At the end of 2015, just before New York State hiked minimum wages, we warned that the price of food was about to surge as restaurant managers passed through rising wages to end clients. Meanwhile, some restaurants, worried about losing their clients, opted to instead eliminate tipping entirely - that primary source of incremental wages for thousands of food industry workers - while hiking base prices by as much as 30%, with the money going toward higher payroll. Worst of all, many restaurants simply laid off much of their staff who suddenly became unaffordable.
In short, there would be less money for everyone, even as food prices surged, disappointing everyone in the process.
Now, a little over two years later, just as so many libertarians predicted would happen, the NYC restaurant financial situation has turned from merely painful to grotesquely dire for the vast majority of managers as a result of record mandatory wage hikes over the past couple of years, in addition to rising rent, food and other costs.
The result: restaurant owners are demanding that the socialist administration of Bill de Blasio and other City Hall lawmakers allow them to levy a surcharge on all diners to cover their bloated expenses. Without the surcharge, which could range from 3% to 5% - or more - many restaurant owners said they will go out of business.
As MarketWatch reports, a group representing more than 100 restaurateurs - among them such exclusive venues as Nobu, Tao, Smith & Wollensky, Tribeca Grill and Daniel - drafted a giant letter that was displayed on the steps of City Hall Wednesday. The group claims to have weathered nine mandated wage increases over the past several years. Next up: a minimum wage hike in 2019, to $15.
“Allow us the option of using a clearly disclosed surcharge to generate the revenue to simply survive,” the group said in an open letter to Mayor de Blasio.
Among the complaints the restaurants list are the following:
- We have laid off tipped employees including, servers, bartenders, bussers and runners
- We have cut hours for many employees.
- We have laid off highly compensated employees.
- We have changed our menus to try to control kitchen payroll.
- We have closed restaurants, which will continue closing at an increasing rate.
- We have been forced to increase menu prices. These price increases have not and cannot come close to offsetting mandated wage increases and real estate costs.
- We do not consider opening new full-services restaurants in NYC.
Full letter below:
Yes, it turns that not even Daniel - where prix fixe dinners run in the hundreds - can afford to pay a $15 minimum wage... so what's left for all other NYC restaurants that charge far less?
Another irony: New York City - with its socialist administration - is the only place in the U.S. that bans such a fee even as it mandates minimum wage increases virtually every year.
While restaurants have been lobbying their direct city regulator, the Department of Consumer Affairs, which bars such a surcharge, for the past two years to no avail the issue is reaching a new urgency now as Gov. Cuomo is considering raising the minimum wage for tipped employees to $15 an hour, abolishing the current minimum wage of $8.65 for tipped employees.
Absent the ability to pass on this price increase to customers, many restaurants would promptly go insolvent.
But why not just raise food prices instead of sticking on an additional surcharge? According to Andrew Rigie, executive director of the New York City Hospitality Alliance, restaurant owners would rather use a surcharge to bring in additional revenue than raise individual menu prices because it is less likely to scare away diners.
“It’s a consumer perception issue,” Rigie said, because apparently diners are so stupid they don't realize they will still end up paying more, only instead of knowing the hit in advance, they will only see it in the final bill.
Already Hollywood stars like Sarah Jessica Parker are throwing their considerable influence into the debate, framing it as a social justice issue. Parker is headlining a May 21 gala fundraiser for One Fair Wage, which seeks to abolish the tipped employee minimum wage. It gets better: tips lead to sexual harassment, the group claims.
Veteran restaurateurs like Drew Nieporent, owner of Nobu and Tribeca Grill, said if Cuomo does away with the lower minimum wage — and the city doesn’t allow a surcharge to cover the added expense — it will be “disastrous” for restaurants.
Meanwhile, other liberal bastions such as Seattle and California, where wages have grown fast, are increasingly turning to surcharges to defray their costs. Translated: restaurant price are rising at a roughly 5% clip each year.
Los Angeles eatery Bestia, for example, adds a 4% charge to all checks, according to its menu “to benefit our back of the house employees.” Soon, such "benefits" are coming to every restaurant near you, unless of course NYC's socialist administration refuses. In which case, watch as the liberal dream of constantly rising wages translates into a nightmare for New Yorkers, where only the most exclusive and expensive restaurants can operate as the lower and medium tiers go out of business, proving once again that socialism is always a terrible idea.