Cuomo’s Big Labor Handout

$15 wage threatens to close hundreds of small businesses

July 24, 2015

Critics are blasting a New York Wage Board decision to hike the minimum wage to $15 an hour for fast food establishments that threatens to close hundreds of businesses.

The International Franchise Association, which represents tens of thousands of major chain restaurants and their franchisees, said that the decision could lead to massive job losses and closed stores.

The 'New York wage board decision to discriminate against the quick service food industry will cost jobs and potentially cause small businesses to close," IFA president & CEO Steve Caldeira said in a statement. 'Applying a new mandatory minimum wage increase to a narrow group of businesses creates an un-level playing field for owners that provide important entry-level jobs and valuable experience for millions of workers across the state of New York."

A wage board consisting of two labor friendly appointees and one entrepreneur voted to hike the starting wage to $15—more than double the $7.25 federal level and a 70 percent increase from the $8.75 statewide wage—after several weeks of hearings. The board convened after a years-long pressure campaign by labor giant Service Employees International Union (SEIU) targeting McDonalds and other fast food establishments. SEIU spent more than $20 million on front groups that sponsored protests at McDonalds locations across the country in 2014.

The wage hike could have an immediate effect on small businesses. The franchise model relies on entrepreneurs paying licensing fees to parent companies in order to operate under the company umbrella; the typical franchisee takes home about $50,000 each year with one-in-three restaurant owners earning less than $25,000 per year. The new $15 minimum wage would give the average full-time fast food workers a starting salary of more than $30,000.

The move will likely lead to higher prices for customers, hiring freezes, and hour cuts for workers, according to a survey of nearly 1,000 franchise owners conducted in the run-up to the wage board decision. The Employment Policies Institute, a free market think tank that is critical of minimum wage increases, found that the $15 wage could force one out of every five franchise businesses to close. The survey also found that only 5 percent of businesses said the wage was 'unlikely" to lead to price hikes, while 70 percent called the odds of price increases 'very likely."

'This outlandish recommendation should be seen for what it is: A big favor to Big Labor. While Gov. Cuomo burnishes his political credentials, hundreds of small businesses and the thousands of people they employ will bear the consequences of this bad policy," EPI research director Michael Saltsman said in a statement. 'New York is the first state to push a $15 minimum wage specific for the fast food industry, and it will soon be the first to find out why that’s a bad idea."

Caldeira said IFA is committed to fighting the targeted wage increase, just as the organization has done to a similar $15 wage bill passed in Seattle.

'If Governor Cuomo wishes to advance a wage increase, it should cover all of New York’s businesses, not just a select few. IFA, along with the Coalition to Save New York Restaurants, will aggressively fight Governor Cuomo’s politically-motivated decision to discriminate against local franchise small business simply to satisfy the request of his allies at the Service Employees International Union," he said in a statement.

Published under: Big Labor