Advantages of Raising the Minimum Wage in California

Categories: Raising Minimum Wage

Christi (Pro: Economy)

An article on USA Today.com was written on March 29th of this year to explain a change that will be happening in California. The plan is to have the minimum wage raised to $15 by the year 2022 which will increase the wages of 6.5 million of California’s residents, accounting for 43% of their workforce. Governor Jerry Brown said, “This plan raises the minimum wage in a careful and responsible way and provides some flexibility if economic and budgetary conditions change.

” In our country, 29 states and Washington DC have minimum wages that are above the federal minimum wage, with California currently being at $10 an hour. Federal minimum wage is set at $7.25 an hour and for those that receive tips, including servers and bartenders, tipped minimum wage is at $2.13 an hour. Today the six of us are going to present different ideas to you about why raising the minimum wage for restaurant workers would be good as well as why it would be bad.

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I am going to explore the positive outcomes that raising minimum wage would have on our economy. According to the United States Bureau of Labor Statistics, over half of all workers that are being paid at or below the federal minimum wage are employed in the hospitality industry, with the vast majority of these workers being in restaurants and other food service establishments. For many of these workers, tips that they receive may be supplemental to the low hourly wages that they are receiving. If we were to raise the federal minimum wage, it would promote better business for those that are being required to pay their employees more as well as cause a boost in the spending habits of the consumers.

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In the Journal of Money, Credit, and Banking, authors Dennis Fougere, Erwan Gautier, and Herve Le Bihan discuss how if the federal minimum wage were to increase, prices in the retail and service sectors of business would also increase. However, with that being say when low-income households are able to earn more money, they are likely to spend it. This helps to boost the economy by putting more dollars into businesses, both locally and nationally. In fact, a recent study by the Federal Reserve Bank of Chicago concluded that, following an increase in the minimum wage, spending by households with at least one minimum-wage worker increased by $700 per quarter.

If the increase in minimum wage causes consumers to spend more money than they would now, this would mean more profits for restaurants that are employing people with the newly raised federal minimum wage. More profits for these restaurants means that they will become financially stable to conform to the higher wage rate, even if they had to raise their prices because of it.

As far as the workers making the money go, if someone who was receiving regular federal minimum wage at the moment work 40 hours in one week, they would make a total of $290 before taxes were taken out. That means that in one month they are making a total of $1,160 before taxes. In Muncie, Indiana the current average cost of living for a single adult is $2,156. If you think about it that would mean that someone working 40 hours a week at federal minimum wage would not be able to afford the monthly average cost of living here in Muncie. If we were to follow California’s lead and increase the overall federal minimum wage to $15, that would mean that someone working 40 hours a week at the new federal minimum wage would be making $600 before taxes each week and $2,400 each month before taxes. Even if the cost of living went up, there is still a chance that that person would be able to afford the cost of living more so than if we were to keep the minimum wage where it was.

The same goes for tipped minimum wage recipients. If they were guaranteed to get a certain amount on their paycheck each pay period, they would also be able to better plan their costs of living than if they were just counting on having a good night for tips, in a good station at work, with the right kind of customers. If we were to raise the federal minimum wage, this would also have an effect on tipped wage workers because they will no longer be receiving tips. Instead of counting on all of these factors while working for tips, having a set minimum wage at $15 an hour will give them a more stable source of income.

It is proven that raising the minimum wage will help create a more constant flow of customers in restaurants that are typically the highest percentage of minimum wage employers as well as to create a more stimulated economy because more and more people will be spending their money instead of living paycheck to paycheck. I will now turn it over to Kelsi who will discuss why raising the minimum wage would negatively affect the economy.

