Minimum Wage: A Public Relations Nightmare

Michael Sanson

With the Democrats poised to assume control of Congress next month, you can expect a significant increase in the federal minimum wage. Even President Bush has indicated that he’ll have to seriously consider a number of Democratic priorities, including the minimum wage hike from $5.15 to $7.25.

Both Sen. Edward Kennedy and Rep. Nancy Pelosi, the incoming Speaker of the House, list a wage hike as a top priority.

“Millions of hardworking men and women across the country aren’t getting their fair share,” Kennedy says. “If there is one message from this election that emerged loud and clear, it’s that no one who works for a living should have to live in poverty.”

Based on the results of the last election, many Americans agree with the Democratic viewpoint. Six state ballot initiatives that established or raised the minimum wage all passed. And that’s a problem for you.

Clearly, the profit margins are so razor-thin in this industry that a wage hike will mess badly with your bottom line. The National Restaurant Association has repeatedly argued that a minimum wage hike will result in lost jobs, increased prices and reduced employee benefits.

The NRA points to a new study by a professor of economics at the University of California. David Neumark concluded that a minimum wage hike may discourage employers from using the low-skilled workers the wage hike is supposed to help. A number of other university and independent studies have concluded the same.

In October, the NRA conducted a survey (600 of its members) and 41 percent of the family dining and casual segment operators said they would eliminate jobs. Two out of five said they would delay plans to hire new employees. Nearly nine out of 10 said they would raise menu prices.

There’s little doubt a minimum wage hike will pinch you good. But you’re also facing a public relations problem. As Kennedy is quick to point out, the minimum wage has remained at $5.15 an hour for nearly a decade. We all know how slim your profit margins are, but the general public thinks everyone who owns a restaurant is rich. It’s going to be very difficult not to look like Scrooge when you bitch and moan about a hike.

So, what’s the alternative? Raise menu prices? It would take a pretty impressive public relations campaign to convince customers that price hikes are necessary to take care of your lowest-paid employees. But that’s what may be necessary. When the voters in Arizona, Colorado, Missouri, Montana, Nevada and Ohio passed the minimum wage hike in their states, they announced to the world that they care about the lowest paid of their brothers and sisters. Now you have to convince the public to bear the brunt of price increases. It won’t be pretty.

I’d like to hear your thoughts on this issue. Not that the minimum wage hike will hurt. That we know. How will you deal with it?