In New York City, the clock is ticking on one of the many progressive legislative packages pushed through over the past few years by Governor Andrew Cuomo to appease his liberal base. Oddly named the “Victory for New York Families” bill, the law mandated that minimum wage levels in the city would have to rise to $15 per hour by the end of this year, along with various benefits including paid family leave. I suppose that certainly seems like a victory for those in low skill, low wage jobs, but that’s only if they still have a job. As the Federalist reports this week, the arrival of the deadline has already seen a number of employers, particularly in the food and beverage industry, either closing their doors or laying off workers. And people on the unemployment line still don’t get anywhere near $15 per hour.
The “Victory for New York Families” legislative package Gov. Andrew Cuomo signed more than two years ago has been devastating for New York City. They force businesses to offer mandatory paid family leave and pay every employee at least $15 per hour.
This minimum wage spike has forced several New York City businesses to shutter their doors and will claim many more victims soon. Businesses must meet the $15 wage by the end of 2018, the culmination of mandatory increment increases that began in 2016. Restaurants where staff earn tips are subject to a $5 per hour tip credit, but must pay $10 per hour. That is nearly double the 2014 minimum wage of $8 with a $3 tip credit.
For many businesses, this egregious law is not just an inconvenience, it is simply unaffordable. The most recent victim is long-time staple, The Coffee Shop, a tremendously popular Union Square bar and café favored by many celebrities.
The interview with Charles Milite, owner of the Coffee Shop (referenced above) tells a story that’s all too common. They were able to operate a large-scale diner business in the Big Apple, covering every meal of the day. But they had a lot of employees, so labor costs were a major factor in profitability. There were still plenty of customers, but they weren’t going to keep coming if the food prices doubled or even tripled.
Milite not only had to face paying everyone nearly double their wages and provide paid family leave, but he had enough workers that he didn’t qualify as a small business under Obamacare so he had to offer full health coverage. These are minimum wage, low skill jobs, and that simply priced him out of the marketplace. There were still plenty of customers to go around, but the Coffee Shop just couldn’t compete anymore.
The other factor is the issue of tipping. The new rules have instituted the “tip credit” system which we’ve discussed here before. Unlike what the name implies, as prices go up for the same food and same service, people are less inclined to tip (assuming they do so at all). That removes the incentive for most of the best servers to work there. As a result, service quality goes down along with net wages for servers.
Given the fact that the same collection of Democrats keeps getting elected over and over again in New York City, this will apparently be the new normal. Best of luck to all the workers who are smart enough and financially able to flee the area and start a new life elsewhere.