HOW WILL WAGE INCREASE AFFECT RESTAURANTS?
Some owners of Denver eateries worry about more labor woes.
D
enver restaurants are becoming a lightning rod in the debate over the city’s proposed minimum wage increase, which would raise the hourly pay floor to more than $15 by Jan. 1, 2021.
Last week, Mayor Michael Hancock and Councilwoman at-large Robin Kniech proposed raising the Denver minimum wage from $11.10 to $13.80 per hour starting Jan. 1 and then to $15.87 an hour starting in 2021.
If the Denver City Council passes the proposal, employees who receive tips would make $10.78 as of Jan. 1 and $12.85 by 2021. The current tipped minimum wage in Colorado is $8.08.
More than 67,000 Denver residents are earning less than $13.80 per hour working in Denver, Mike Strott, the mayor’s deputy communications director, said in an email to The Denver Post.
“This raise is urgent for them, and we wanted to craft a proposal that would provide these residents that raise as quickly as we were able to under the state law,” he said.
The Colorado Restaurant Association opposes the proposal for two main reasons, according to CEO Sonia Riggs.
“First, the speed with which this hike would be implemented is extreme. $4.77 in a 15-month timeline is significant,” Riggs said via email. “Second, this hike will further increase the earnings disparity between servers and kitchen staff. … So in the case of the restaurant industry, this proposal actually hurts the people it’s trying to help.”
The restaurant industry has long battled labor issues exacerbated by a wage gap between front- and back-of-house employees.
Because front-of-house workers such as servers and bartenders are tipped, their employers can pay them $3.02 less per hour than their untipped counterparts, in accordance with the state’s tipped wage credit. But, as Riggs points out, tips can often add up to as much as $20-$40 an hour in final take-home pay, while cooks are still making an hourly amount somewhere in the teens.
“This proposal requires full-service restaurants to give their highest earners a 50% increase in their hourly wage,” Riggs said. “When the cook making $17 an hour sees the server getting a 50% raise to do the same job, the cook is going to want $20/hour. But … the restaurant has to raise prices and decrease costs (including cutting staff ) in order to survive.”
Councilwoman Kniech said she couldn’t comment on the restaurant industry’s “internal approach” to front- and back-of-house pay.
“Our primary goal is higher wages for vulnerable service employees,” she wrote in an email. “The shortage of restaurant workers in Denver has been well-documented and a prominent conversation among the industry. It would be an oversight not to consider the connections between wages and that workforce shortage.”
Denver restaurateur Ryan Fletter thinks his industry’s labor shortage won’t necessarily be helped by the higher minimum wage.
“What started as a wage gap problem will be exacerbated,” Fletter said. “You continue to spread this problem of kitchen staff making $13-$18 and waitstaff all making $25-$30 an hour. It makes the hardest job in the restaurant, which is in the kitchen, that much more of a pathetic position to be in.”
At Fletter’s two Denver restaurants, Chow Morso and Barolo Grill, he said he pays cooks and chefs above minimum wage. To attract and keep them, he offers health insurance and a 401(k), as well as competitive hours and a yearly team trip to Italy for research.
He’s even added a “kitchen livable wage” fee onto diners’ bills. The extra 2% is clearly labeled for customers, who are largely supportive, Fletter said. “But I don’t know that they would (feel) the same if, say, their duck cost $34 instead of $30.”
Regardless of business owners’ ability to pay higher wages, restaurateurs such as Fletter said they worry about raising menu prices along with wages while trying to maintain their customer base.
In Seattle, for example, the $15 minimum wage went into effect last year for large employers and this year for small-business owners, with wages increasing by $1 a year over a five-year period for businesses employing 500 or fewer workers. Reports on the effects of the $15 minimum wage in cities that have enacted it are mixed.
“In Seattle now, you can’t buy a sandwich for much less than $20,” Fletter said. “I think we’re going to see something similar here, unless it’s made with really cheap ingredients.”
As Riggs at the Colorado Restaurant Association puts it, “95-97 cents of every dollar spent in a restaurant goes directly to the people, the place and the food. That doesn’t leave a lot of room for additional costs.”
Chef and restaurateur Caroline Glover runs on higher margins — around 12% — at her restaurant Annette in Aurora. That’s because she and her husband, Nelson Harvey, run the almost 3-year-old business with 19 employees and “don’t really get paid (ourselves), so it’s not like real life,” she said.
“I don’t think the whole public will understand that prices will probably have to go up for us (as minimum wage increases),” she said. “I think the mass consumer doesn’t understand why prices are what they are to begin with. It’s not like we’re just pulling numbers out of thin air.”
At Annette, Glover runs one of the area’s most experimental restaurant pay models.
Aside from herself, her husband and managers, all hourly employees are paid equally across the board. Which is to say, everyone from the dishwashers to the cooks and servers makes untipped minimum wage plus an even share of pooled tips (tip pooling among the whole staff is legal if included employees are making the untipped minimum wage).
Whether front- or backof-house, Glover said all of her employees typically make about $28-$30 an hour. The kitchen staff is satisfied with this, but the waitstaff, used to making more than $30 an hour, has been harder to convince. “I have one half of the restaurant that’s happy, and then I have this other half …” Glover said.
Even still, she’s been fielding phone calls from new restaurateurs curious about Annette’s pay model. Business owners around Denver are increasingly experimenting with pay structures, tip-pooling and other competitive incentives.
“There are restaurateurs out there trying to figure out how to better distribute earnings across the restaurant staff,” Riggs said, “but with the speed of this change, there’s no way the industry will find a solution in time. We’d like to see a slower, more gradual increase (in minimum wage) to give businesses time to strategize and adjust.”
Even in Golden, longtime restaurateur-turned-baker Jeff Cleary is worried about the proposal.
“If it goes up to $15, I don’t know how restaurants will do it,” he said. Cleary owns Grateful Bread, which supplies many Denver restaurants. Last year, facing a labor shortage and personal illness, he closed his business for a couple of weeks. Now he employs around half of the staff he once did at the bakery’s peak, and he worries about continuing to attract hard workers.
“Somebody’s not going to come out here for $13 if they can get $15 in Denver just for walking in the door,” he said.
Independent of Denver’s minimum wage debates, in Aurora, Glover said she will continue her restaurant’s model, raising pay accordingly and focusing on educating her customers and staff.
“Being in the restaurant industry for so long and working and not being able to make ends meet, it’s hard,” she said. “But I sign all the paychecks, and I think everybody’s making a livable wage and a fair wage, and I feel like that’s kind of why we stuck with it (at Annette). … I’m not here to say it’s the best model, but I can sleep at night.”