Boost Productivity to Control Labor Costs

There are many policies and regulations that affect the restaurant industry, mainly related to the health and food safety, workforce and tax/profitability of the business.

The fast-food workers are expressed as a pond in a bigger game. They have to deal with their low pay in order to ensure low prices by these franchises. Jencunas concerns go on to represent the beginning of a bigger chain effect. Briefly, he states that, “The average fast food store would go from profitable to unprofitable overnight. Some would close immediately, leaving their workers worse off than they were when working for $7.50 an hour, while others would raise prices and try and remain in business, hurting consumers” (“Don't Deserve Any More, or Less”). Evaluating his reasoning we see that if fast-food workers ask for a higher minimum wage, they will in return influence the profit margin and actually increase unemployment rate in this industry. The researchers go on to inform us that if their minimum wage increases the industry won’t be able to afford the change in their profit margin and result in bankruptcy. However, Mary Kay Henry, president of the Service Employees International Union, which supports the fast-food strike states a different claim:

The restaurant server is one of the most popular jobs in the country and according to the National Restaurant Association, currently, 1 in 12 Americans work in the restaurant industry and about 50 percent of all adults have worked in the industry at some point during their lives. The industry is clearly very large with over 13 billion workers, but overall, workers in the industry do not get paid very well. According to the U.S. Department of Labor (DOL), the average annual salary for a

If the minimum wage goes up, this would affect profits as well as number of employees working at the restaurant. Currently the firm is able to hire a large team of servers at each location. This allows them to cater to each customer's needs and to complete orders on

Aaronson, Daniel, Eric French, and James MacDonald (2008), "The Minimum Wage, Restaurant Prices, and Labor Market Structure", Journal of Human Resources 43(3), 688-720.

A part of the problem has always been whether or not to raise the minimum wage. Over the past several decades the minimum wage has increased significantly higher and higher. According to minimum-wage.procon.org, “should federal minimum wage be increased,” minimum wage has actually been increased twenty-two times and the most recent in 2009. The current minimum wage is seven dollars and twenty-five cents and some states have a higher minimum wage rate (Doyle). This increase in minimum wage over time can cause a lot of problems among businesses and workers. I have debated for a long time if this is really what we need to do because I have worked in the restaurant industry and know what it is like to receive minimum wage. People have argued for years why the minimum wage should not be raised. In my opinion, minimum wage should not be increased because it will lead to higher costs at restaurants, unfairness to waiters and waitresses, machines replacing workers, and cause the cost of living to possibly increase.

“A competitive model of the fast-food industry implies that an increase in the minimum wage will lead to an increase in product prices. If we assume constant returns to scale in the industry, the increase in price should be proportional to the share of minimum-wage labor in total factor cost. The average restaurant

Card and Krueger suggested that minimum wage increase did not impose any negative effect on the labor market with their 1993 study Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania. In their study, Card and Krueger used the minimum wage increase in New Jersey and conducted a natural experiment using pooled cross sectional data from New Jersey and Pennsylvania. The methodology adopted in Card and Krueger’s study was difference in differences using New Jersey as the treatment group and Pennsylvania as the control group. In early 1990, a new minimum wage law was legislated in New Jersey stating that minimum wage must be increased from $4.25 to $5.05 by April 1, 1992. The authors chose to investigate the effect on the fast-food industry because fast-food stores are a lending employer of low-wage employees and were expected to rise minimum wages immediately after the law became effective (Card & Krueger, 1994). In addition, fast-food restaurants required relatively homogeneous qualifications from their employees making it possible to disregard the effect of individual ability. Lastly, fast-food industry workers’ wages do not include tips which greatly simplified the process of wage and employment measurement (Card & Krueger, 1994). The first round of interviews took place in February to March 1992 when 410 restaurants were surveyed. The same restaurants were later interviewed again in November and December 1992. The number of full-time workers was calculated using the Full time-equivalent employment measurement. A simple before and after comparison showed that both full-time employees and price of a meal increased in New Jersey compared to the control state-Pennsylvania. In the first wave, information showed that the average employment was 23.3 in Pennsylvania where New Jersey had

Developments are showing that it’s time now for American small businesses to gear up for what this trend might mean for the future. There are few expenses that affect business owners more than employee wages. Experts estimate that semi-variable costs, like salaries and wages, account for anywhere between 30 to 40 percent of a company’s total revenue. As expected, the remaining revenue covers other overhead costs like operational expenses, inventory, leasing agreements, insurance, and everything in between. The fear for many small business owners, specifically those throughout the restaurant industry, is that if a federal minimum wage increase is authorized, it will significantly impact how they are able to balance a budget, with many already

Direct labor costs ended at $221k or 41.8% of sales compared with $221K and 34.8% of sales for the same period a year ago. Direct labor headcount

If you don’t plan properly and staff too many employees- hours may be have to

More jurisdictions are requiring quick-service restaurants to (-- removed HTML --) post work schedules (-- removed HTML --) at least two weeks in advance. Some districts are also requiring more restaurants to offer overtime pay. Minimum wage can also change based on local, provincial or federal laws. Even when the pay is not regulated higher than you want to pay, you might need to pay more to attract qualified workers.

May be unable to find, hire and keep sufficient number of qualified employees at an attractive rate

Attracting restaurant workers for minimum wages is becoming more difficult. Restaurants face higher costs due to health insurance costs and industry pressure to pay higher wages and salaries. Improving economic conditions mean more jobs, and many restaurant workers leave their jobs for higher paying careers. Restaurants have trouble finding enough qualified help to staff their businesses and are increasingly forced to raise salaries and pay to train new hires, which costs up to one-fifth of most workers' annual salaries.

Many organizations do not have the luxury of having a constant demand in their businesses. Some companies face a large increase in business for the holiday season, summer vacation, or for a major event throughout the year. These predictable trends allow many businesses to hire additional employees to help with the demand. The organizations are then forced to lay several employees off when the demand returns to a normal level.