Last week the Massachusetts Senate voted in a landslide to increase the minimum wage from $8 per hour to $11 per hour over three years. Included in that increase would be the hourly pay rate for tipped wage employees (most notably servers in the restaurant industry), the first of which would take place since 1999. Currently, tipped wage employees make a base rate of $2.63 per hour.
BostInno spoke with Bob Luz, CEO of the Massachusetts Restaurant Association, to find out why these workers haven’t received a raise from the state in 14 years and he told us simply, “it works.” And, moreover, servers aren’t technically minimum wage positions.
“I would say this is a very steep increase over a very short period of time,” Luz told BostInno. “It’s a 37 percent increase over three years. The restaurant industry is not a minimum wage industry. The average tipped employee earned $13.13 per hour, which ranked number 1 in the nation. When we have the highest wages in the nation, I think it shows these are not minimum wage earners.”
The $13.13 per hour figure is a culmination of the $2.63 base rate coupled with the average number of tips one receives. Luz pulled his numbers directly from the U.S. Bureau of Labor Statistics.
But what Luz is most concerned about is the “crippling” effect the wage increase could have on the restaurant industry as a whole. Many restaurants are still recovering from the recession and a wage raise, “voted on and approved at 50 percent… to $4.50,” would subsequently affect the likes of menu prices by an estimation of 15 percent, according to Luz.
Of course, its often the inexpensiveness of the menu that will draw us to particular restaurant. Granted, dish prices are only a small factor amongst a slew of others that pique our interest in one locale as opposed to another, but restaurants post their menu outside their door for a reason: to draw in customers based on the excellence and dexterity of their food items, coupled with affordable costs.
“I’m concerned about, quite honestly, the only way restauranteurs would be able to absorb this would be to take menu prices up dramatically… They’re very reluctant to raise prices because they know how delicate the economy is now. Any time we raise prices, we see a drop and it’s cripping,” noted Luz.
Not only will a wage increase affect menu prices, though, but it’ll likely have a drastic affect on how restauranteurs staff their joints. Typically, tipped wage employees comprise approximately 65 percent of an eatery’s full service workforce. And when they’re already making well above minimum wage at their current rate, an increase will be nothing more than a massive hemorrhage.
But the issue is also more than just having to increase prices. The Senate-approved bill hopes to tie minimum wage to the Consumer Price Index (CPI) specific to the Northeast for the first time, meaning wage increases would parallel the rate of inflation and rise accordingly every year. While that sounds great in theory, Luz reminds us that if the value of the dollar were to deflate, there would be no likewise decrease in wages.
So while restauranteurs wait on bated breath as to how the state House of Representatives will tackle the legislation – should it pass, Governor Deval Patrick has already expressed his support and intent on signing the bill into law – they’re doing all they can to help educate House members on how devastating the measure truly is for their industry. Luz also mentioned that House Speaker Bob DeLeo has said that in order for the wage increase to come intro fruition, there must be some savings elsewhere. As to where that is, nobody’s sure at the moment. Maybe “unemployment insurance reform,” suggests Luz.
