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Pressure of Pandemic and Minimum Wage Increase Puts Restaurants Close to Collapse

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Raising the U.S. minimum wage apparently is not a good idea even for employees. A small restaurant owner in Virginia said his workers do not want the new wage because it would decrease their income.

Tony Stafford, chef and founder of Ford’s Fish Shack in Virginia, told Fox News that raising the minimum wage and removing tips would decrease employee wages.

Restaurant tipping is deeply ingrained in the American mindset. Owners worry that potential diners will see significantly higher prices without realizing that they do not include tips.

When Joe Biden unveiled his COVID-19 relief plan, he included $1.9 billion in aid, but restaurants, the sector hardest hit by the pandemic, found no planning to overcome the pandemic’s rampages. Instead, he did find the proposal to raise the minimum wage to $15 an hour, one more reason to declare bankruptcy.

“It’s one more blow,” Matt Grimes, owner of the Colonial Cottage opened in 1933, told to Roll Call. To pay those wages, he said, “I’d have to raise my prices by no less than 30%. How much are you willing to pay for bacon and eggs?”

Grimes said he currently pays a starting wage for hourly workers of $9, above the federal and state minimum of $7.25. But at $15, he said, he would “do everything possible to reduce staff and have only the most efficient workers.”

He also asserted that under Biden’s measure his waiters would likely lose revenue because generous tips would disappear as customers are affected by price increases.

The Congressional Budget Office recently found that an increase in the minimum wage would have mixed effects. In a 2019 report, it said raising the federal minimum to $15 by 2025 would boost wages for 17 million workers and lift 1.3 million out of poverty. But he also said 1.3 million other workers would be put out of work.

“When it comes to the restaurant and foodservice industry, the Biden plan may do more harm than good,” Sean Kennedy, executive vice president of public affairs for the National Restaurant Association, told to Roll Call.

As of December 2020, 17% of restaurants, more than 110,000 places, and mostly small restaurants, closed permanently or for an indefinite period, according to the National Restaurant Association.

Increasing the minimum wage increases unemployment

Joe Biden finally confirmed that he would support raising the federal minimum wage to $15 an hour. Now thousands of small businesses, including small restaurants, which are the ones that mostly pay the minimum or less than $15 per hour, find themselves in a difficult financial situation or on the verge of closing their doors.

Considering that the vast majority of minimum wage earners in the U.S. do not work in corporations, but in Small and Medium-Sized Enterprises (SMEs), a significant increase in the minimum wage is very likely to deter small- and medium-sized businesses from hiring new staff – at best – or laying people off at worst.

Small restaurants on the brink of death

According to a National Restaurant Federation report, U.S. restaurant sales fell $240 billion between March and December 2020.

By April, when mobility restrictions peaked, eight million people employed in bars and restaurants had been laid off.

“Rather than continue to struggle in an extremely uncertain business environment, many restaurant owners decided to close their doors,” the federation regretted.

“We are running out of time.” This is the desperate plea of a Mississippi restaurant owner calling for passage of the “Restaurant Act” to survive in the face of deliberate shutdowns by Democratic officials.

Now, in addition to increased wages due to quarantine and excessive confinement, the U.S. culinary industry is on the brink of collapse.

“We need Congress to pass the Restaurant Act,” said Robert St. John, owner of New South Restaurant Group. “If President Biden and Congress want to have an impact on the unemployment numbers, he can cut them right now,” he added in an interview on Fox & Friends.

Sabrina Martín Rondon is a Venezuelan journalist. Her source is politics and economics. She is a specialist in corporate communications and is committed to the task of dismantling the supposed benefits of socialism // Sabrina Martín Rondon es periodista venezolana. Su fuente es la política y economía. Es especialista en comunicaciones corporativas y se ha comprometido con la tarea de desmontar las supuestas bondades del socialismo

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