New York-based cooks and cashiers at McDonald's, Burger King, Taco Bell, and elsewhere will soon be on track to earn more than cooks and servers at full-service restaurants. Here's why: a labor panel created at the behest of Governor Andrew M. Cuomo voted this afternoon to raise the minimum pay for fast food workers to $15/hour, a massive 71 percent hike from the current rate of $8.75.
The increase, designed to improve the lives of chain restaurant employees whose wages can keep them reliant on taxpayer-subsidized welfare programs, will take place gradually over the next six years, with New York City hitting the $15 target by 2018, and the rest of the state by 2021.
The policy, if it's adopted as expected by the state's labor commissioner, will make New York the fourth major U.S. state or city to approve a $15 wage in some form, a base rate of pay that has been the goal of "Fight for 15" demonstrations throughout the country. The wage hikes for New York's fast food workers are set to begin on December 31, 2015, with the NYC rate going up to $10.50, and the state rate rising to $9.75.
Owners and operators will likely pass on at least part of their higher labor costs to the consumer in the form of price hikes. The larger New York hospitality industry is already facing wage pressures, with the minimum having gone up by $1.50 to $8.75 in under two years, and with another hike to $9 set for the new year. The tipped-minimum for restaurant workers will see an even steeper increase in late December, going up by $2.50 to $7.50.
Chains with thirty or more nationwide locations will be subject to the order, the Wage Board announced today. That means Danny Meyer's Shake Shack, with 42 locations, will have to comply, but Parm by Major Food Group, with just four locations will not. A spokesperson for Shake Shack declined to comment on how the higher wage rate will impact prices for burgers and other items, as the company is currently in a quiet period.
The policy will apply not just to company-owned restaurants but to franchise locations as well
The policy will apply not just to company-owned restaurants but to franchise locations as well, meaning that an independently owned Popeye's or Wendy's will have to increase worker pay as well. That's an important distinction that the fast food industry will surely oppose; when McDonald's announced earlier this year that it was raising its minimum pay to $10 an hour by the end of 2016, franchise locations, which run about 90 percent of that chain's restaurants, were exempt from that rule.
Unlike other municipalities that have raised their own minimums, New York's law will only directly benefit its 180,000 fast food workers, which, according to Cuomo, cost the state $6,800 per person each year in various welfare programs, the highest per capita burden in the country. By contrast, all of the lowest-paid workers in Seattle, Los Angeles, and San Francisco will gradually see their wages rise to $15 over the next decade.
New Yorkers who don't work in fast food stand to benefit indirectly, however. The higher wage, which will be phased in over the course of a few years, could also prompt competitive salary increases throughout the hospitality and retail industries to avoid a drain of workers who'll suddenly find fast food jobs more attractive.
The average New York fast food cook or prep worker, according to the U.S. Bureau of Labor Statistics, earns $9.75/hour, roughly $20,280 a year — barely above the federal poverty line for a family of three. So for a worker who puts in a steady 40 hours a week, the higher $15 wage translates to an annual $31,200 salary, an increase of over $10,000 a year. That'll be more than the $12.81 mean hourly rate that New York restaurant cooks currently earn, or the $12.16/hour that servers make. Some fast food chains already pay well above the state minimum. Shake Shack, for example, stated in its initial public offering documents that it pays entry-level workers no less than $10/hour.
Unless Cuomo succeeds in raising the minimum for the larger workforce, New York's lowest legally mandated wage for non-fast food workers will lag behind Seattle, San Francisco, and Los Angeles, which will all reach $15/hour over the next ten years, as well as Chicago, set to rise to $13, Oakland, which reached $12.25 in March, and Washington D.C., which rose to $10.50 in July.
Vermont Senator Bernie Sanders introduced legislation that would raise the federal minimum to $15/hour, up from the current $7.25; such a bill is unlikely to pass as President Barack Obama's efforts to pursue a lower $10.10 minimum have foundered in Congress.
Cuomo attempted to raise the state minimum to $10.50, in a bid that included a separate higher New York City minimum at $11.50, but was rebuffed by the Republican-controlled senate. Under state law, "a Wage Board can suggest changes to the minimum wage in a specific industry or job classification if it finds that wages are insufficient to provide for the life and health of workers within that industry or classification," according to the governor's website. Legislative approval is not required to enact those changes. A wage board is the instrument that Cuomo used last year to raise the pay of the tipped-workers.
A recent survey of 924 fast food businesses in New York found that 70 percent of were "very likely" to raise prices in response to a $15 minimum, with 83 percent of respondents claiming they were very likely or "somewhat likely" to reduce hours or staffing levels. The survey was conducted by the Employment Policies Institute, a conservative think tank.
New York City Minimum Wage Schedule for Fast Food Workers:
- 12/31/2015 = $10.50
- 12/31/2016 = $12.00
- 12/31/2017 = $13.50
- 12/31/2018 = $15.00
New York State Minimum Wage Schedule for Fast Food Workers:
Source: New York State Fast Food Wage Board
- 12/31/2015 = $9.75
- 12/31/2016 = $10.75
- 12/31/2017 = $11.75
- 12/31/2018 = $12.75
- 12/31/2019 = $13.75
- 12/31/2020 = $14.50
- 07/1/2021 = $15.00