Andrew Coppolino: food industry concerned by minimum wage increase

Will you still pay $10 for your negroni even though it has a half-ounce less alcohol and accept that the steak at the centre of your plate might be smaller?

Already dealing with slim margins, escalating food costs and rising rent, restaurants and other food businesses are now bracing for an anticipated hike in the minimum wage and say they may have to reduce their menu offerings and raise their prices in order to survive.

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Following the release of the Ontario Ministry of Labour's Changing Work Places Review, it seems the Wynne government, if re-elected next year, will implement some of the document's recommendations. That could include boosting the minimum wage to $15 per hour by 2019 for full-time, part-time, youth and seasonal employees, as well as increasing the number of sick days and annual paid vacation days.

Minimum wages for servers who work in licensed establishments will see an increase, though it's not clear if the wages will rise as high as $15 hour.

In the food and hospitality industry, restaurants will be hit hard as the changes take effect quickly.

Restaurateurs like Nick Benninger of Waterloo is uncertain what shape the changes will take, but is sure about the bottom line and his business calculations.

'$800 extra per payroll'

"I know it adds up to a lot of extra money each week. Just taking 10 part-time employees up from say $13 to $15 is $800 extra per payroll. For us, that translates into $2,400 in additional sales we need to do to pay for that," says Benninger.

Many local food businesses small and large operations concede the money will have to come from somewhere and prices will likely have to go up.

Several owners would not speak on the record, but questioned whether customers will pay more to cover the increases. One restaurateur said, "We're talking about a living wage, but we're chasing it and driving all the prices up at a rate above inflation."

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About four million workers in Ontario make less than $15 per hour. According to the government, the proposed changes are designed to help minimum wage workers earn a "living income." Other jurisdictions in North America have taken similar steps in what has been called "the fight for 15."

In Canada, Alberta is set to boost the minimum wage to $15 per hour in 2018. New York and California have proposed increases for 2021 and 2022, respectively. Cities such as Seattle and San Francisco have already made changes to wage structures and employment laws.

Restaurants could close

Currently, Ontario's general minimum wage is $11.40 per hour; the student minimum wage is $10.70 per hour, while the liquor-server minimum wage is $9.90 per hour (with those rates scheduled to go up a few cents in October of this year).

The wage is slated to increase to $14 per hour on Jan. 1, 2018, a few months before the election. For businesses such as restaurants, the increase to $15 about 30 per cent in many cases could have a negative impact.

A Harvard Business School study published in April 2017, found that for every dollar increase in minimum wage there is a four to 10 per cent increase in restaurant closures.

The increases will also make business planning more difficult, says Stephanie Soulis who runs Little Mushroom Catering in Cambridge. She's concerned about food and labour costs that out-price the market.

"We quote people 12 and sometimes 18 months ahead (on mostly weddings), and guarantee those prices to those who put down a deposit, so are we going to be at a loss?" asks Soulis.

As for the recommendation of paid sick days for part-time hourly employees, Soulis is concerned that could hurt too.

"We're basically paying two people for one person's work," she said.

Significant increases in the minimum wage will change the complexion of the local food and restaurant industry. That could mean higher prices, reduced staff hours each week, fewer people in the kitchen, as well as investments in labour-saving equipment and menu engineering.

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"It will be hard,"Benningersaid, noting that owner-operators aren't sure exactly how the industry will adjust to what is a daunting increase.

"I expect to see some price increases, some businesses taking big losses and maybe closing, and also some making major innovations too. I hope to be among the latter."