$15/HOUR: FEAST OR FAMINE?
Mike Bhatnagar, owner of the 100-seat restaurant The Hat, says increases in the minimum wage mean he is taking an extra hit because the costs of both food and labour have gone up but sales haven’t increased accordingly. Some restaurateurs, however, have a
Even as Alberta restaurant sales hit record highs, hospitality sector voices warn that number hides the truth about minimum wage — which took its final jump to $15 on Monday in Alberta.
“It’s been pretty bad for us. And overall for the industry as such,” said Mike Bhatnagar, owner of the longtime Jasper Avenue staple, The Hat.
Restaurant receipts recently touted by the Alberta Federation of Labour’s Gil McGowan are only part of the story. The AFL president tweeted at the end of August that if Alberta’s increased minimum wage was really bad for business, then the restaurant industry would be hurting.
“But it’s not. Quite the opposite, in fact. It’s thriving,” stated McGowan’s Aug. 28 tweet.
Statistics Canada figures support that perspective. Alberta enjoyed record restaurant sales in June, with receipts ringing in at $788 million — 2.3 per cent higher than June 2017.
But Restaurants Canada notes that figure doesn’t take into account “menu inflation.” Restaurants have raised their prices, thereby increasing sales receipts. Factor in a national menu inflation rate of 4.3 per cent, and real sales receipts in Alberta were down by nearly two per cent in the first six months of 2018, says the organization which represents 30,000 businesses nationwide.
“Consider the source,” said McGowan in reaction to the Restaurants Canada number. “It’s data collected by Restaurants Canada, which is a self-interested employers’ organization with an interest in keeping wages low.”
In a phone interview, McGowan says Oct. 1 should be seen as an “occasion of celebration.”
“It’s the first time in decades that Alberta’s minimum wage is closer to a living wage than a poverty wage. That’s good news for hundreds of thousands of Albertans and the economy as a whole.”
He points out that while it’s true that employment numbers in the food service and accommodation sector are down across Alberta by eight per cent since the first minimum wage increase in October 2015, that sector is particularly responsive to factors such as the price of oil because it’s attached to discretionary spending.
The Hat’s Bhatnagar, who has owned the 100-seat restaurant for more than six years, said that despite the fact that he has raised menu prices, profits are declining month by month. Since minimum wage increases began, Bhatnagar has reduced staff at lunch and at dinner, and may close the restaurant on Sundays. Increased costs for labour and food are the main reason it’s harder for Bhatnagar to make money.
Restaurant owners interviewed by the Journal acknowledge they’ve raised prices in response to increased labour costs (including new provisions that require employees to be paid for statutory holidays), as well as other hikes for food, fuel and insurance. Mo Blayways, who owns two locations of 1st Round, has increased prices by more than 10 per cent over the last three years.
“It’s a death by a thousand cuts,” said Blayways, who has 150 fulltime and part-time employees. “At the end of the day, (the minimum wage increases) have been extremely damaging to our consumers and our employees.”
Each time the minimum wage has been hiked in the last three years, employment falls in the Alberta hospitality sector, says Restaurants Canada western vicepresident Mark von Schellwitz.
“Our industry employment is down by thousands of workers over the past few years, not to mention the under-employment, as many surviving employees have seen their hours decrease as well,” said von Schellwitz in an email.
The City of Edmonton’s chief economist, John Rose, says the city’s accommodation and food services sector has had a “pretty grim 12 months.” In August 2017, roughly 47,700 people in Edmonton were employed in this area. By this past August, that number was 41,700, a drop of 12.6 per cent.
“The broad-based, slow recovery in the economy has put a bit of downward pressure on the hospitality and food sector and, of course, we’ve had the increase in the minimum wage. Although it’s hard to quantify, I suspect that’s had an impact, too,” said Rose.
The minimum wage increases have taken place during one of the worst recessions in Alberta since the 1980s, making an assessment on the impact of the increases difficult.
Restaurateurs have shifted their business models in response to the wage pressure. Blayways, a member of a Restaurants Canada advisory committee on minimum wage, has increased the size of sections his employees must cover on a shift. Whereas six or eight servers used to be on a given shift, there are now four to six. On some shifts, Blayways has eliminated the dishwasher position.
Reducing staff and increasing menu prices “is not putting more money in our pockets as owners,” said Blayways.
“This is allowing us to stay solvent,” he said.
Restaurants Canada notes that in 2014, labour costs made up 29.7 per cent of restaurant costs. A recent survey of the organization’s membership reveals that labour costs now total 32 to 34 per cent of a restaurant’s budget for the vast majority surveyed.
Some restaurant owners in Edmonton are sanguine about minimum wage hikes. Chris Sills, co-owner of Rostizado restaurant, says his Mexican restaurant has adapted to increasing wages (which added $80,000 yearly to the restaurant’s costs) without too much difficulty. Rostizado has raised prices, increased the size of sections a server must cover, and let some people go. Sills says debt servicing, and a slowdown in business, has also affected the restaurant’s bottom line.
Sills says staff complain that customers are tipping less than before.
“I don’t think (the minimum wage increase) is a bad thing,” said Sills. “But I think the servers are having a hard time because they are making less money.”
Sara Gramajo, 38, a career server who has been at The Workshop Eatery since 2016, says her tips have decreased slightly since minimum wage came in. In addition, her “tip-out,” the amount of her tips that are traditionally redistributed by management to the staff who don’t get tips, has increased to 6.5 per cent effective Oct. 1 from five per cent in 2016.
Gramajo said that redistribution is “fair” in her mind. Workshop Eatery restaurant owner Paul Shufelt says a bigger tip-out from servers is necessary to compensate kitchen staff and bartenders who don’t get a raise on Oct. 1 because they are already making $15 or more.
Arden Tse, co-owner of the ramen restaurant, Prairie Noodle, says they are coping with increased labour costs by raising menu prices and rejigging their business model somewhat. They did not lay off staff as a result of the increased minimum wage.
“At the end of the day we have to deal with whatever we have to deal with,” said Tse.
It’s the first time in decades that Alberta’s minimum wage is closer to a living wage than a poverty wage.