April 8, 2019
by Jennifer Tiedemann
New York City’s restaurant workers are finding out that a $15-per-hour minimum wage isn’t delivering what they were promised.
The city’s new minimum wage law went into effect at the very end of 2018—for every employer with 11 or more workers, the minimum wage moved from $13 to $15 per hour. (New York City restaurant workers who are eligible for tips must receive a base wage of $10 an hour, and if tips don’t raise their earnings up to the $15-per-hour minimum, restaurants are required to make up for that compensation gap.)
This increase marked the third such increase since the end of 2016, when the city’s base wage went to $11 per hour. In fact, New York City’s minimum wage has doubled over the past seven years. That’s a big increase in a short period of time—and many New York City restaurants are showing signs of financial strain.
Crain’s New York recently reported that “last year, for the first time in more than a decade, the number of restaurant jobs in New York City declined. And early data show the erosion continued in the first two months of the year, with the losses almost entirely in full-service restaurants.” In 2018, New York City lost nearly 6,000 restaurant jobs, or about 3.4 percent of its total.
Last year, when New York City was still considering a $15-per-hour minimum wage, Goldwater Institute Executive Vice President Christina Sandefur wrote that “mandatory minimum wage laws are laws against jobs.” And now that that minimum wage is law, the data is bearing that out. While the number of restaurant jobs has dropped over the last year, at the same time, the number of restaurants has simultaneously increased—from 24,865 two years ago to 27,043 today. So restaurants in the Big Apple are making do with fewer employees—not a surprising finding given that it’s become more expensive to hire and keep restaurant workers. (And this isn’t just a New York problem—check out this recent Goldwater Institute report on how Arizona’s $12-per-hour minimum wage law has hurt job creation—in the restaurant business and other industries.)
The New York City data paint a pretty negative picture, but how has the minimum wage increase really affected restaurant owners and employees? Joe Bloostein owns Heartland Brewery, a small chain of New York City sit-down restaurants with locations in Times Square and the Empire State Building—and he says that that increase has really squeezed his business. “We lost control of our largest controllable expense,” Bloostein told CBS MoneyWatch in January. “So in order to live with that and stay in business, we’re cutting hours.”
While New York City’s intention in raising the minimum wage was to boost compensation, that only works when business owners aren’t forced to cut hours and jobs—and unfortunately, for many restaurant owners, shouldering the burden of a higher minimum wage requires that they do just that. And that means many New York City restaurant workers won’t see higher pay—but they may see their job go away entirely.
Jennifer Tiedemann is the Deputy Director of Communications at the Goldwater Institute.