Kelsi (Con: Economy)

Although Christi makes some good points, I think we all need to look at the big picture when it comes to a minimum wage increase. Increasing minimum wage of servers will cause a chain reaction that will have adverse effects on the economy in a number of ways. First, lets look at some statistics. According to pewresearch.org, and as Christi stated, 29 states have a minimum wage that is above the federal wage. This allows states to set a minimum wage to tailors to the cost of living in that state without putting a financial burden or unrealistic standards of pay on businesses. Servers receive tips that usually meet or exceed federal minimum wage. If their tips do not meet this minimum, companies are required to pay servers the amount the make up the difference. This is called a tip credit. 2/3 of the US provide tip credits that pay servers over the federal minimum wage of $7.25. This tip credit allows restaurants to make sure their servers are adequately paid during slow times, while also not putting a cap on the income a server can make during the busy times. Already 7 states require food establishments to pay their servers federal minimum wage before tips. Only 1/3 of the US still pays server’s the typical $2.13 an hour plus tips, all the others pay their server’s a higher base pay.

It is important to understand the consequences of demanding higher minimum wages. Restaurants now are shelling out approximately $2.13 an hour per server per hour, which means a server gets the majority of his/her income from tips, which is money spent by the consumer. If there is an increase in their minimum wage to even just $10/hour to eliminate the inconsistency of tips, that’s a 500% increase per server per hour that is now coming out of the restaurant’s pocket, rather than being given to them by the customer. This lowers the profit margin (less money spent by the customer, more money spent by the restaurant). Although it would be nice to live in a world where companies made sure their employees were paid a fair and sufficient wage, even if it means lessoning their profit margins a bit, that is simply just not the case. They WILL find a way to offset the cost of having to pay their employees higher wages. This can be done in several ways by cutting the number of hours delegated to servers, cutting the amount of servers the restaurant has hired on (increasing unemployment), raising the price of food and drinks, and using lower quality ingredients.

I have worked at a few different restaurants in the past and have witnessed some of these price cutting methods first-hand. Managers choosing to purchase pre-prepped ingredients (such as sauces or croutons) rather than making them fresh from scratch in order to save time and money, or cutting bussers and relying on servers and hostesses to clean tables, which can get very hard to do during busy hours. These cuts cause the quality of service and product to suffer, which will drive down business. No one wants to pay $15 for a hamburger made with sub-par ingredients.

Another way increased minimum wage will set of a chain reaction is by creating higher demands from those who didn’t reap the benefits of the wage increase. Cooks for example may start demanding an increase in their pay due to seeing servers of the same establishment not getting wages. People in other professions may think that the work they do at that their job is just as valuable if not more and start to demand increase in their wage. According to nationalreview.com this is a trend that has already started in California where, as Christi pointed out, the minimum wage has been raised to $15. Veterans of a job are demanding that they see a pay increase in their wage due to the fact that some of their superiors were awarded one. I have seen this first hand as an employee at IU Health. This past year, IU Health decided to employers out there who pay their employees more than minimum wage because they want to take care of them. Those employers take care of their workers because in turn the employees will take care of the customers. An article from the New York Times written by Steven Greenhouse and Stephanie Strom says that employers such as Boloco, Shake Shack, and Moo Cluck Moo all start their employees well above minimum wage because they believe it will help their companies strive in the long run. The Chief Executive of Shake Shack was quoted saying “The No. 1 reason we pay our employees well above minimum wage is because we believe that if we take care of the team, they will take care of our customers,”.

Moo Cluck Moo is a small restaurant chain based in Michigan. When it first opened roughly a year and a half ago they paid their employees $12 to start out. Since then they have added one more location and raised their starting pay to $15 an hour. Harry Moorhouse, the owner of Moo Cluck Moo, was quoted saying “We don’t have any turnover, we don’t have to train people constantly,”.

Even though Mr. Moorhouse pays his employees $15 an hour his meals costs on average $1.25 more than that of a full meal at McDonalds. That right there proves that even with Mr. Moorhouse paying a higher wage to his employees, his food is still affordable. He sells upscale hamburgers, chicken sandwiches, and salads. The low cost of his meals goes against what the general theory is when thinking about raising the minimum wage. The theory is that prices will increase with the rise of the minimum wage and clearly that is not the case here. His customers are extremely happy with his food.

