A New Jersey-based restaurateur told a Senate panel that increasing the federal minimum wage would have a negative effect on the restaurant industry.
Melvin “Mel” Sickler, a multiunit franchisee of the Auntie Anne’s Pretzels and Cinnabon brands, testified March 14 before the U.S. Senate Health, Education, Labor and Pensions Committee hearing on recently introduced legislation that would increase the federal minimum wage rate by 39 percent, from $7.25 an hour to $10.10 per hour.
Sickler told the panel that an increase could force operators to reduce employee hours, postpone plans for new hiring and expansion, and reduce the number of restaurant employees.
“The restaurant industry is dominated by small businesses – more than seven in 10 eating and drinking establishments are single-unit operations,” Sickler said. “Food and labor costs are the two most significant line items for a restaurant. With average pre-tax margins of roughly 4 to 6 percent, increases in food and labor costs can have a dramatic impact on a restaurant’s bottom line. Only a small minority of restaurants will be able to handle a 39 percent minimum wage increase without taking actions that will harm workers.”
Sickler, who testified on behalf of the National Restaurant Association, also noted the decline of restaurant job opportunities in Oregon after the state began raising its minimum wage above the federal level in 1997. All restaurants in the United States employed an average of 16.9 workers in 2011, unchanged from 1996. Oregon’s restaurants, however, employed an average of only 13.8 workers in 2011, or 2.6 fewer employees per establishment than they did before the state’s minimum wage began rising above the federal level in 1997.
In addition, David Rutigliano, co-owner of the six-unit SBC Restaurant Group in Shelton, Conn., testified on behalf of the Connecticut Restaurant Association, saying the combination of an increased minimum wage, the enactment of mandatory paid sick leave legislation in his state and compliance with the health care law – all at a time when the economy and many small businesses are still struggling – would be a tough burden.
“At a time when many businesses are struggling to keep their doors open, mandating wage increases will only hurt those employees which this proposal seeks to help,” he said. “In my home state of Connecticut, where we already have the fourth-highest minimum wage at $8.25 and one of the highest tipped wages at $5.69, there is currently a proposal in the state legislature that seeks to increase the minimum wage to $9.75 and the tipped wage to $6.73. That, along with the recently enacted mandatory paid sick leave law, is making an already difficult situation even worse. Add to that the Affordable Care Act, and I ask anyone here to explain how … the restaurant industry, which is labor heavy and runs on extremely low profit margins, will survive let alone prosper?”
Sickler told the committee that the restaurant industry, while serving as the gateway for many young people to enter the workforce, also provides great opportunities for advancement.
“The National Restaurant Association calls on members of this committee and all of those serving in Congress to focus on policies that encourage more people, not fewer, to enter the workforce,” he said. “Our collective goal should be to get our young people hired and on the path to achieving the American Dream.”
Pictured, top right: Franchisee Melvin Sickler testifies at Senate hearing on minimum wage.