are earning less even though they’re making more.”

In a survey conducted by New York City Hospitality Alliance late last year, about 75% of the more than 300 respondents operating full-service restaurants reported they’ll reduce employee hours this year because of the new wage increases, while 47% said they’ll eliminate jobs in 2019.

Note also that the survey also reported that “76.50% of respondents report reducing employee hours and 36.30% eliminated jobs in 2018 in response to mandated wage increases.” Those staff reductions are showing up in the NYC full-service restaurant employee series from the BLS, see chart above. December 2018 restaurant jobs were down by almost 3,000 (and by 1.64%) from the previous December, and the 2.5% annual decline in March 2018 was the worst annual decline since the sharp collapse in restaurant jobs following 9/11 in 2001.

As the chart shows, it usually takes an economic recession to cause year-over-year job losses at NYC’s full-service restaurants, so it’s likely that this is a “restaurant recession” tied to the annual series of minimum wage hikes that brought the city’s minimum wage to $15 an hour at the end of last year. And the NYC restaurant recession is happening even as the national economy hums along in the 117th month of the second-longest economic expansion in history and just short of the 120-month record expansion from March 1991 to March 2001.

Here’s more of the article:

“There’s a lot of concern and anxiety happening within the city’s restaurant industry,” says Andrew Rigie, executive director of the restaurant advocacy group. Most restaurant owners want to pay employees more, he says, but are challenged by “the financial realities of running a restaurant in New York City.” Merelyn Bucio, a server at a restaurant in Soho that she declined to name, says her hours were cut and her workload increased when wage rates rose. Server assistants and bussers now work fewer shifts, so she and other servers take on side work like polishing silverware and glasses. “We have large sections, and there are large groups, so it’s more difficult,” she says. “You need your server assistant in order to give guests a better experience.”

At Lalito, a small restaurant in Chinatown, they used to roster two servers on the floor, but post wage increases, there’s only one, who is armed with a handheld POS (point of sale) system, according to co-owner Mateusz Lilpop. Having fewer people working was the only way for him to reduce costs, he says. Since the hike, labor costs at Lalito have risen about 10 percent — from 30 to 35 percent to 40 to 45 percent of sales, he says.

These changes get passed onto the diner, some restaurateurs argue. Service can suffer due to fewer people on the floor, or more and more restaurateurs will explore the fast-casual format over full-service ones. Some restaurants are also raising prices for customers. According to the NYC Hospitality Alliance’s survey, close to 90 percent of respondents expect to raise menu prices this year. Lalito’s menu prices have increased by 10 to 15 percent. Lilpop says, and it’s not just the cost of paying his staff driving prices up — it’s a ripple effect from New York-based food purveyors’ own labor cost increases.

“If you have a farmer that has employees that are picking fruit, he has to increase his labor costs, which means he has to increase his fruit prices,” Lilpop says. “I have to buy that fruit from him at a higher rate, and it goes down the chain.”

A few economic lessons here.

  1. A reduction in restaurant staffing that results in a decline in customer service (e.g., longer wait times, less attentive wait staff, etc.) is equivalent to a price increase for customers.
  2. The increases in the city minimum wage to $15 an hour, in addition to directly increasing labor costs for restaurants, also affects the labor costs of companies that supply food, liquor, restaurant supplies, menus, etc. and causes a ripple effect of indirect higher operational costs throughout the entire restaurant supply chain as described above.
  3. Even for workers who keep their jobs, a higher minimum wage per hour doesn’t necessarily translate into higher weekly earnings, if the reduction in hours is greater than the increase in hourly wages. For example, 40 hours per week at $13 an hour generates higher weekly pre-tax earnings ($520) than 33 hours per week at the higher $15 an hour ($495).

Prediction: This will be a rough year for full-service NYC restaurants as they try to navigate a future with significant economic headwinds and significantly higher labor costs from the city’s $15 an hour minimum wage.

This article was reprinted from the American Enterprise Institute.

COLUMN BY

Mark J. Perry

Mark J. Perry

Mark J. Perry is a scholar at the American Enterprise Institute and a professor of economics and finance at the University of Michigan’s Flint campus.