Happy customers is what this industry is all about and the employees are the ones who are there to make that happen. Raising the minimum wage will increase the happiness level of all underpaid employees who mope around at work. The customers will experience a more positive environment due to happier employees which will increase the positive vibe in the building.

A happy employee will work harder or faster than someone who is not happy with their job. According the the Journal of Human Resources, an increased wage could cause an increase in productivity. I say could because we simply do not know without trying it out which is what is happening in California. An increase in productivity will likely keep production costs where they originally are according to the model presented in the Journal. A happy employee will likely lead to increased productivity and more money coming into the business. This can all happen with an increased minimum wage.

I will now hand it over to Erica.

Erica (Con: Staff Morale)

As Justin has stated there are positive effects when the minimum wage is increased, but there is also a negative aspect to this concept as well. Justin pointed out that if we raise the minimum wage like California is to $15 an hour and got rid of tips people would be living happier not worrying about their financial state, but who would go above and beyond anymore?

According to George Root from Small Business, he stated that increasing [wages] in the hopes of encouraging higher productivity can backfire on you. Instead of working together toward a common goal, employees may become more competitive and distrustful of their fellow workers. The employees that work hard are now getting the same level of pay for going the extra mile compared to those who just wait on the table with no courtesy, there is no benefit from them working hard anymore. These employees would start to think that they are underappreciated, causing them to find work elsewhere. Jeannette Wicks-Lim stated employers fear their disgruntled staff will cut back on hard to measure aspects of their work such as responding to others cheerfully and taking initiative in assisting customers.

Motivation is a key factor in maintaining a positive morale, therefore by taking away the biggest motivator for individuals causes them to become less productive and ultimately make the business suffer economically. When people are less motivated at work, and tend to do the average amount of work, ultimately causing the staff to become disengaged in their work because they aren’t working for anything else such as tips. They create an atmosphere where it is okay to do the bare minimum because you will all still make the same amount of money at the end of the day. When this attitude gets around to the entire staff, the group as a whole becomes less efficient. These inefficiencies cost the business money and make for the company morale to be lower because there are greater risks for staff dismissal. Tips are a great way to keep the morale at a particular business high because they keep the staff motivated.

Another contributing to factor of why it may not be the best decision to raise the minimum wage is because of the lay-offs. As Christi mentioned, the minimum wage is currently $2.13 and if it is spike up to $15 an hour that is 7 times higher than the original. That causes employers to look at their financial state, and would have to lay off some of their best employees simply because they could not afford it. The effect on the morale would be that people would be looking for other jobs and that would increase the absenteeism in the workplace. For the employees that were full-time at the restaurant, they would most likely have their hours cut, and the employer would have everyone become part time to cut down costs. This would also increase the absenteeism because they would be looking for new jobs, and would make the other people at the restaurant resent the one calling off according to George Root in Employees Poor Attendance Affecting the Workplace. That resentment towards an individual could cause a hostility in their environment and could make everyone on edge and could cause even higher turnover.

I have dealt with this situation personally, when part of your staff doesn’t show up and forces the rest of you to make up for it, we all become hesitant when we find out we will work with them again. The questions of, “Will they actually show up, are they going to be late, are they actually going to be productive? Run through your mind constantly, which in turn makes for different jobs causing higher turnover.

As Justin stated, this industry is about its customers. In the American culture it is customary to tip, but will their wages being higher that will make not happen anymore. People in this country are used to paying extra for great service, if everyone is being paid the same would there be great service anymore? From my findings, it will become average service, places that have a great atmosphere will most likely end because there will be no reason to work hard in these establishments anymore. Of course these people would worry about being laid off, but they know if they can get away with it, they will do the absolute bare minimum and do what the least amount of work they can do to meet the values of a certain company.

