LA Operators Mixed in Response to Proposed Wage Increase

Restaurant operators in Los Angeles expressed mixed reactions to the Los Angeles City Council’s move Tuesday to pave the way for a minimum wage increase to $15 an hour by 2020.

The City Council’s Economic Development Committee voted 14-to-1 in favor of drafting an ordinance for the minimum wage increase, which would be phased in from the current $9 per hour over the next five years. Smaller businesses with fewer than 25 employees would have an extra year to comply.

The measure is scheduled to return to the committee for final approval next month.

Under the measure, the minimum wage would rise to $10.50 per hour for employers of more than 25 workers by July 2016, gradually increasing each year until reaching $15 per hour in 2020.

At that point, the minimum wage would be tied to the consumer price index for automatic adjustments for inflation.

In 2014, Los Angeles Mayor Eric Garcetti proposed a minimum wage increase to $13.25 by 2017. He said in a statement Tuesday that he looked forward to signing the $15 an hour wage measure.

“Today, help is on the way for the 1 million Angelenos who live in poverty,” Garcetti said. “I started this campaign to raise the minimum wage to create broader economic prosperity in our city, and because the minimum wage should not be a poverty wage in Los Angeles.”

Restaurant operators’ reactions were mixed.

Andy Wiederhorn, CEO of Beverly Hills, Calif.-based Fatburger, said the wage hike will likely result in higher menu prices.

Consumers “are going to see menu items increase in price because restaurants already operate on narrow margins, so there is only so much of the increase in labor costs that the restaurant can eat,” Wiederhorn wrote in an email. “A large percentage of it will be passed on to the consumer, and the public needs to be ready for that.”

For others, the wage hike was not bad news.

“It excites me, as it will bring a higher caliber mentality to the job force. I think people will respond to it by seeing their worth more in the workplace, and investing time and energy, more long term, where they work,” said Natasha Case, co-founder of the Los Angeles-based Coolhaus ice cream shop and food truck.

Denver-based Smashburger, which operates company locations in the Los Angeles market, said it already pays workers about 20 percent to 25 percent above the minimum wage systemwide.

“It’s ultimately a win-win for us,” Josh Kern, Smashburger chief marketing officer, wrote in an email. “The employee is happier, which then results in better customer service for our guests, which will then result in a better experience and more frequent visits. It pays in the long run to pay more up front.”

At $15 per hour, however, that positioning above minimum wage may not be possible, he said. Still, he noted, employees would have other incentives and bonus potential.

The California Restaurant Association, which has lobbied for a tip credit and other concessions at the state level, expressed disappointment that Los Angeles lawmakers voted in favor of “an extreme approach.”

The CRA successfully lobbied against the inclusion of a paid leave requirement that was initially included in the wage hike measure. But its attempts to allow a tip credit or consideration of total compensation, as well as a proposed lower wage for teens, were not included in the draft that was approved.

“This action was taken knowing that it will cost jobs and the closure of small businesses, especially in the restaurant industry,” the CRA said.

If approved, Los Angeles would join a growing number of cities that have adopted a $15-per-hour wage. Seattle is phasing in an increase that would reach $15 per hour over the next three to seven years. San Francisco voters approved an increase to $15 per hour by 2018.

Labor activists have been pushing for a minimum wage increase to $15 per hour at the federal level, staging periodic protests to draw attention to the “Fight for $15.”

Lawmakers in the San Francisco Bay Area city of Emeryville, Calif., went a step further Tuesday, approving a minimum wage of $16 per hour by 2019.

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