Thousands of Restaurants May Close Nationwide Due to Minimum Wage Laws, Expert Says

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Minimum Wage Hikes Hitting Restaurants Hard Restaurants, Some May Be Forced to Close

Restaurants are under increasing pressure from minimum wage hikes to pay workers more and pass off costs in higher prices for customers, Fox Business reports.

Eighteen states raised their minimum wage at the start of the year, forcing thousands of restaurants to adapt to rising labor costs. However, patrons will only absorb so much of the cost.

“When we increase in prices … we see guest count go down,” “Restaurant Stakeout” host and CEO of Uncle Jack’s Steakhouse Willie Degel told FOX Business. “The consumer is not willing to pay for the experience then.”

Minimum Wage Hikes Hitting Restaurants

Degel predicted a dark future for the restaurant industry if labor costs keep increasing.

“I think you’re going to see thousands of restaurants close their doors,” Willie Degel told FOX Business. “Fine dining is going to go by the wayside.”

Some restaurants are downsizing staff to keep their doors open. Red Robin announced last week that it will cut all busboy positions from its 570 stores nationwide. The chain hopes to save $8 million to help pay for the minimum wage hikes that hit many states where the chain operates, The New York Post reports.

Wages and benefits are ramping up across most industries without the prodding of minimum wage laws. The unemployment rate held steady at 4.1 percent for the last three months of 2017, slightly below what the federal reserve considers normal, between 4.3 and 5 percent.

The low unemployment rate has created a hyper-competitive labor market with businesses competing to attract skilled workers through higher pay and better benefits. Some construction companies are struggling to fill positions while offering six-figure salaries.

Photo via Shutterstock

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One Reaction

  1. Simple economics. If you increase the price of something, you usually get less of it. In this case it means less customers if restaurants pass along cost increases in the form of higher prices. It also shows that if you have to pay more for each employee, you get fewer employees. Tough spot for an already incredibly competitive industry.

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