Street Talk

Street Talk: MRA chief sees wage hike as recipe for unemployment

Word games.

February 21, 2014
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For Michigan’s restaurant owners and employees, 2014 is getting more ominous by the day.

Just when new costs of doing business couldn’t get any higher, thanks to the Affordable Care Act and other new government regulations, the Raise Michigan coalition is targeting restaurants and small businesses with its initiative to spike Michigan’s minimum wage from $7.40 to $10.10 and completely eliminate the tip credit.

Brian DeBano, Michigan Restaurant Association president and CEO, said the proposed bill will not only increase menu prices and cost Michigan jobs — it will put many restaurants out of business.

“While hearts may appear to be in the right place, heads unfortunately are not,” said DeBano. “A $10.10 minimum wage in Michigan — a 36 percent hike — would lead to thousands of job losses across a state that is still recovering from the last recession.”

He said the economics of minimum wage hikes are pretty fundamental. The jobs that pay minimum wage are overwhelmingly in service industries, including many restaurants. Many are family-owned establishments where you’ve been celebrating birthdays and anniversaries for years, he said.

“The proposal by Raise Michigan also includes the elimination of the tip credit. Most states, including Michigan, allow for a lower minimum wage for those employees directly and regularly receiving tips. What many people don’t understand is that if a tipped employee ever receives less than the full minimum wage after tips are tallied, the employer is required to provide the difference themselves,” DeBano said. 

“Any restaurateur who employs tipped workers can tell you how important the tip credit is to keeping them in business. In Michigan, the median wage for tipped employees is $16 per hour. If the tipped minimum wage was eliminated in Michigan, it would make us the only state east of the Mississippi River not to have one.”

Restaurants are low-margin and low-profit, generally making only a few cents for each sales dollar. They also devote about one-third of their budget to wages and benefits, he said, adding that with these day-in, day-out business realities, a 36 percent increase in the cost of labor would force these small business owners to make some hard choices.

“One obvious ‘solution’ might be to raise menu prices — but that can cause more problems than it solves, especially with consumers being increasingly more cost-conscious. In these economic times, people often choose to stop eating out when prices increase. That’s why price hikes often lead to fewer overall sales or even a loss of revenue at restaurants. The other option is to scale back on the number of employees and the hours worked — both undesirable options,” he said.

According to a report released recently by the nonpartisan Congressional Budget Office, the national push to raise the minimum wage to $10.10 per hour would cost 500,000 jobs in 2016.

“When restaurants do well, they help boost Michigan’s economy. The National Restaurant Association estimates that every $1 million spent in Michigan’s restaurants creates just under 30 jobs elsewhere in the state,” DeBano said. “Every dollar you spend in restaurants generates another 99 cents in sales elsewhere in the state. And overall, restaurants clock over $13 billion in sales every year.”

He said a minimum wage hike will jeopardize the well-being of a large portion of Michigan’s economy, and will prevent the state’s restaurants from creating the 24,000 jobs that are expected over the next decade.

“That’s why, on behalf of Michigan’s restaurants, I hope that Michiganders fight to protect the state’s employees and save the state’s job creators from a minimum wage hike. We only want what’s best for employees — and a minimum wage hike doesn’t fit the bill.”

Salt in the wound

Despite using more salt than anticipated due to worse-than-average winter weather, the Michigan Department of Transportation and local transportation agencies say they are working together to stretch remaining salt supplies through spring. However, winter cost overruns and an anticipated worse-than-usual pothole season are already squeezing summer maintenance budgets.

“MDOT, county road commissions, and municipal public works departments will work together to make sure we get salt to wherever it's needed throughout Michigan, and potholes are patched as quickly as possible,” said State Transportation Director Kirk T. Steudle. “But the higher-than-expected costs of this winter will make for some difficult choices when it comes to non-winter maintenance activities the rest of this year.”

MDOT had used more than 440,000 tons of salt on state highways through the end of January. That's about 80 percent more than at the same point last winter (238,472 tons), and 95 percent more than the same point during the winter of 2011-2012 (223,568 tons).

Overall, MDOT’s winter maintenance budget for this winter is $88 million, based on the five-year winter average. At this point, MDOT expects to exceed its winter budget by $40 million, which will mean a reduction in non-winter maintenance activities through October 2014. Safety-related maintenance activities get top priority, but non-safety activities such as aesthetic mowing, brush and tree cutting and garbage clean-up may be deferred.

Based on the five-year average salt usage for February, March and April, MDOT expects to use more than 600,000 tons of salt for the season. That would be the most used in a season since the winter of 2007-2008, when 760,000 tons were used.

Steudle said MDOT orders salt based on a five-year average for usage. If needed during an unusually severe winter like this one, MDOT has provisions in its contracts with each of four approved salt vendors to purchase up to 30 percent more salt than what was ordered at each location for the season at the contract price.

“Our vendors have assured us that they can cover this year’s contract amount of salt, including the 30 percent contingency, but likely won't be able to provide more,” Steudle said. “However, our staff is cautiously optimistic that we'll be able to get through this winter with the salt remaining in our contract.”

MDOT is in contact with county road commissions and cities to determine what areas in the state are low on salt and is working to identify where salt can be redirected to meet those needs. In past years, salt has been moved to areas that have run out, but the overall supply has not been completely exhausted.

Smart move

Legislation that removes the word “retarded” from any Michigan law is working its way through the Michigan Legislature, said state Sen. Rick Jones, who sponsored one of the bills.

“As a board member and advocate for the Special Olympics, I am passionate about helping those with special needs,” said Jones, R-Grand Ledge. “Retarded is an offensive and insensitive word that has no place in our laws or government.”

The seven-bill package has been introduced and is currently in the Senate awaiting a vote.

“It really is horrible this archaic word still exists in our laws today,” Jones said. “This is a common sense bill that I hope receives unanimous support in both chambers.”

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