Big, scary, uncertain news for the restaurant industry today. Multiple outlets are now reporting that the L.A. City Council has voted to increase Los Angeles’ minimum wage to $15 by the year 2020. This makes L.A. the third major American city to increase the wage to $15 this year, while others like New York are plotting the same increase for fast food workers.
Businesses and constituents have been sharply divided on the proposed increase, which helps to close the income gap while further putting strain on small businesses. Restaurants in particular, which are already plagued with thin margins, have been rallying for a more intelligent, nuanced approach to the proposed law, particularly where it concerns tipped employees. Unfortunately, California’s state law regarding tipped employees making minimum wage trumps L.A.’s own municipal wage increase ruling, which means even tipped employees will be paid out at the $15 an hour level.
Even tipped employees will be paid out at $15 an hour
The mayor himself had supported the passage of the bill, which was finalized a couple of hours ago in a sweeping 14-1 vote. The new wage timeline, as proposed, would see the minimum wage increase to $12 by July 1, 2017, the float incrementally higher until reaching $15 by July of 2020. Businesses with less than 25 employees will have extra time to comply with the increase, and non-profits can, under certain circumstances, be exempt from the increase altogether.
With increasing payroll worries, restaurants will need to rethink their bottom line, either by increasing menu prices or no longer offering health insurance to employees or, in many cases, adding a 20% service charge to each receipt to help offset costs. Ultimately, the true effects are still unknown, but many small restaurant owners today must be scrambling to find out what it means for their own future livelihood.
Infographic by Eater data lead Ryan Sutton