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National Restaurant Association - Opportunity at risk: Gov. aims for restaurant wage mandate

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Opportunity at risk: Gov. aims for restaurant wage mandate

With teen unemployment already hovering just above 20 percent, New York Gov. Andrew Cuomo (D) announced a plan that could make the job search much harder for teens across the state: He has decided to create a “wage board” that will have the authority to raise the minimum wage paid by the state’s quickservice restaurants — and no other businesses — without legislative approval.

“The idea that a state’s executive branch can unilaterally target one sector of employers in an unprecedented move around a democratically elected legislature is extremely alarming,” National Restaurant Association President and CEO Dawn Sweeney said.

Cuomo directed his state labor commissioner to create a panel to study wages in the fast food industry and recommend what an “adequate wage” might be. The NRA strongly opposes the governor’s move and will work closely with the New York State Restaurant Association to ensure that the interests of QSRs and their employees are represented as the the panel reviews industry wages.

The members of the panel are Buffalo Mayor Byron Brown, SEIU Secretary-Treasurer Mike Fishman, and Kevin Ryan, chairman and founder of online retailer Gilt, MongoDB, Business Insider and Zola.  In his opening statement to the panel May 20, New York Acting Labor Commissioner Mario Musolino said the 3-member panel has 45 days to come up with a recommendation for wages "fast food chains" should be required to pay. The wage board is expected to further flesh out the definition, but Musolino said last week "fast food chains" refers to "limited service restaurants, where customers order at the counter and pay in advance, which are large chains with multiple locations nationally."

“Singling out a sector of one industry to have a higher minimum wage than all other occupations is unfair and arbitrary," said NYSRA President and CEO Melissa Fleischut. "The minimum wage is rightfully set by the legislature and should affect all businesses equally.”

Young and unskilled workers stand to suffer the most when mandated starting wages climb. Restaurant operators faced with rising costs are often reluctant to hire younger workers. New York’s teen unemployment rate of 20.2 percent is still well above its pre-recession average of 16.7 percent between 2003 and 2007, according to figures from the Bureau of Labor Statistics.

“The restaurant industry trains New York’s workforce and provides real pathways to the middle class and beyond. Dramatic increases to the minimum wage will hinder restaurant owners’ ability to continue to provide entry-level opportunities and stepping stones for those who need it most,” Sweeney said.

In his announcement, made through an opinion piece in the New York Times, Cuomo made a number of inaccurate and misleading statements about the industry. For example:

  • The governor claims that labor costs are low and profits are high in the restaurant industry. In reality, labor is often one of the top costs for restaurant operators, accounting for a median of about 30 percent of total sales, according to National Restaurant Association research. And Association research shows profit margins in the industry are razor-thin, averaging 3 percent to 6 percent.
  • Cuomo characterized QSRs as multi-billion-dollar, corporate-owned entities. In fact, the majority of New York QSRs—69 percent—are independently owned restaurants, including 25 percent that are independently owned by franchisees. Only 6 percent of quickservice restaurants in New York are owned by a corporate brand, according to NRA research. 

Cuomo didn’t target a specific amount for an increase but his recent proposal to increase the state’s minimum wage to $11.50 from $8.75 failed to pass the state legislature.

Studies on the impact of statewide minimum wage increases in four other states  projected the loss of tens of thousands of jobs in each state.

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