Bills have been introduced in the House and Senate to dramatically increase the federal minimum wage. The Minimum Wage Fairness Act (S. 2223, by Sen. Tom Harkin, D-Iowa), and the Fair Minimum Wage Act of 2013 (H.R. 1010, by Rep. George Miller, D-Calif.) would raise the current federal minimum wage to $10.10 over two and a half years -- a nearly 40 percent increase -- and automatically index the wage to inflation each year after that, regardless of economic conditions. The legislation also calls for increasing the minimum cash wage for tipped employees under federal law until it reaches 70 percent of the federal minimum wage. This means the minimum cash wage for tipped employees would triple, in stages, to $7.07. The wage then would be indexed to inflation.
10 Reasons Why $10.10 Legislation Won’t Work
Impact of Mandatory Wage Hikes
Alarmingly, the nation is experiencing the lowest labor participation rate in three decades. Unemployment in the U.S. remains above 7 percent. Teen unemployment is over 22 percent, with higher rates in some urban and rural areas. According to the U.S. Bureau of Labor Statistics, 11.3 million Americans are unemployed, and another 8.1 million are involuntarily working part-time. An additional 2.3 million are defined as “marginally attached” to the workforce, meaning they are seeking work but have not actively looked for a job in the past four weeks. Collectively, 21.6 million Americans are unemployed, marginally attached to the workforce, or involuntarily working part time.
As businesses struggle to recover from the economic recession, dramatic, mandatory wage increases such as those proposed under the Fair Minimum Wage Act of 2013 would place yet another financial burden on business owners who are already feeling the pressures of a weak economy and additional costs and regulatory complexity associated with the Affordable Care Act.
Restaurants are a critical provider of employment to millions of individuals. They are labor-intensive businesses that already devote about a third of their sales to wages and benefits. Pre-tax profit margins for restaurants typically range from 3 to 5 percent. Many restaurateurs would be forced to limit hiring, increase prices, cut employee hours or implement a combination of all three to pay for the wage increase. According to National Restaurant Association research, 58 percent of restaurant operators increased menu prices and 41 percent reduced employee hours following the 2007 minimum wage increase.
Young people across the country look to restaurants for their first jobs. A mandatory wage increase could further restrict opportunities for young and less-skilled individuals.
Download the National Restaurant Association’s expanded issue brief on the minimum wage.
NRA contacts: Angelo Amador, Ryan Kearney