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Misleading Restaurant Employment Study

By NYC Hospitality Alliance

A recent study study suggests that the restaurant industry has not been negatively impacted by the state's increased minimum wage, tip wage, and other costly new mandates. This is not true.

You may have read stories in the press about a new study released by the Center for New York City Affairs at the New School. The study suggests that the restaurant industry has not been negatively impacted by the state's increased minimum wage, tip wage, and other costly new mandates. This is not true. As we shared with you earlier this year, state job statistics confirmed that full-service restaurants in NYC lost jobs in 2018. Even more alarming, NYC full-service restaurants have continued to shed jobs every month so far in 2019 as employers grapple with significant growing economic pressures. We are also concerned about the concert of voices ranging from politicians to well-funded groups who are dismissive of the challenging experience restaurant and bar owners have running a small business in NYC.

 
As you'll see in this analysis:
 
  • The New School report starts measuring restaurant job growth beginning in 2013, identifying this as the year that increases in the state minimum wage began phasing in. In fact, the minimum wage for tipped employees remained flat over this time period, and the overall minimum wage rose modestly between late 2013 and late 2015. It was not until the end of 2015 that the tipped wage jumped by 50 percent overnight. Since then, employment growth in full service restaurants nosedived and in 2018 the industry shed jobs and continues to do so in 2019, according to NYS Department of Labor data.
  • The report's assertion that there was supposedly a big increase in the number of hospitality establishments in 2017 (after the wage increase) is more likely the result of a reclassification by the NYS Department of Labor.  The DOL simply added thousands of businesses that already existed to the "food services and drinking places" industry category. (The data lends support to this conclusion, with a massive drop in the number of unclassified businesses between the last quarter of 2016 and the first quarter of 2017 corresponding with an increase in those classified under food services.)  
The truth is: 
 
  • Our survey that included operators of 324 full-service restaurants in NYC showed that 76.50% of respondents reduced employee hours and 36.30% eliminated jobs in 2018 in response to mandated wage increases.
  • Fully 47% of these full service restaurants also said that they planned to eliminate jobs in 2019 because of new wage increases and other financial pressures.
Proposed additional mandates:
 
From the proposed elimination of the restaurant tip credit in NYS, to new requirements for paid vacation time in NYC - these policies threaten to make it more challenging to run a successful business in NYC and accelerates this job loss even further.  We will continue working with our elected officials and others to create a better business environment and try to ensure that we don't drive small businesses out of NY and add even more vacant storefronts across the five boroughs!

 


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