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National Restaurant Association - NY restaurateur: $15 minimum wage could end my business

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NY restaurateur: $15 minimum wage could end my business

For Sticky Lips Pit BBQ owner Howard Nielsen and his 180 employees, the consequences of a $15 minimum wage could be more severe than raising prices to meet the new costs.

The Rochester, N.Y., operator laid out the math of the increase, combined with other mandates, in testimony before the “wage board” that New York Gov. Andrew Cuomo (D) appointed to recommend a minimum wage increase for the state’s quickservice restaurants. The board hasn’t yet proposed an amount, but unions and allies are pushing for a $15 wage mandate in New York and other states and cities. New York’s minimum wage is currently $8.75 and is scheduled to increase to $9 by the end of 2015. The state’s minimum cash wage for tipped employees will rise from $5 to $7.50 at the same time.

The state legislature earlier this year rejected Cuomo’s call to increase the state minimum wage to $11.50. 

Nielsen estimates that the Jan. 1, 2016, increase in the minimum cash wage for tipped employees will add $178,000 to his labor costs, and that costs could climb another $120,000 if the state passes another minimum wage increase for all businesses. He said he also faces challenges in implementing the Affordable Care Act. “Because I have been successful and have hired more people, I am getting penalized for having over 50 full time employees. The health mandate could potentially take another $88,000 per year.”  

Those costs, combined with a recent state unemployment-tax increase and increases in payroll taxes and insurance costs, equal more than $400,000 for Nielsen’s restaurants. That’ll put the two-location company out of business, he said.

Nielsen testified at three of the four meetings of the wage board and joined the New York State Restaurant Association in warning the three-member board that an extreme minimum wage increase for quickservice restaurants could do serious damage to restaurants’ ability to hire, grow and even stay in business.

“We are talking about the potential of thousands of upstate and downstate NY businesses closing their doors,” Nielsen said “And not to mention the thousands of jobs that will go with them.” He added that he isn't opposed to a minimum wage increase, but believes increases should be made in smaller, incremental steps that consumers and businesses can adjust to. And while the wage board is focused on determining a wage increase for quickservice restaurants, Nielsen said he's concerned the next step will be a significant statewide minimum wage increase. 

Nielsen, who formerly owned a small chain of pizza restaurants, posted his full testimony on his restaurant’s website.

The wage board, which was formed by Cuomo in May, held the last of four meetings on June 22 and is expected to issue its recommendations by mid-July. New York State Restaurant Association President and CEO Melissa Fleischut provided testimony. Fleischut also penned an op-ed in Crain’s New York Business prior to the hearing in which she criticized Cuomo’s arbitrary targeting of the state’s quickservice restaurants.

“Rather than work with the legislature to find common ground through a deliberative process, the governor instead hand-picked a wage board to do his bidding,” Fleischut wrote. “The board…lacks a single representative from the restaurant industry, and yet has the power to arbitrarily, and unfairly, single out a sector of the industry for an idealized wage hike.”

The NYSRA has been leading the Save NY Restaurants Coalition, which also includes the National Restaurant Association, New York Chapter of the National Federation of Independent Business, and International Franchise Association. The coalition is waging an aggressive public education campaign to call attention to the risks the wage increase poses to jobs and opportunity in the state.

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