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Business groups predict $15 min wage will have unintended consequences

Last Updated by Karen DeWItt on
Matt Ryan

Governor Cuomo’s labor commissioner is likely in the next few days to finalize a phased in hike in the minimum wage to $15 an hour for fast food workers. That action  dismays some business groups, who say it will have some unintended consequences.

The governor, after unsuccessfully trying to raise the minimum wage further through the legislature, appointed a wage board, which voted in July to increase the minimum wage for fast food worker to $15 an hour over the next several years. Cuomo spoke to jubilant fast food workers and union leaders when the vote was announced.

“You cannot live and support a family on $18,000 a year in the state of New York. Period,” Cuomo said, as the crowd cheered. “That’s why we have to raise the minimum wage.”

Mike Durant, with the National Federation of Independent Businesses, says while many fast food companies are multi million dollar corporations, the actual fast food restaurants are often franchises owned by Mom and Pop style companies with very low profit margins, around 3 or 4 percent. He says other costs are also rising, including providing health care under the federal Affordable Care Act, and New York’s high worker’s compensation costs

“It’s like a balloon,” Durant said. “And when you squeeze it at one end, in this instance, labor costs, it can be something that puts them over the edge.”

He predicts the over 40% increase in labor costs over the next few years will likely to lead to fewer hours for fast food workers, closing of restaurants, and even more automation of jobs traditionally held by human workers.

He says newer chains like Panera Bread are already adopting tablets to take orders.

The New York State Business Council’s Ken Pokalsky agrees, and says more fast food restaurant are using kiosks instead of full food outlets, and switching to automation like automatic drink cup fillers. 

“It’s not realistic to believe that the sector sees only one option, that they have to keep paying the same amount of people twice as much money for the same amount of profit,” Pokalsky said.

The state’s Business Council filed formal objections during the public comment period.

They say an appointed wage board should never have been used to increase the wages in the first place, and that it was “improperly paneled”, because there were no representatives from the fast food industry on the three member board. The Business Council says the wage board also failed to answer the question of the pay rate for workers, like cleaning services, which may be contracted to work at fast food restaurants, or instances where a fast food outlet is part of a larger business like a gas station and convenience store.

Durant, with the Nation Federation of Independent Businesses, says the issue has “eroded” the governor’s once friendly relationship with the state’s business community. He says the wage board hearings were “hostile” to businesses.

“ Each hearing that this wage board had really became a labor rally,” said Durant, who said the Governor, and his Lieutenant Governor Kathy Hochul, who spoke at one of the rallies “embraced  it”.

The business groups’ concerns are unlikely to stop the momentum toward a higher minimum wage, though. Governor Cuomo has already said he intends to seek legislation to raise the minimum  wage to $15 for other workforce segments. 

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