New York City Businesses Struggling, Cutting Staff after Minimum Wage Increase
NYC business owners say they are forced to cut hours for staff and raise prices
Business owners in New York City say they are struggling to operate since the minimum wage increase to $15 per hour, with some forced to cut staff hours and raise prices for customers.
Other businesses, however, are cutting staff numbers or simply going out of business altogether.
Many business leaders are reporting these changes were unintended consequences of the new minimum wage, which came into effect just over six months ago.
According to the New York State Department of Labor, in June, NYC's unemployment rate was 4.3 percent, compared with New York State’s unemployment rate of 4 percent.
Both figures have remained relatively steady throughout the past year.
According to Fox News, New York City’s minimum wage has increased three times for employers with at least 11 employees in the past three years.
At the end of 2016, the hourly rate rose to $11 from $9 an hour.
In 2018, the minimum wage jumped to $13 from $11 an hour.
The rate will increase to $15 an hour for employers with 10 or fewer workers at the end of 2019.
The current federally mandated minimum wage is $7.25 an hour.
Other states have passed $15-minimum-wage legislation, including Massachusetts, California, Maryland, Illinois, New Jersey, and Connecticut.
Anthony Advincula, a spokesman for Restaurant Opportunities Centers United, which advocated for the $15 minimum wage, said there are other factors beyond higher wages that result in unsuccessful businesses, and owners shouldn’t blame the boost for their struggles.
“Increasing to $15 would reduce income inequality, and the number of individuals living in poverty now is ridiculously high,” he said.
“This is not just a business issue, this is a race, gender, pay-equality issue.”
Sarah McNally, the owner of McNally Jackson Books, employs 75 people at four shops in Manhattan and Brooklyn.
Ms. McNally said she hasn’t cut hours or reduced the number of people she employs to mitigate the increase, but she is working to open two more shops and scale her workload to stay profitable.
While Ms. McNally said she always has paid her employees at least $5 above minimum wage, January’s increase tightened that gap.
“With raising minimum wage to living wage, it feels now like we’re at the bottom of the pay spectrum,” she said.
“There’s absolutely no benefit to being a retail business in New York.”
Thomas Grech, president of the Queens Chamber of Commerce, said he has seen an uptick in small-business closures during the past six to nine months, and he attributed it to the minimum-wage legislation.
“They’re cutting their staff. They’re cutting their hours. They’re shutting down,” he said.
“It’s not just the rent.”
Lisa Sorin, president of the Bronx Chamber of Commerce, said Manhattan businesses and their customers can afford to pay more to compensate for the wage increase, while those in the surrounding boroughs probably couldn’t.
“It’s almost like a whirlwind of keep up or get out,” Ms. Sorin said.
Restaurants and establishments with customer bases with less disposable income are challenged, but all are experiencing changes in customer habits regardless of the borough, said Andrew Rigie, executive director of the New York City Hospitality Alliance.
To mitigate the challenges restaurants face, Mr. Rigie said, local and state government should consider providing tax incentives to owners and preserve the tip credit, which allows restaurants to count some or all of an employee’s tips toward its minimum wage obligations.
“Many people working in the restaurant industry wanted to work overtime hours, but due to the increase, many restaurants have cut back or totally eliminated any overtime work,” he said.
“There’s only so much consumers are willing to pay for a burger or a bowl of pasta.”