"Over a period of just 105 weeks (December 12, 2016 – January 9, 2019) the minimum wage in New York City will jump 135% from $9 to $15."
The debate over increasing the minimum wage has been a contentious one throughout the past year. If you own or manage a restaurant or bar, it will likely continue to be one of your primary business concerns in 2017. Yet, it may surprise you to learn that for most of your servers and bartenders, changing the tipping policy may do more to shake their feelings of financial security than not receiving a government-mandated pay increase.
To see how businesses and employees are responding to this changing landscape, we conducted a proprietary survey of almost 800 chefs, servers, bartenders and other restaurant staff, the vast majority of whom are based in New York City. We wanted to gauge how a minimum wage increase, fluctuations in their work schedules, and the trend of implementing a no-tipping policy which restaurants are increasingly adopting would affect their job satisfaction levels. Interestingly, the questions related to tipping policies elicited the strongest, and most uniform, responses.
The impact of these wage increases will be greater in New York City than anywhere else simply by the sheer number of restaurants and staff it takes to keep the ovens on, food on the plates and diners happy. Wage increases in New York City are the most aggressive in terms of size and speed. Over a period of just 105 weeks (December 12, 2016 – January 9, 2019) the minimum wage in New York City will jump 135% from $9 to $15.
So we first asked respondents about whether a minimum wage increase would have a significant impact on their paychecks. You might expect 100 percent of them to say “Yes!”
In fact, the responses were nearly split down the middle. 51 percent indicated “no” while 49 percent answered “yes.” Dive a little deeper into the survey’s findings, and you’ll learn why.
But they were much more single-minded when it came to potential changes to their employers’ tipping policies:
· 70 percent confirmed a change would compel them to look for a second job.
· 63 percent said a "no-tipping policy" would deter them from applying for a job at a restaurant.
Employees and job seekers gave us some very enlightening and interesting answers when we asked them specifically how has the increased minimum wage changed their job seeking strategy?
“It doesn't affect me much as I am a tipped employee, so I never see my paycheck as it is. If people stopped tipping because of wage increases, then I would have a SERIOUS problem!”
“I feel it will make it more competitive, especially amongst small business owners. A well trained, professional staff is hard to come by nowadays.”
“It has caused me to look for positions that are less experienced because entry-level postings will have higher pay than it used to be.”
Interestingly enough, while a change in tipping policy is of great concern to employees, a concurrent survey we conducted of owners/operators found that tipping policies are more than likely to stay in place. 85% of respondents stated that the increase in minimum wage would not affect their tipping policies.
However, nearly 50% of respondents did say that the increase in wages would force them to reduce staff hours. That decision will likely carry serious repercussions for both sides: 79% of the employees we surveyed said they will have to look for a second job if their hours are reduced.
55% of owners/operators told us that they would have to raise menu prices now to offset the wage increases, with a further 66% raising prices over the coming six months. Of those owners/operators who said they would have to raise menu prices, 40% said they would raise prices by 5% while 30% said they would only raise prices by two percent. 89% said these price rises would have a negative or neutral impact.