EDITORS NOTE: This FEE column with images is republished with permission. Image Credit: Wikimedia Commons | CC BY 2.0

America Is Broken

Despite whatever President Obama said during his state of the union address, America the beautiful is broken.  Obama’s state of the union speech reminded me of his 2004 Democrat convention oratory.  His address was filled with socialist idealistic imagery, with attempts at igniting a passionate and mindless following by a misled and ill-informed sea of people willing to help him shove America over the cliff and unto the ash heap of history.

There were the typical political style utilization of numerous half-truths, hyperbole and non-sequiturs to make mostly non-existent and partisan points, while forging ahead with politics as usual.  To sum it up, it was a speech that became the hallmark of Barack Hussein Obama’s progressive political career.  There are some who believe he has retreated to his anti-American roots as a community organizer.

President Obama’s final presidential state of the union address provided a huge supply of sop to his far left anti-liberty political base.  It was also creatively molded to seem like a motivational speech of encouragement to a nation that in reality he disdains.  I am sure that Mr. Obama hoped that his speech would hoodwink  Americans into believing his presidency to be one of optimism, humanism, statesmanship and bi-partisan outreach.  Sure, if one is ignorant and totally void of understanding, Obama achieved that goal.  Taken in a vacuum, Obama’s speech probably secured that goal.

However, as time will reveal, it may quite likely be as ineffectual as using one of the “first black president” Bill Clinton’s state of the union speeches to characterize his presidency in isolation from Monica Lewinski.  “We the People” of America must refuse to accept the dregs of political leadership and raise our expectations.

Perhaps Americans should take a remedial course on civics, the constitutionally mandated role government and elected officials, including the president.  It has been said that knowledge is power.  As long as the people of America are either indoctrinated against the truth or simply not taught it in the first place, our rights will continue to be trampled away by big government.  At the same time, our republic as a whole s diminished in stature, power and wealth.

If president Obama truly desired to bring about a healing of the wounds his seven years has inflicted upon our republic, he could have done so during his state of the union address.  But rather, he remained on his long traveled path of promoting his doctrine of failed and wicked social, moral and political destruction.  Unfortunately, over 40 percent of the American people agree with Obama along with millions of illegal immigrants, Obama is emboldened in his gruesome goal to fundamentally change America into a land of muck, mire and misery.

The United States of America was envisioned as a blessed republic of “We the People” where the government was to be a servant of the sovereign citizens of our nation.  The government was also meant to be a mighty sword against evildoers and enemies of our republic, not a brutal beast of tyranny against law abiding sovereigns like you and I.  My Dad used to tell me that our nation and the government are both a reflection of the people of America.  Right now that is not a pretty picture ethically, morally, spiritually, or economically.

Throughout the duration of the president’s fifty nine minute state of the union speech he told half-truths and outright lies as well.  One major fib was his description of ISIS enemies as people riding around on pickup trucks and that they are not a threat to America’s existence.  The fact that he could say that with a straight face is jaw dropping.  Mr. Obama either forgot or chose not to mention that many murdering ISIS terrorists are cruising around in well fortified armored vehicles left behind by United States forces.  The Muslim ISIS are also heavily armed and with firearms and are plundering all whom they encounter, especially Black Africans and Christians.

I find it very interesting and telling how the president took people to task for daring to complain about or promote standing up to Muslims, who have come into America with a stated mission to change her.  But not once during Obama’s state of the union speech did he address the horrendous treatment of Christians or the millions of Black Africans who exist under the boot heel of Muslim abuse and humiliation.  Dear reader, it is put up or shut up time for us.  The status quo no longer has the ability to maintain or more importantly contain the forces of evil that are continuing to unite and attempt to beat America into submission to the will of enemies, both foreign and domestic.

Despite the fact that our nation’s standard of living is now lower than any time since the Korean War, or that the military is not the powerhouse it still was, even under the George W. Bush administration, or that the government schools are aiding our enemies by indoctrinating students against America and all that is good etc. etc. it is not yet over for our great republic.  All we have to do is seek providential guidance, reestablish real education and God’s forgiveness for allowing the destruction being heaped upon this country.  Then establish and stick to the political will to conduct the nation’s business in a manner that benefits our republics best interest.  Will it be difficult? Absolutely, but more importantly it will be well worth the effort.

