A fine dining seafood restaurant in Washington, D.C. surprised patrons with a surcharge on their meals and outrage ensued, but perhaps customers should direct their anger at legislators for raising the cost of business.
The Oceanaire Seafood Room started charging a three-percent surcharge on meals crediting the city’s minimum wage increase as the reason for the increases. Printed on the bottom of receipts below the signature line reads the note:
“Due to the rising costs of doing business in this location, including costs associated with higher minimum wage rates, a 3% surcharge has been added to your total bill."
The restaurant’s manager says this surcharge was a directive from the chain’s headquarters.
The surcharge won’t stick around long though as they have removed it following patron outcry.
Although the surcharge is gone, the impetus for the restaurant to find new revenue to cover increases in the cost of doing businesses remains.
Washington, D.C. hiked its minimum wage from $10.50 to $12.50 per hour and that wage will rise to $15 by 2020. We can expect that restaurants and other employers of low-wage workers must find new sources to cover increased labor costs.
The nation’s capital is not alone. A national union-backed campaign has swept cities and states prompting them to adopt the arbitrary $15-per-hour minimum wage. The success of their efforts comes with unintended consequences. Low-wage workers suffer from smaller paychecks, fewer job opportunities, and job losses in some cases.
Progressives tout that minimum wage workers benefit from bigger paychecks, but they leave out what happens to workers who lose their jobs or have their hours cut. Customers also experience price increases that cuts their budgets.
Given the public backlash, it’s doubtful that other restaurants will follow The Oceanaire and print the surcharge notice on their menus, but it won’t stop them from raising their prices.
Tilman Fertitta, billionaire restauranteur who owns The Oceanaire and its restaurant group, gave an ominous warning to diners in 2014 about the results of minimum wage increases:
"I have no issue with raising minimum wage," Fertitta said, "but then the customer can't say to us, 'why are you raising your prices?'" Even at fast casual chains like Rainforest Café or Bubba Gump, where per-person dining costs hover around $20, Fertitta warns that diners should be ready for higher menu prices.
Consumers are "going to be paying a dollar more an entrée at basically every restaurant in America."
As we’ve seen over the past year that states and municipalities implemented minimum-wage hikes, the unintended impacts are clear. San Diego restaurants implemented similar surcharges and diners had to foot the bill. Moms and dads got sticker shock when a daycare center in Spokane, Washington increased tuition by $140 per child to cover the costs of the minimum wage increase.
Harvard Business School found that minimum wage increases in San Francisco Bay triggered restaurant closures resulting in workers losing their jobs. However, they may be able to find new work in other areas, but the biggest unintended consequence will be when minimum wage workers are displaced by automation.
Minimum wage increases seem egalitarian on their face, but actually trigger greater harm than good to vulnerable workers and those who need opportunity.