In political battles to raise the minimum wage, activists love to trot out a handful of business owners who support new mandates. These so-called “high road” employers — part of an umbrella group called Business for a Fair Minimum Wage — act as a foil for other businesses who warn of the consequences of forcing higher labor costs on low-margin employers.
It’s a clever public-relations trick, but a closer look at this holier-than-thou group of business owners finds that they’re not the saints they claim to be.
Take the Washington region’s own Andy Shallal, owner of the popular Busboys & Poets restaurants. Mr. Shallal has figured prominently in the most recent debate over raising the federal minimum wage. For instance, in a press conference staged earlier this month by Sen. Tom Harkin, Iowa Democrat, and Rep. George Miller, California Democrat, Mr. Shallal bragged that he already pays his employees at least $10.25 an hour. As he said at the time, “I am living proof that you can do this and still be successful.”
Mr. Shallal was less than honest. Speaking to the Baltimore Business Journal a few weeks later — presumably, without his talking points in hand — he revealed that the lowest-paid employees in his Maryland restaurant make $3.63 an hour (the base wage for tipped employees in the state.)
Of course, with tip income included, his waiters and waitresses make far above the minimum wage (Census data shows that their average hourly wage is $13). But this also means that the pay scale at Mr. Shallal’s restaurants isn’t all that different from the large corporate chains that he and his activist allies frequently criticize.
It’s also ironic: Mr. Shallal has been lauded as a model employer by the Restaurant Opportunities Center, a labor-aligned advocacy group that has invested considerable time and energy trashing the tipped wage scale that Mr. Shallal uses. Such apostasy is apparently tolerated as long as you’re willing to publicly identify as a business owner who supports a “fair” minimum wage.
Curiously, Mr. Shallal’s admission about his payroll means that the Harkin-Miller proposal he’s promoting would roughly double the hourly wage of his tipped employees. Either Mr. Shallal is uninformed about this particular provision of the law, or he’ll get an unpleasant surprise when his customers balk at paying the steep price for their new Harkin Burger.
Outside the Beltway, consumers have heard from Costco CEO Craig Jelinek, who’s enjoyed plenty of free public relations with his stump speech in favor of a higher minimum wage. Left-wing pundits have held him up as a model employer and asked why others can’t be more like him.
It turns out there is a good reason why. The membership warehouse giant has a unique retail business model (you have to pay to be a customer) where the profit earned per employee is nearly $10,000. Compare that to the $2,641 in annual profit-per-employee earned by a national restaurant chain.
Faced with the additional $3,640 in a full-time employee’s labor costs from a $9 minimum wage, restaurants that can’t dramatically raise prices without losing consumers to grocery stores or self-service buffets will have to make difficult labor-cost adjustments or even close their doors entirely.
Of course, consequences like these aren’t acknowledged by Business for a Fair Minimum Wage. In fact, the group points to a handful of widely-refuted studies to try and argue that wage hike consequences don’t exist. However, the group’s membership roll — which includes lawyers, consultants, self-employed artists and numerous others who won’t have to contend with the unintended consequences of a higher minimum wage — suggests that they’re not credible spokesmen on the issue of labor costs.
A more convincing alternative? Ask the wait staff at Busboys and Poets. They’ve told their CEO, Mr. Shallal, recently that they don’t want a higher minimum wage for fear of losing tip income as a consequence. It’s an insight from the very people that laws like this are supposed to help. Unlike their boss, however, they never got the chance to testify before Congress.
Michael Saltsman is the research director at the Employment Policies Institute.