Based on TGI Fridays CEO, ending the minimal wage would enhance costs
Ray Blanchette, CEO of TGI Fridays, said President Joe Biden’s proposal to remove the minimum wage would likely result in fewer hours for the chain’s staff and higher menu prices.
Biden has proposed raising the federal hourly minimum wage from $ 7.25 to $ 15 and removing tip credits, a change that would primarily affect the hospitality industry. The changes would mean employers would have to pay each employee at least $ 15 an hour, even if they were tipped.
In 43 states, employers can only pay their employees $ 2.13 an hour as long as the hourly wage and tips add up to the local wage floor. Otherwise the employer has to make up the difference. The minimum wage was last raised in 1991.
TGI Fridays is already paying most kitchen workers more than $ 15 an hour, according to Blanchette. The pain would come from paying your waiters the new minimum wage.
“In front of the house, where we spend many hours, we would cut working hours significantly if something so dramatic happened,” said Blanchette on Friday in CNBC’s “Squawk on the Street”. “And we would have to raise prices considerably, which does not seem right.”
He also said the changes would create inequalities between different types of workers.
“If the cooks are making $ 15 to $ 18 an hour and then suddenly the waitresses are making $ 40 an hour, it doesn’t make sense to me,” said Blanchette.
In many states, there are already significant wage gaps between employees in front of and behind the door due to tips, especially in upscale restaurants. Some activists have pushed for an end to the practice altogether.
The full-service restaurant industry is largely against ending the tip credit, arguing that it harms workers, employers and customers. Proponents, however, say that the tip credit creates too much uncertainty for workers and that employers often break the law when it comes to making up the difference when the tip falls below the minimum wage. Three years ago the UK fined TGI Fridays for failing to pay employees the country’s minimum wage.
Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington have already banned the minimum wage. New York State has removed tips for employers other than restaurants and bars.
Blanchette also said that TGI Fridays will not require its employees to receive the Covid-19 vaccine if it is available to them. Instead, he said the restaurant chain was “likely” to offer workers a financial incentive. Trader Joe’s, Dollar General, and Chobani are among the companies that choose to pay their employees to be vaccinated.