Resort restaurants will mount fight against wage hike proposal

(Feb. 15, 2012) Opposition to a proposed increase of Maryland’s minimum wage – and an increase of the pay margin for tipped workers – continues to mount, with restaurateurs saying statistical evidence to the affirmative oversimplifies the reality on the ground.

“We’re going to be strongly opposed to that legislation,” said Melvin Thompson of the Maryland Restaurant Association. “These businesses are going to have added personnel costs that could force them to make some tough decisions.”

A proposal circulating through the Maryland General Assembly seeks to raise the state’s minimum wage from the current $7.25 per hour to $10 per hour by 2015. According to the bill’s backers, the increase will be phased in – but the result will be to raise the standard of living for the roughly 320,000 people in the state who live off an hourly minimum wage.

Such an infusion of disposable income would presume to be healthy for tourism and the recreation industry as a whole. But another element of the proposal could be extremely onerous, in particular, to the resort restaurant industry.

The bill would also seek to raise the percentage of pay for tipped workers from 50 to 70 percent. Under Maryland law, which is similar to that in most other U.S. states, workers who receive tips do not have to be paid a full share of the minimum wage. Currently, the must receive at least half, or $3.63 per hour.

But if the minimum wage is raised to $10, and the minimum portion for tipped workers to 70 percent, this almost doubles the rate to $7 per hour.

“It makes a $60,000 swing for us, and we’re a smaller place,” said Travis Wright, owner of West Ocean City’s Shark on the Harbor restaurant and current president of the Ocean City Hotel-Motel-Restaurant Association. “It’s just frightening.”

According to many business owners, the wage hike could have the opposite of its intended effect, at least for seasonal restaurants. Additional pay would be given to those who do not rely on it, such as seasonal wait staff, most of whom are students who do not live off their summer earnings per se, and make many times in tips what they are paid directly.

“The impact on the tipped employees is going to be nominal at best,” Wright said. “They make so much more than minimum wage based on the tips they declare … that they’re not going to see that money [from the wage increase]. It’s just going to be eaten up in taxes. It’s not going to do anything to raise their standard of living.”

A recent study in support of the hike from the Economic Policy Institute, however, indicates that 87 percent of workers affected by the wage increase are more than 20 years old, and that the average worker earns roughly 39 percent of his or her family’s income, numbers that the institute alleges “do not support the perception of minimum-wage workers as pri-

marily teenagers working for spending money.”

However, the figure does not separate tipped from non-tipped minimum wage workers, a relevant figure given that the margin increase to the former is considered the most onerous part of the proposal.

Conversely, an increased wage burden may force employers either to cut staff or pay for non-tipped employees, such as kitchen or management staff, more of whom are long-term, career employees who rely on that income more heavily.

Wright said that all of his non-tipped, back-of-the-house employees already make well over $10 per hour, meaning they would see no personal benefit from the hike.

“We’ve got really good year-round jobs to offer people,” Wright said. “If you raise the minimum wage to $10 per hour, it just makes the person who was already making $11 or $12 seem less important. The perceived value of people who are already making a fair wage goes down.”

According to Thompson, most restaurants operate on a profit margin of less than four percent. Given this shallow buffer, most establishments could not financially function by doing more business on lower dividends.

“That money has got to come from somewhere, and the only real way to do that would be raising prices to the consumer,” Wright said