Those people that work in this industry are here to best serve the community, with a bright and shining face. When we decide to make everyone on the same playing field and pay everyone the same amount as they are in California ridding tips, we will lose what makes the hospitality industry great. The staffs thinks they are underappreciated, they find out that they can work the bare minimum, there will be a lack of motivation and the employees will think it is fine to miss work and put the burden on their fellow coworkers. Raising the minimum wages will create a negative atmosphere and decrease the staff morale.

Here is Joe to further explain technology and minimum wage.

Joe (Pro: Technology)

Technology has impacted the restaurant industry pretty significantly, including national chains such as Applebees, Chilis and even Olive Garden. If you have visited any of these locations recently, then you should be aware of the touchscreen technology that they have at

your disposal. Most of these touchscreen apparatuses have the ability to display the menu, allow you to choose a drink and appetizer and even pay your bill all without the need of the server. According to a report done by Hsiu-Yuan Wang and Sung-Yeh Wu, many restaurants located in Australia, China and even here in the United States have started using Ipads as electronic menus to not only “navigate menu selections, read notes on taste and order meals but also to access photos of every dish and even inform the chefs how they want their steaks cooked”. The ipads in the end limit the job of the server and enable the customers to put in the orders for themselves. With these job limitations for the servers, it can allow them to do other jobs that could decrease the use of other employees.

At the end of the day, restaurants are a business and need to worry about profits and customer satisfaction. So with the purchase of touchscreen technologies, the impact could be huge. Wired.com stated that the restaurant Frame in Tel Aviv, Israel has increased their revenue over 10 percent due to the installment of touchscreen technologies at their tables. With revenue increasing through the purchase of technology, then the workload will indeed be less for the servers enabling them to work more for a higher pay and cutting out the middlemen. Like I mentioned before, servers will become bussers and hosts with these devices being able to do a majority of their job. Therefore, a minimum wage can be given to them while making the sacrifice to cut the other employees out.

Besides the servers being able to do more work for a higher pay with the installment of these devices, it is also becoming a popular amusement toy. Technology has had a huge impact in our generation that we have 6-year-old children who can operate a touchscreen devices better than most adults. By applying these technologies into the restaurants, families will be able to have some entertainment throughout their meals. Many of these touchscreens include many games that require some form of payment that’s added towards the bill. This can add a small margin of profit to the restaurant as well, causing the pay of restaurant workers to increase since they no longer have to keep the customers and their children entertained for a tip.

Although the touch screen entertainment may only be a small portion of a restaurant’s revenue, the technology itself is helping restaurants make a profit. Ziosk, a popular tablet company that has expanded their devices to over 2500 locations, have helped restaurants achieve a 10% increase in per person average checks (PPA). Customers use these ziosk devices 80 percent of the time according to their research, and 75 percent of credit and debit card owners use them to pay. So with guest satisfaction going through the roof with just one of these tablet companies, imagine how well the other companies are doing as well? The best part about these technological services is that they are practically free. Ziosk and Chili’s have a subscription in which if the customers play the games on the Ziosk device, then those game payments go towards the subscription; if the subscription by Chili’s is paid off then they split the profit of those games 50/50. There are no other costs. So ultimately the technology is free.

If companies such as Ziosk are offering such great deals, why aren’t servers and restaurant workers in general receiving higher wages? Especially since Ziosk devices have the ability to keep track of a server’s speed by how fast they are delivering the food and beverages to their customers. With technologies such as these, tips could indeed become obsolete and set a better wage for all workers. Kitchen employees may receive a higher wage as well since tables could be flipped faster with touchscreen menus. Overall, technology should impact a raise in minimum wage for all restaurant workers since it only makes the job easier for everyone else, allowing the employees at the front of the house to do a little more work, and the back of the house to receive a little more for their hard work as well.

