Businesses and individuals alike have experienced their share of upheaval in the course of the coronavirus pandemic. It's for this reason that President Biden is looking to move quickly on aid. In January, he presented a $1.9 trillion relief proposal that includes boosted and extended benefits for the jobless, a follow-up round of stimulus checks (this time, worth $1,400 apiece), and a minimum wage hike that Senate Democrats are currently debating whether to keep.
Currently, the minimum wage sits at $7.25 an hour. Biden is seeking to gradually raise it to $15 an hour by 2025.
The Congressional Budget Office says that a $15 minimum wage would raise 900,000 Americans out of poverty and give 27 million Americans a much-needed pay raise. But while a minimum wage hike may seem like a good idea in theory, it's bad news for restaurants, many of which can't afford to shell out additional money on payroll.
Restaurants are fighting back
The restaurant industry is urging Congress to reject Biden's minimum wage hike, warning that shouldering that burden could result in widespread closures and additional layoffs. Many dining establishments are struggling with revenue loss in the wake of the pandemic. Capacity limits have forced many restaurants to turn diners away for indoor service, and while outdoor service may have worked well for a lot of establishments over the summer, those in cold climates have struggled with it during the winter.
Restaurants also didn't benefit from the Paycheck Protection Program (PPP) the same way a lot of other small businesses did. Eligible businesses were entitled to PPP loans capped at 2.5 times their monthly payroll costs, and those loans were forgivable as long as 60% or more of their proceeds went toward payroll expenses. But since restaurants aren't a payroll-heavy business, the aid they received was minimal, so now, many are struggling just to hang on. As such, forcing restaurants to pay a higher minimum wage could be their death knell.
In fact, the National Restaurant Association just conducted a survey and found that according to 82% of restaurants, a minimum wage increase would negatively impact their ability to recover from the pandemic. Furthermore, restaurants generally agree that raising menu prices won't be enough to compensate for higher labor costs -- and if anything, that could turn customers away at a time when food establishments need more business, not less.
TGI Fridays CEO Ray Blanchette has been particularly vocal on the matter. He says tips actually do allow servers to earn more than the minimum wage and insists eliminating tipped wages (a potential by-product of a wage hike) would hurt both restaurant workers and guests.
The Millionacres bottom line
If a minimum wage increase is implemented, even gradually, it could result in widespread restaurant closures, especially among establishments that saw the most substantial revenue declines since last March. And if that happens, commercial landlords everywhere could end up seriously out of luck. At a time when so many small businesses are closing their doors, landlords can't afford vacancies. But if restaurants are forced to pay workers a wage their budgets don't allow for, they may have no choice but to shutter for good.