Clarification: The story below, which appeared on page 1C Feb. 18, should have said not all of the restaurant owners present at the meeting opposed raising the minimum wage.
Speaking to a group of restaurateurs and food service business owners in Fort Wayne on Wednesday, U.S. Sen. Mike Braun made it clear he plans to oppose a proposed $1.9 trillion pandemic relief package.
“Here every penny is being borrowed from our kids and grandkids. We've already done $4 trillion of it, $1 trillion that has not been spent or obligated, and most of this has nothing to do with helping in a targeted way businesses and employees that have been hurt by COVID.”
Braun was joined by representatives from area restaurants including Casa restaurants, The Hoppy Gnome, Paula's On Main, Cosmo's, Don Hall's restaurants, Mancino's, Banditos and The Copper Spoon.
In particular, Braun said he opposes congressional efforts to raise the minimum wage to $15 per hour, something most of the assembled business owners said they are also against. Known as the Raise the Wage Act, the bill would increase the federal minimum wage to $15 over five years.
Coupled with a proposed repeal of the tip credit, the restaurant owners said they fear their ability to retain quality employees would diminish. The tip credit takes the combination of a tipped employee's base wage and earned tips and compares it to the required minimum wage. If the amount earned through wages and tips is less than the minimum wage, the employer must pay the employee the difference.
Braun said the current system isn't broken and doesn't need fixing.
“The tipped wage method that restaurants use gives wages way above the average of other areas, sectors of the economy, sometimes even close to double what this proposed minimum wage would do, which would straitjacket business owners, put a ton of fixed costs in place in lieu of what's working,” he said. “It's putting insult on top of injury from what they've already had to deal with from COVID.”
Braun said he favors raising wages by “having businesses that compete well and do it the old-fashioned way.” That was working before the pandemic, Braun said.
“We were raising wages in some of the most difficult sectors of African American wages, other minorities, and it wasn't being done by paying for it through government,” he said. “I think we need to look hard at what was working before we start entertaining just a barrage of stuff that doesn't make sense.”
Even without changes to minimum wage and the tip credit, Braun said he would not support the stimulus package. “Even when you get the minimum wage out of it, you're looking at probably two-thirds of it that is kind of a mishmash of just a lot of things” on the Democratic Party's agenda, he said.
All of the restaurant owners who spoke to Braun during Wednesday's event said they worry about the implications of raising the minimum wage. Tabitha Gray, owner of Mancino's, said a minimum wage hike would be catastrophic. Gray said she employs 19 people.
“If our minimum wage goes up to $15 an hour, I will have no choice but to close my doors,” Gray said.
To highlight how a minimum wage increase could impact his business, James Khan, owner of the Hoppy Gnome, BakerStreet Steakhouse and Proximo, said he pulled his financial records from 2019 across all of his restaurants. That year, payroll for his servers came to $227,000, he said. A $15 minimum wage would increase that cost to $1.74 million and including bartenders would add $400,000, he said. Factoring in payroll taxes and workers compensation insurance, Khan estimated his cost increases would top $2 million. Increased wages would mean higher menu prices, Khan said.
“On $10 million in revenue that I brought in, my net profit was $300,000,” he said. “This is not a factory. We run on the tightest of margins. In our group ... our labor cost is 50% of our sales; $5 million in 2019 alone went back to the economy, not counting the $2.2 million in tips my servers and bartenders were able to take home in 2019.”