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With a Minimum Wage Increase on the Horizon, Restaurateurs Consider Their Options

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The minimum wage for tipped workers in NYC could go up to as much as $8.50. If it does, who will raise their prices? Who will charge a service fee?

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As the city waits to learn whether the state's Labor Commissioner will approve a major increase of the minimum wage for tipped workers, restaurateurs are beginning to consider how they might have to change their business to accomodate such an increase. As it stands now, minimum wage for tipped workers is $5.00 an hour, but that could go up as high as $8.50 in the city by the end of the year if this new minimum wage law passes. If it does, labor costs for restaurants will climb significantly.

Crain's polled some restaurateurs, including Jimmy Haber, of the BLT empire, and Tom Colicchio, to see where they stand on the matter. Haber, whose labor costs could go up by as much at $1.4 million, says he's "seriously exploring" adding a service charge to diners' bills, and paying his employee's a "merit-based salary." Colicchio, on the other hand, says he would probably just up his menu prices. He's concerned that "changing people's habits," to get them to accept a service charge and not leave a tip, would be harder than just charging them more for food. Of course, paying a certain amount for dinner may also be a hard habit for diners to break.

Restaurateurs in San Francisco are currently facing similar questions, as the state moves to gradually increase minimum wage to $15 (it went up to $11.01 on January 1, and will hit $15 by 2015). There, a handful have already switched to charging a 20 percent service fee, including heavy-hitters Atelier Crenn and Saison.

So keep an eye on this story – if the law does pass, there could be changes to the way New York dines.

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