The Minimum Wage Hike Hangover Arrives: Dining Out To Cost 10% More Starting January 1

Tyler Durden's picture

One year ago, when the brainwashed economist Ph.D intelligentsia was stampeding over each other to come up with the most hyperbolic terms to dub the recovery that would be unleashed on the economy as a result of plunging oil, and gas, prices - with "unambiguously good" being our personal favorite - we would write post after post explaining just how wrong this is, and how in a hyperfinancialized economy, a 2-year record collapse in oil prices is about as "unambiguously bad" as it gets, and not just only for the hundreds of thousands of highly paid energy sector workers who had been the only source of in the early years after the financial crisis.

Back then US GDP had risen 2.9% over the prior year; it has since tumbled to 2.1% and is sliding, while the rest of the world, especially the oil-producing nations, is gripped in a severe recession which has already spread to the US manufacturing sector and will soon drag down US services into a recession as well, aborting the Fed's rate hike cycle.

And then there was the idiocy with raising minimum wages which was supposed boost overall compensation: in another instance showcasing the real intellectual capacity of career and academic economists and those clueless enough to listen to them, we warned repeatedly that even the smallest of mandatory wage hikes would ripple through the economy and unleash extensive price increases across the board, not to mention countless job cuts as small and medium business, already struggling with keeping profits from plunging, had to find ways to eliminate overhead or raise prices.

As a result of this latest forced governmental intervention into the economy, everyone would be far worse off.

But while we had seen isolated cases of mostly food sector companies push prices higher, so far there has not been a coordinated industry-wide effort that will see a sizable impact on food inflation. This will change for New Yorkers starting on January 1, when the cost of a night out in the Big Apple is about to get even pricier.

As the Post reports, NYC diners can expect their restaurant and bar tabs to rise as much as 10 percent, plus tips, as restaurants seek to protect their profit margins from mandatory wage hikes; some eateries will eliminating tipping entirely - that primary source of incremental wages for thousands of food industry workers - and are hiking base prices by as much as 30%, with the money going toward higher payroll.

As a result even less money will end up going in any one individual worker's pocket; worse those who are ambitious and seek to stand out from the crowd will see their efforts diluted as their outsized contribution is repaid at the same rate as everyone else: easily the worst aspect of socialism.

The reason for the across the board increases: "squeezed restaurateurs face a mandatory increase in wages that is changing the economics of the restaurant business and may result in a seismic shift in how workers are paid and the number of hours they work. New York’s minimum wage will rise to $9 an hour from $8.75, while the wage restaurants pay servers — not counting the tips customers pay — is going up by 50 percent, to $7.50 an hour."

This will have a profound impact on the bottom line, if not on the likes of massive corporations like McDonalds, then certainly on your favorite around the block restaurant.

“Higher wages will cost us $600 a week,” said Jon Goldstein, a partner in Bistro 61, an Upper East Side eatery, which is experimenting with scheduling tweaks before it considers menu increases.

 

 

“We’ll stagger our servers’ shifts so they don’t all come in at the same time or for a full shift, and we’ll make sure we don’t pay overtime,” Goldstein said.

Which means less money for everyone.

Some of the most famous names will be impacted too: P.J. Clarke’s, which operates three eateries in the city, estimates that the wage hikes will cost it $200,000 per restaurant and that its prices will go up nearly 4 percent next year. At one of its locations, the pub will eliminate table-busing positions.

“We’ll make smaller sections for the servers so that, instead of 16 seats, they’ll have 12 seats,” said co-owner Philip Scotti “We’ll try it at one restaurant and see how it works.”

 

At American Whiskey, a cavernous bar and restaurant at West 30th Street, diners can expect to see their tabs increase between 5 percent and 10 percent, said owner Casey Pratt.

 


 

It's not just the food: draft and bottled beers will go up by $1 and $2, to $8 and $9, while some main dishes will tick up by $2.

 

“I don’t think it’ll be enough to keep people away,” said Pratt.

Pratt will find out soon enough just what the price elasticity of New Yorkers for alcohol truly is.

For some hiking prices is not an option so they have to do the only other thing they can: cut costs: smaller and lesser known restaurants don’t feel they have the power to raise their prices enough to eliminate tipping altogether like celebrity restaurateurs Danny Meyer and Tom Colicchio, who are rolling out such changes in their restaurant empires.

“Everyone sells pizza,” said Jason Brunetti, who owns Pizzetteria Brunetti in the West Village. “What’s going to justify me selling pizza for $3 more when you can get a margherita pie at a thousand different places?”

 

 

Instead, Brunetti is trying to eliminate overtime pay by hiring a part-time employee to make up the difference.

 

By ending tipping, restaurants can sidestep the tipped minimum-wage pay hike. That makes the move even desirable for restaurants that would rather pocket the higher revenue while retaining the flexibility to raise prices as well as wages for workers.

And then comes the spin: restaurateur Gabriel Stulman, who owns six restaurants in the West Village, announced last week he’s eliminating tipping on Jan. 4 at Fedora and will consider doing so at his other eateries. “While the prices for individual menu items may seem high at first, the overall cost of the meal will be only slightly greater under the new system,” according to the restaurateur’s site.

Sure, just call it the hedonically-adjusted ObamaWage tax: "it may seem high at first, but once the zombification settles in, it will all fall into place."