NY business owners: Rising minimum wage could cripple us

New York business owners may be divided on the idea of raising the minimum wage at the end of the year to $15, but they all agree that it will force changes in how they operate.

Some local owners are rapidly switching out many low-paying service workers for robotic technology, computerized sales and outsourcing deliveries, The Post has learned.

While job openings nationwide in low-wage industries like fast food and accommodations have soared to record highs, the pending raise in minimum wage has many analysts warning of a dystopian future of mass long-term unemployment — especially when the next recession bites.

Ready to replace today’s vast ranks of low-skilled workers like burger flippers and order takers, the robots are everywhere.

Meanwhile, some employers in New York who have 10 or fewer employees are fearful of being crippled by soaring payroll and may cap hiring in the coming year, according to labor attorney Michelle Lee Flores at Akerman.

Employers with 10 or fewer workers have until Dec. 31, 2019, to raise the minimum wage to $15 hourly from the present $12.

Bigger establishments must enact the $15 hourly, from $13 today, by year’s end.

The Post talked to four New York business owners and managers about the impact the rise will have on their businesses.

Sebastien Muller, director of operations, Le District, Liberty Street

Muller is closely watching labor trends in the service industries and concludes that much more automation is coming, which will eliminate many classes of lower-paid workers.
He says the significant surge in the minimum wage is accelerating this automation process.

“Do you think it is a coincidence that stores are eliminating cashiers and automating checkout?” he asked. “Airport restaurants are moving to electronic service, McDonald’s will figure out more ways to automate.”

Despite the revolution, Muller supports New York’s minimum wage increases. “I think it is a good thing, actually, because it will help give employees a better quality of life,” he said.

“But don’t get me wrong — the coming increase is a big hit, which will have a snowball effect, from the cost of service contractors to waste management.” About half the staff of 350 at Le District — a food hall featuring French-themed restaurants and markets — earn the minimum wage. Muller thinks it can absorb higher payroll by more labor-saving technology, and by carefully monitoring costs.

Colin Cento, co-founder, Poke Green, three locations in Lower Manhattan

Colin Cento does not endorse New York’s minimum wage increase, noting how it benefits a mass of mostly unskilled workers.

“Do those levels of skill deserve 15 dollars an hour?” he asked rhetorically. “I majored in finance and economics at college, and that part of me is not in favor of the increase.”

As the clock ticks towards raising the minimum wage, Poke Green has taken matters into its own hands. Many of Poke Green’s 30 workers are near or at the minimum wage at this fast-food-style establishment.

Since tipping is rare, Cento says New York’s “tip credit” — which permits employers to pay lower than the minimum — is not a factor, even if it’s eventually eliminated, as some propose.

To reduce soaring labor costs, the company has curbed hiring and partnered with Epifruit, a third-party online platform and delivery service.

“If we have to pay $15 an hour instead of $13.50 today, it is not going to be as much of a hike overall, since we are offsetting most of our overhead with a 30 to 35 percent-plus reduction in delivery costs through outsourcing,” Cento said.

Michele Mazza, Executive chef, Il Mulino, multiple NYC locations

With some 200 employees, many earning minimum wage, along with tipped workers, who are spread out across various locations at this upscale Italian restaurant empire, Mazza says the rise in the minimum wage is bad.

“I would have to increase our menu prices, which then means customers may even reduce the size of their tips,” he said.

“The city needs to give some relief to the restaurant industry, which is already dealing with high operational costs, and has just recovered from the last recession.”

Rhea Duggal, Owner, East Houston Wine and Liquor East Houston Street

Rhea Duggal says her liquor business is growing profitably at roughly 15 percent annually, raking in more than the average comparable store in New York, thanks in large part to dedicated customers and a hardworking staff of 15 in total at peak times.

But she frets about the coming surge in the minimum wage. “Do the math, and it’s close to $3,500 per person, including payroll processing fees and taxes,” she said. “That’s some $35,000 from my bottom line a year, a pretty big hit in my business.”

Duggal has responded by outsourcing more of her order deliveries to an electronic vendor who drops off packages to customers — and that saves her significant sums.

The only wrinkle is the pay hike may also hammer such vendors’ own labor costs. “It’s a vicious circle,” said Duggal.

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