by Tammy Binford

New York fast-food workers may be celebrating the likelihood of a $15-an-hour minimum wage phased in over the next few years, but others are questioning the justification offered for the raise.

A three-member wage board appointed by New York Governor Andrew M. Cuomo recommended the new minimum wage for fast-food workers July 22. It won’t take effect without an order from the state’s acting labor commissioner, which is expected.

New York state law allows a wage board to recommend a minimum wage for a specific industry or job if it finds pay is inadequate to provide for the health of those workers. The panel justified the $15 wage recommendation by arguing that wealthy multinational companies are burdening taxpayers by paying wages so low that employees are dependent on food stamps and other forms of welfare.

Paul J. Sweeney, an attorney with Coughlin & Gerhart, LLP, in Binghamton, New York, and an editor of New York Employment Law Letter, says that argument makes “several false assumptions.”

"Wages often reflect market conditions, and the economy is gradually improving such that employees can now command higher wages and/or seek out higher-paying work," Sweeney said. "As such, the need for government intervention may be less now."

Sweeney said several individual factors such as education, work experience, personal accomplishments, attitude, and work habits drive employability, and many workers use fast-food jobs as a first step to a successful career rather than a career goal.

“In that regard, the [fast-food] workforce is diverse and includes high-school-aged youth working for ‘pocket money,’ college students paying for school, and retirees who are supplementing their income,” Sweeney said. “As such, the wage board’s recommendations represent a ‘one size fits all’ solution, which makes no distinction as to these personal circumstances.”

Sweeney also says higher labor costs resulting from a higher minimum wage are likely to lead to higher product or service costs, “which will be passed on to the ‘taxpayer.’” Also, he said the higher minimum wage may backfire on fast-food workers since it may motivate employers to automate service or cut staff.

Calls for more raises?

Sweeney said he expects the new fast-food wage to encourage calls for higher wages in other sectors, such as retail.

“I fully expect that Governor Cuomo will use the fast-food minimum wage increase as a platform to seek similar increases for other industries” either using the wage board process or by calling on the state legislature to pass an across-the-board minimum wage increase for all workers, Sweeney said.

“Hopefully by then, there will be impartial economic studies for this experiment to quantify the positive and negative impacts of a dramatically higher minimum wage,” Sweeney said.

The New York action follows a minimum wage increase for workers at McDonald’s company-owned outlets nationwide. The fast-food giant announced in April that beginning July 1, 2015, its starting wage would be $1 over any locally mandated minimum wage. The company’s announcement said that it projects that the average hourly wage nationwide for employees in company-owned stores will be $10 an hour by the end of 2016.

While the McDonald’s action applies only to company-owned stores, the New York requirement applies to both company- and franchisee-owned restaurants.

Plan details

Under the plan, the minimum wage for fast-food workers would rise from the current $8.75 an hour to $10.50 in New York City and $9.75 in the rest of the state on December 31, 2015. The wage would then rise each year, reaching $15 in New York City by December 31, 2018, and in the rest of the state by July 1, 2021.

The requirement would apply to fast-food restaurants that are part of chains with at least 30 outlets nationwide. Fast-food restaurants are defined as establishments where food and drinks are served at counters where customers pay before eating and can eat in or take food out.

Reaction

The New York State Restaurant Association quickly voiced disapproval of the wage recommendation. “From day one Governor Cuomo’s wage board has sought to silence the business community and force through an unfair and discriminatory increase on a single sector of one industry,” said Melissa Fleischut, president and CEO of the association. “From stacking the board with supporters of an increase to allowing business owners to get booed and heckled at public hearings, the governor has rigged the game at every turn.

“Since the governor used a process that rejects compromise, the result is an extremist policy that will force business owners in this low-profit-margin industry to cut hours, lay off employees, and use technology to help offset skyrocketing labor costs,” Fleischut said.

The wage increase was applauded by others. Mario Cilento, New York state AFL-CIO president, said the increase will lift fast-food workers out of poverty and provide them with “an opportunity for a better life for themselves and their families.”

“A higher wage benefits us all by providing a kick-start to New York’s economic engine, leading to job creation in both the fast-food industry and other sectors as well,” Cilento said.