Letter: The math of minimum wages
In response to Rich Gieser’s letter from March 20, I was intrigued until I did the math. As a business owner in New London, I added up my tipped employees’ hours from 2012. The total was 9,360 hours; this does not include the hours worked by non-tipped employees (cooks, bakers and dishwashers).
Using Mr. Gieser’s raise increase of $2.25 per hour (for tipped employees) X 9,360 hours = $21,060 in additional wages per year. The restaurant industry’s standards are that total wages should be approximately 30 percent of gross sales. I would need a sales increase of $70,200 per year just to maintain the industry margin.
Mr. Gieser wants me to believe that adding 8 cents to the cost of a meal would cover this expense. For the sake of math, let’s say a restaurant serves 50,000 meals in a year. If that restaurant were to increase its meal price by 8 cents, there would be an additional $4,000 earned annually. Here’s some more math: $4,000 - $70,200 = -$66,200. Therefore, adding 8 cents per meal will not cover the $70,200 needed in additional revenue.
According to the Minnesota Department of Labor, in 2012 tipped employees were the highest paid in the food service industry (when compared to non-tipped employees), earning average compensation of $18.24 per hour.
I believe that if this bill passes, the consequences would be severe to our industry. The money to cover these costs has come from somewhere, either through a decrease in hours to employees, in price increases to the consumer, or both.