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How LA’s new minimum wage will affect restaurants

June 9, 2015

With the national conversation focusing on such prickly topics as wealth inequality, it wasn’t long before legislators started seriously considered upping the minimum wage. Since 2009, the federal minimum has been set at $7.25, and no one who lives in any major U.S. metropolis regards this as a livable wage. Dealing with this reality, the central question became not just to up the minimum, but to how much. This decision fell to the cities, and Seattle led the charge with their plan to raise the minimum to $15 an hour over time. (In April they made the first adjustment, to $11 an hour.)

Cut to California. In late April, Los Angeles’ city council passed a measure to up the minimum to $15 by 2020, and they’ve tied this wage to inflation. This means many things to many business sectors, but for now let’s focus on one vital industry: the restaurant business. Los Angeles has one of the richest dining scenes in the country, offering everything from high-end eateries to street food stalls. Here are three factors that should be impacted by the wage increase.

Food costs

Not so surprisingly, many in the southland are looking north to see what the practical impact on the restaurant industry is. One thing is clear: there has been a fundamental shift in how restaurants offset the minimum wage hike. Employers in Seattle are making dramatic changes, and an increase in menu prices now seems to be the norm. Los Angeles can expect to see restaurants charging more for plates of food, too. How eager employers are to tweaking their price margins depends on how much they support the wage hike.

Staff/hours

As Seattle has proved, hours are going to be cut in the L.A. restaurant industry. It isn’t just staff schedules in question, either; business hours will be affected as well. Look for many employers to trim workers hours as well as to open later and close earlier. Having said that, the cry from far-right conservatives that the Seattle hike is decimating local eateries is a falsehood. Hours may be cut, to be sure, but don’t count on the wage increase directly putting anyone out of business. The restaurant industry in places like Seattle and Los Angeles will always be competitive.

Tipping

The pages of major L.A. papers are now filled with columnists criticizing the act of tipping. Getting rid of tipping altogether, as some suggest, seems an untenable and draconian solution, since tipping is so embedded in the American culture. However, restaurateurs faced with a dramatic rise in the minimum wage have found creative compromises. For example, many are including the gratuity in the bill and listing it as a “service” charge. Some employers are even spreading this charge around so the kitchen staff as well as the wait staff gets a kickback.

Only those who viewed the raising of the minimum wage through the rosiest of rose-colored glasses ever thought it would come off without a hitch. What Seattle serves to illustrate to Angelinos, though, is that arriving at livable wages for fair work will be a protracted process that will require flexibility and compromises on both sides.