God Bless You, God Bless America and May America Bess God.

VIDEO: 93% of U.S. Counties still in a Recession

Eric Norath from the Wall Street Journal reports:

More than six years after the economic expansion began, 93% of counties in the U.S. have failed to fully recover from the blow they suffered during the recession.

Nationwide, 214 counties, or 7% of 3,069, had recovered last year to prerecession levels on four indicators: total employment, the unemployment rate, size of the economy and home values, a study from the National Association of Counties released Tuesday found.

National Association of Counties (NACo)  in a 2015 study reports:

County economies are the building blocks of regional economies, states and the nation. The conditions of a county economy can constrain and challenge county governments, residents and businesses, while also providing opportunities. This analysis tracks the performance of the 3,069 county economies in 2015 by examining annual changes in jobs, unemployment rate, economic output (GDP) and median home prices. It also explores wage dynamics in 2014 and between 2009 and 2014.

Watch the County Economies 2015 Report – Interview with Dr. Istrate:

To read the full study click here.

The following counties have returned to prerecession levels of total employment, the unemployment rate, size of the economy and home values by the end of 2015:

  • Anchorage Borough, Alaska
  • Fairbanks North Star Borough, Alaska
  • Kodiak Island Borough, Alaska
  • Marin County, Calif.
  • San Francisco County, Calif.
  • San Mateo County, Calif.
  • Santa Clara County, Calif.
  • Denver County, Colo.
  • Dolores County, Colo.
  • Minidoka County, Idaho
  • Clark County, Ind.
  • Elkhart County, Ind.
  • Gibson County, Ind.
  • LaGrange County, Ind.
  • Marshall County, Ind.
  • Steuben County, Ind.
  • Vanderburgh County, Ind.
  • Adams County, Iowa
  • Clayton County, Iowa
  • Dubuque County, Iowa
  • Jefferson County, Iowa
  • Johnson County, Iowa
  • O’Brien County, Iowa
  • Plymouth County, Iowa
  • Story County, Iowa
  • Douglas County, Kan.
  • Ellis County, Kan.
  • Greeley County, Kan.
  • Hamilton County, Kan.
  • Haskell County, Kan.
  • Hodgeman County, Kan.
  • Johnson County, Kan.
  • Leavenworth County, Kan.
  • Miami County, Kan.
  • Mitchell County, Kan.
  • Norton County, Kan.
  • Rawlins County, Kan.
  • Rush County, Kan.
  • Russell County, Kan.
  • Stevens County, Kan.
  • Wyandotte County, Kan.
  • Bullitt County, Ky.
  • Calloway County, Ky.
  • Campbell County, Ky.
  • Jefferson County, Ky.
  • Madison County, Ky.
  • Marshall County, Ky.
  • Nelson County, Ky.
  • Oldham County, Ky.
  • Scott County, Ky.
  • Shelby County, Ky.
  • Washington County, Ky.
  • Barry County, Mich.
  • Kent County, Mich.
  • Ottawa County, Mich.
  • Blue Earth County, Minn.
  • Carlton County, Minn.
  • Clay County, Minn.
  • Le Sueur County, Minn.
  • Marshall County, Minn.
  • Nicollet County, Minn.
  • Olmsted County, Minn.
  • Pennington County, Minn.
  • Polk County, Minn.
  • Rock County, Minn.
  • Benton County, Miss.
  • Union County, Miss.
  • Custer County, Mont.
  • Dawson County, Mont.
  • Deer Lodge County, Mont.
  • Fallon County, Mont.
  • McCone County, Mont.
  • Meagher County, Mont.
  • Musselshell County, Mont.
  • Powder River County, Mont.
  • Powell County, Mont.
  • Richland County, Mont.
  • Roosevelt County, Mont.
  • Sheridan County, Mont.
  • Valley County, Mont.