Minh-Thu will now discuss her side of the argument regarding technology impact.

Minh-Thu (Con: Technology)

As Joe stated before many national chains that we know and love have incorporated some form of technology to the food service. If a person wants to order at one of these restaurants most of the time they can just input want they would like into a touch screen, tablet, or kiosk and then get the person to person interaction when the food is served. It is amazing how far technology has come through the years and there is no mistake that it will continue to improve society. However improving food service with technology can cause frustration on the customer and worker, the loss of human interaction and experience and have many jobs be replace by the innovation of technology.

A study in 2014 from Cornell University School of Hotel Administration by Michael Giebelhausen, Stacey G. Robinson, Nancy J. Sirianni, & Michael K. Brady titled Touch vs Tech: Where Technology Functions as a Barrier or a Benefit to Service Encounters stated that “Customers must select card type, orient the magnetic stripe, swipe at the appropriate speed, indicate whether the card is debit or credit, confirm the purchase amount, and provide a signature within the appropriate space.” Yet sometimes those certain items are not needed like a signature is not always required with other models of kiosks. Many times the customer has trouble with their cards being read and accepted on the machine. It also seems that when using these machines the customer is paying more for their meal just for using them. The confusion this causes on the customer can lead to frustration when operating one of these tech servers. Workers will have to help customers navigate through the process. However the same frustration customers go through the workers will also go through since they have to understand the use of these kiosks and touch screens and they might not be able to help because of the machine’s mechanics. Workers will need additional training due to more responsibilities and skills alongside the technology and service they do in the establishment.

While having more touchscreens and other machines to order food customers lose the human interactions that technology does provide for the customer. In a 2015 article of the Washington Post reporter Lydia Depillis interviewed the National Restaurant Association senior vice president for research and knowledge Hudson Rieche who said that because the industry is hospitality the challenge is to incorporate the technology in a high technology state. With that statement report Lydia Depillis wrote “And for some concepts, it’s possible that the presence of employees is actually a restaurant’s competitive advantage. Compared with grocery stores and gas stations, many people come to restaurants exactly because they want some human interaction.” People want to talk to other people about the food and service. Having another person to help out is sort of a reassuring aspect to the restaurant experience, to know that someone is there to help you at the restaurant when you are not sure on what to order. In Depillis article she also interviewed Andy Wiederhorn a chief executive of Fatburger who during the time was testing out a table system at a chain and he said that he thinks tablets have a place at the table, but it is hard to ask questions and ask for suggestions from a tablet. Servers are needed in the restaurant setting.

So what does all of those ideas have to do with the raise of the minimum wage? The way the machinery affects both the customer and server it would be best if those machines were not in used in the restaurant, however with the raise of the minimum wage having touchscreen, kiosk and other automated machines can help business save money however this would cause many people to lose their jobs. The Washington Post article written by report Lydia Depillis states that when the minimum wage increase is implemented many jobs in the industry will be lost to the machines. The statistics that she provides were 2.4 million wait staff, nearly 3 million cooks and food preparers and 3.3 million cashiers jobs will be threatened if machines are used in restaurants. The reason behind this is that business need to work out their expenses and if this is the way to save money those owners or those in higher management will be taking the chance to install those machines in the restaurant. Machines will just need to be installed and have maintenance checkup once in awhile. Seems to be much easier to pay for those expenses then paying employees fifteen dollars an hour. Even though technology is improving the way we go eat in a restaurant it can harm the people who work in the food industry.

Throughout this whole debate we talked about both the negative and positive aspect on how raising the minimum wage could affect the economy, staff morale and technology input for the food industry. The first point was how the economy will be effective if the minimum wage increase. People will have a more stable income if the minimum wage increase however it seems unfair for those who have work for many years to still be paid the same amount as those who just started working. The second idea was staff morale, the pro was with the increase in wages workers will still put in the effort to serve high quality meals because they are valued in the establishment while the con side workers will just do the bare minimum since they will still be paid. Lastly the third idea is the technology input if the minimum wage were to increase. Technology will help the business financially as well as providing workers more time to serve others.

