Restaurant Owners Say Mpls. At The Beginning Of Minimum Wage Odyssey

By Neal St. Anthony Star Tribune (Minneapolis)

WWR Article Summary (tl;dr) The Minneapolis City Council decided last week to raise the minimum wage from $9.50 an hour to $15 per hour over the next five years for city businesses of more than 100 employees. This article takes a look at what this means to at least one popular restaurant owner.

Star Tribune (Minneapolis)

The progressive owners of downtown's popular Hell's Kitchen restaurant have nothing against good pay.

"I'm so liberal, I almost fall left," quipped Cynthia Gerdes, a two-time entrepreneur who built Creative Kidstuff into a $14 million-sales retailer before starting Hell's Kitchen 15 years ago. "I'm the daughter of two immigrants."

Hell's Kitchen, which generally pays more than minimum wage, also is among 10 percent of restaurants that provide health insurance.

But the three owners are concerned about the Minneapolis City Council's decision last week to raise the minimum wage from $9.50 an hour to $15 per hour over the next five years for city businesses of more than 100 employees, and by July 2024 for those of under 100 workers.

"We think this is the beginning of the discussion, not the end," said Pat Forciea, president of 180-employee Hell's Kitchen and a minority owner.

The DFL-dominated council's action, in an election year for Mayor Betsy Hodges and pushed by the Service Employees International Union, signals an intention to do better for working stiffs. It also was a rebuke to the Minnesota Restaurant Association.

The restaurant group first lobbied at the Legislature for a bill that would have stripped the city of its "local control" ability to raise the minimum wage above the state level, before its futile local-lobbying effort of city officials.

However, the industry and small businesses have some legitimate concerns with the Minneapolis ordinance.

Council Member Blong Yang of the North Side, voted against the $15 wage because of potential harm in his economically fragile ward.

"I'm confident Target, McDonald's and plenty of other big companies will be able to accommodate a higher minimum wage," Yang said before the vote. "What I am concerned about are small businesses, independent businesses, minority and immigrant-owned businesses."

Also, for the higher wage not to have unintended consequences in Minneapolis, neighboring St. Paul and some of the inner-ring suburbs, which share the same pool of workers will need to adopt a similar wage scale. If not, Minneapolis risks becoming an economic island.

Tina Rexing, the owner of T-Rex bakery and cafe a few blocks from the St. Paul border, has the same concerns. And it's troubling that the council did not carve out a tip credit.

That's essentially a lower minimum wage for servers who can make $15-to-$30 an hour already in some establishments. I agree that the working class and working poor, who have done least well since the Great Recession and for the past 40 years, should do better. Every household is different. But it's nearly impossible to make rent and raise a kid on minimum wage.

Regardless, Minneapolis has to be careful here. For one thing, some of these small businesses will have to raise prices. And maybe cut hours.

That 30 percent raise in the minimum wage to $9.50 mattered a few years ago. It's earned by about 248,000 Minnesotans, or about 15 percent of the workforce last year. It was too long coming. It also pushed the minimum wage to "somewhat above the inflation-adjusted Minnesota minimums of the late 1970s," according to a recent report by the Minnesota Department of Labor and Industry.

Gerdes, who supported the state increase in the minimum wage from $7.25 to $9.50, is not pleading poverty. "This will make us rethink our business model, although I never will say I'm moving or closing," said Gerdes of the looming $15 minimum. "We'll figure it out. We may have to raise prices. And we're going to have to raise the wages of an experienced cook or pastry chef compared to an [inexperienced barista or server] who's going to make $15 an hour. A tip credit would have evened things out."

Privately held Hell's Kitchen made $400,000-plus last year on sales of around $9 million, Gerdes said. It's a 4 or 5 percent margin before taxes.

"The owners pay taxes on that and we plow what's left back into the business," Gerdes said. "We will have to cut somewhere."

In Seattle, a more expensive city and the leader in the $15 minimum wage movement, a debate has broken out amid dueling studies and anecdotal reports of hour-and-job cutbacks as the minimum wage reaches $13 per hour on its march to $15.

My hope is that the economy booms, wages rise and businesses prosper, small and large.

Minneapolis politicos also may need to revisit this matter downstream.

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