  • Box Butte County, Neb.
  • Chase County, Neb.
  • Cheyenne County, Neb.
  • Clay County, Neb.
  • Dawson County, Neb.
  • Douglas County, Neb.
  • Dundy County, Neb.
  • Furnas County, Neb.
  • Garden County, Neb.
  • Garfield County, Neb.
  • Gosper County, Neb.
  • Hayes County, Neb.
  • Keya Paha County, Neb.
  • Kimball County, Neb.
  • Lancaster County, Neb.
  • Loup County, Neb.
  • Perkins County, Neb.
  • Red Willow County, Neb.
  • Sarpy County, Neb.
  • Saunders County, Neb.
  • Thurston County, Neb.
  • Wayne County, Neb.
  • Anson County, N.C.
  • Bowman County, N.D.
  • Burleigh County, N.D.
  • Cass County, N.D.
  • Divide County, N.D.
  • Dunn County, N.D.
  • McKenzie County, N.D.
  • Mountrail County, N.D.
  • Sioux County, N.D.
  • Stark County, N.D.
  • Traill County, N.D.
  • Ward County, N.D.
  • Williams County, N.D.
  • Delaware County, Ohio
  • Fairfield County, Ohio
  • Franklin County, Ohio
  • Greene County, Ohio
  • Knox County, Ohio
  • Licking County, Ohio
  • Madison County, Ohio
  • Putnam County, Ohio
  • Union County, Ohio
  • Alfalfa County, Okla.
  • Canadian County, Okla.
  • Grady County, Okla.
  • McClain County, Okla.
  • Woods County, Okla.
  • Chesterfield County, S.C.
  • Oconee County, S.C.
  • Aurora County, S.D.
  • Anderson County, Texas
  • Andrews County, Texas
  • Atascosa County, Texas
  • Bastrop County, Texas
  • Bexar County, Texas
  • Blanco County, Texas
  • Brazos County, Texas
  • Caldwell County, Texas
  • Calhoun County, Texas
  • Collin County, Texas
  • Comal County, Texas
  • Crane County, Texas
  • Dallam County, Texas
  • Dallas County, Texas
  • Deaf Smith County, Texas
  • Denton County, Texas
  • DeWitt County, Texas
  • Dimmit County, Texas
  • Duval County, Texas
  • Ellis County, Texas
  • El Paso County, Texas
  • Fannin County, Texas
  • Fayette County, Texas
  • Frio County, Texas
  • Gaines County, Texas
  • Glasscock County, Texas
  • Grayson County, Texas
  • Grimes County, Texas
  • Guadalupe County, Texas
  • Hansford County, Texas
  • Hartley County, Texas
  • Hays County, Texas
  • Hockley County, Texas
  • Houston County, Texas
  • Hunt County, Texas
  • Jackson County, Texas
  • Johnson County, Texas
  • Karnes County, Texas
  • Kaufman County, Texas
  • Kendall County, Texas
  • Kenedy County, Texas
  • Kent County, Texas
  • La Salle County, Texas
  • Live Oak County, Texas
  • Lubbock County, Texas
  • McCulloch County, Texas
  • McLennan County, Texas
  • McMullen County, Texas
  • Maverick County, Texas
  • Medina County, Texas
  • Navarro County, Texas
  • Parker County, Texas
  • Parmer County, Texas
  • Randall County, Texas
  • Reeves County, Texas
  • Rockwall County, Texas
  • San Jacinto County, Texas
  • Schleicher County, Texas
  • Scurry County, Texas
  • Shackelford County, Texas
  • Tarrant County, Texas
  • Terrell County, Texas
  • Travis County, Texas
  • Upton County, Texas
  • Ward County, Texas
  • Webb County, Texas
  • Wharton County, Texas
  • Williamson County, Texas
  • Wilson County, Texas
  • Wise County, Texas
  • Yoakum County, Texas
  • Zapata County, Texas
  • Chittenden County, Vt.
  • Franklin County, Vt.
  • Lincoln County, Wash.
  • Calumet County, Wisc.
  • Dane County, Wisc.
  • Eau Claire County, Wisc.
  • Green County, Wisc.
  • Lafayette County, Wisc.
  • Outagamie County, Wisc.
  • Trempealeau County, Wisc.

RELATED ARTICLE: Six Years Later, 93% of U.S. Counties Haven’t Recovered From Recession, Study Finds