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Legislative Budget Hearing Examines $15 Minimum Wage

Raising the minimum wage to $15 per hour was the focus of the State Legislature’s Workforce Development Budget Hearing this month and the Association was there to speak up for you. Our testimony reminded the legislative fiscal committees that you’ve had to absorb a 24% increase in the minimum wage over the past three years and that the minimum wage for tipped workers in our industry was increased from $5.00 to $7.50 per hour on December 31st – a 50% increase covering about half the typical restaurant’s workers. In addition, the Association told the Committee that we find the “offsets” proposed by the Governor in the Executive Budget to “help soften the blow” of the massive wage increase would barely make a dent in the exorbitant costs imposed on our members.

We made it clear to the budget panel that while the Governor’s proposal leaves tipped workers alone, under the existing Labor Law, any increase in the minimum wage by the Legislature would require a Wage Board to be appointed within six months by the Labor Commissioner. And the Commissioner would unilaterally determine the cash wage for tipped food service workers – the only workers whose minimum wage rate would be set by Executive fiat rather than by the laws enacted by the State Legislature. We pointed out that it was entirely possible this would result in the elimination of tipping or the tip credit which would cause significant economic harm to our members’ businesses and result in massive disruption in our industry.

Rather than just berate the legislators, our testimony informed them about the history of the tipped wage and set the record straight. It pointed out that over the past thirty years the cash wage for tipped workers has been set at roughly two-thirds (67%) of the minimum wage and when raised it typically was increased at the same rate as the minimum wage was increased – whether established by statute or by a Wage Order of the Commissioner of Labor. The law recognized the total compensation received by tipped food service workers, cash wages plus tips, and set the cash wage at a rate that requires all workers to earn at least the minimum wage.

It’s important for legislators to understand that this historical balance was upset with the implementation of the most recent minimum wage increase (approved by the Legislature in 2013). They changed the law to increase the minimum wage from $7.25 to $9.00 in three steps – a 24% increase in total – and expected the Commissioner of Labor to raise the tipped wage by the same percentage through the Wage Order process. But the Labor Commissioner chose to raise the cash wage for tipped workers from $5.00 to $7.50 per – a 50% jump in one fell swoop.

Experience suggests that the impact of excessive wage is felt by employees. Yet, despite this obvious fact the Commissioner of Labor will likely make the same mistake again – if given the chance. And our legislators must prevent this or your employees will take it on the chin again. Our testimony urged the legislators not to leave the fate of your business and your employees’ jobs in the hand of an unelected bureaucrat.

We took the opportunity during the Economic Development Budget Hearing to appear before the budget panel and highlight the need for initiatives to improve your business climate – whether or not the minimum wage is increased. We told the legislators of the need to modernize the Alcoholic Beverage Control laws to improve your bottom line including changing the pricing rules and permitting Sunday morning sales. And while we didn’t intend to talk about the minimum wage, several legislators demonstrated familiarity with the history and raised concerns about further increases in the minimum wage on the hospitality industry.

There’s more work to be done and we need your help in order to get through this latest challenge to your business. Please join us in Albany on March 8th for Small Business Day or via the “Virtual Small Business Day” (see below). A strong showing of small business owners will ensure our voices are heard. A poor showing will send a different message – so please join us in Albany.