Advocates for a higher minimum wage scored another victory on Wednesday when New York State voted to raise the wages of fast food restaurant workers to $15 an hour.
The increase, which represents a 71 percent hike from the current minimum wage in the state, will be phased in over the course of the next six years.
And while New York State Governor Andrew Cuomo said the wage bump would create momentum for wage increases in other states, New York franchise owners expressed unhappiness about the proposal, saying they are being unfairly singled out.
“If you are going to do a wage increase in any state, it should be across the board,” says David Sutz, a franchise owner of four Burger King restaurants in New York, which he’s operated since the 1980s. “It’s like I am being persecuted because of where I made a decision to invest my time and money for the past 40 years, and now I’m being labeled the bad guy, and grouped in with CEOs making millions of dollars a year.”
Sutz employs 180 workers, the majority of whom earn the state’s current minimum wage. He says in the past few years, payroll costs have become the biggest expense for his business, surpassing the costs of food.
He adds that New York also has among the highest property taxes and insurance costs in the nation, and the wage hike will wipe out his 3 percent profit margin entirely. And it will likely lead to layoffs or having to cut back hours. It’s also going to cause higher prices for his customers, Sutz said.
Behind the Hike
New York’s three-person fast food wage board voted unanimously to raise the minimum wage for fast food workers, which it defines as working in an establishment with 30 or more locations. New York City will be the first municipality affected, and restaurants there will be required to raise their minimum hourly wages to $10.50 by December 31 of this year, and then $12 by the end of 2016. Restaurants in the rest of the state will have to raise their wages to $9.75 by the end of the current year, and to $10.75 by 2016. By 2021, fast food workers across the state should all be earning, at a minimum, $15 an hour.
The proposal will be open to public comment for 15 days before being finalized, starting July 27. And groups including the New York State Restaurant Association say they will voice their opposition during the comment period.
“The likelihood of this being overturned by a state process is unlikely, but there is a pretty good chance we will see this challenged in court,” says Jay Holland, the government affairs coordinator for NYSRA.
Some wage experts say New York’s move is a positive development, as it will give many low-income workers more money to spend locally, which will create a ripple effect in the economy. It's also likely to lead to proposed wage increases in other industries, for example in the retail sector, and in other states as well. And, presumably, if the New York economy improves after giving these workers a pay hike, other states might follow suit.
“Other workers certainly would like to see their wages go up as well, and potentially we will start to see broader increases,” says Mark Price, a labor economist for the Keystone Research Center, a nonpartisan policy think tank in Harrisburg, Pennsylvania. “This will also create some momentum to think about those industries that can support increases and can get to $15 an hour quickly.”
Nursing homes, for example, might be another candidate, Price says.
Price adds that the current minimum wage, in New York state and nationally, has scarcely kept pace with inflation. In today’s dollars, the minimum wage from 1968, which was $1.60 an hour, would be worth $10.56.
Wages on the Rise
Certainly New York’s move takes place amid a contentious national debate about raising the minimum wage. Specifically, it comes against a backdrop of groups such as Fight for $15, which has been organizing fast food workers to demand higher wages. And it follows a move by McDonald’s to raise its average minimum wage to more than $10, and to give employees with a year’s service 20 hours of paid time off.
President Obama has similarly made increasing the minimum wage to $10.10 an hour a national concern. In June 2014, he issued an executive order raising the minimum wage for employees of federal contractors to $10.10. Raising the minimum wage also featured prominently in the president's State of the Union address in January.
But Congress has pushed back hard against the federal wage increase, with legislation to increase the minimum wage to $10.10 an hour stalling in the Senate last April.
Currently 29 states have raised their minimum wages above the federal minimum. Numerous cities, such as Chicago, San Francisco, and Seattle, have minimum wages higher than either their state or federal wage floors.
Meanwhile, groups like the Employment Policies Institute, a conservative think tank, say the $15 minimum wage will have a negative impact on New York’s fast food franchise owners.
EPI polled nearly 1,000 fast food operators in May about the impact of such an increase on their businesses. Seventy percent said they would be very likely to raise prices in response to such an increase. Nearly 85 percent said they were likely to reduce employee hours. And 45 percent said they will either be very likely or somewhat likely to close their restaurants in response to the wage hike.
And for Sutz, the impact of the increase will cut even deeper, he says.
“I am a small-business owner, and I am in daily contact with everyone in the neighborhood, and I employ you and your kids and your friends, and I support the local organizations and the churches and the synagogues, the police departments and the fire departments,” Sutz says. “I support all of these people, and I feel like I am being punished.”