However technology will be taking over those jobs since it allows business to save more money and not have to pay workers the high wage. This will cause many people to become unemployed. After looking through our research we have come to the conclusion that the idea of an increase in wages is not a bad idea. Except we think that tips should still be available as well. We believe that the tips would help workers with their income due to the idea that many rely on those tips to increase their wages and income. Workers do not receive extra benefits like health insurance or 401 k plans in the restaurant industry and the tips help out with those expenses. Even though this is our opinion the minimum is already increased in the state of California and continuing to other parts of the country. If the minimum wage for Indiana were to increase would you like the idea that your job may have these issues that we discuss today?

Raise the minimum wage to $11 an hour for anyone working in the dietary department. So, if you made less than $11 an hour, you receive an increase to get you to that minimum regardless of how long you had worked there. If you were already making more than that (due to being their for many many years) you received no increase at all. This allowed for someone like me, who had been working there for just under a year, to receive an increase that matched my income to that of someone who had been working there for 10-15 years. And those that had been working there for 20+ years received no increase at all. Although I am not complaining about a pay raise, I do see why people who had been loyal to IU Health for that many years felt jaded. The pay raise also caused people in other departments of the hospital to demand raises such as nurses, maintenance, housekeeping, and transportation.

It is important to remember that in California the cost of living is much higher than many places in the United States. A $15 minimum wage may be what’s required there to keep people above the poverty line, while in places like Indiana a minimum wage that high isn’t necessary. Yes, raising the minimum wage puts more money in your pocket to spend, but it also means that what you’re spending that money on costs more. Tips are usually thought of as a server’s duty to get, however, if managers want to keep their employees happy with the tipping system, rather than having them demand for higher minimum wages, there a steps he/she can take to help improve their average tips. These steps require no extra money, only extra effort. If the manager advocates for his/her employees and educates them on how to improve their tips, this can help increase wages of servers without causing a large dent in profits. The great thing about good customer service is that it’s free.

Justin (Pro: Staff Morale)

Making the bare minimum is not fun for anyone, especially servers who make an even lower wage. No restaurant worker wants to go in on days where they know it will be slow. They just won’t make money and that doesn’t help their motivation for the day. Raising the minimum wage will help servers and bartenders make a livable wage without the help of tips. According to an article written by Sarah Shemkus on Salary.com, in 2011 3.8 million people were working for minimum wage. If you worked for 40 hours a week at 7.25 an hour you would only make $15,080 per year. That already puts that person under the poverty level. So how can we live safely on that wage when it puts us in poverty? There is no financial security with this wage. There are workers out there who are not earning enough on the minimum wage to pay their bills.

For a server making the minimum wage, which Christi stated was at $2.13 an hour, there is no way they could live without tips. Raising the minimum wage would help that but would get rid of their tips. They would be less worried about making hundreds of dollars in tips if their wage was raised to something more realistic. Most servers work very hard to earn money at work because they need to pay their bills. Being financially stable is the reason we have jobs in the first place. There is no way we can be completely safe with a wage so low.

Increasing the minimum wage will allow more employees to start planning for their future. Making more money allows them to put money into a savings account or even a 401k. Businesses who offer a 401k will have more employees able to save more money. When the employee has an employer who cares about their future the employee will care about their job even more. It is a sign that the employer actually cares and values their work. When your work is valued you want to do more and you feel better about yourself.

What better way is there to keep your employees happy other than showing that you appreciate their work? Getting paid more than minimum wage will do the trick. There are

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Advantages of Raising the Minimum Wage in California. (2021, Dec 13). Retrieved from https://studymoose.com/advantages-of-raising-the-minimum-wage-in-california-essay

Advantages of Raising the Minimum Wage in California

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