Menu Prices Will Go Up With a Higher Minimum Wage. But You’ve Been Underpaying for Years.

In 2012, the organization Fight for 15, composed of fast-food workers who walked off the job to demand a living wage and workers’ rights, formed in New York City. The federal minimum wage has stayed stagnant at $7.25 an hour since 2009, a rate that, adjusted for inflation, is “about 29 percent less per hour than [workers’] counterparts made 50 years ago.” And though some states have instituted higher minimums (and although $15 an hour is hardly a living wage either), momentum has grown, especially within the restaurant industry, for the implementation of higher wages and the elimination of tipped minimum wage.

Now, “President-elect Joe Biden has pledged to boost the federal minimum wage to $15 an hour, eliminate the tipped minimum wage and index minimum wage to the median hourly wage,” says CNBC. But in light of this, some restaurant owners are stoking fear among customers. Menu prices will have to go up to account for this, they say, which could mean you’ll no longer be able to afford your favorite meal, or the change will push restaurants out of business entirely.

Restaurants that have eliminated tipping and committed to a living wage for employees have reluctantly admitted that the sticker shock of higher menu prices, adjusted to fairly pay employees, makes customers balk. Sometimes, it’s enough to make them revert to a tipped system. But what upset customers are forgetting is that most of us have always been underpaying for our dinners out. The public’s perception of how much a meal should cost is incredibly skewed. Your dinner has been subsidized this whole time.

It is true that the way most restaurants operate, not to mention the realities of the entire food chain, would have to drastically change for everyone involved (farmers, harvesters, slaughterhouse workers, etc.) to be paid a living wage. And while many in the food-service industry agree that something needs to change, the pandemic has made many businesses prioritize staying afloat over fighting the inequities of the dining industry. Danny Meyer, after eliminating tipping at Union Square Hospitality Group restaurants in 2015, brought it back in July, arguing it was basically impossible to cover fair wages and benefits without menu prices “appearing onerous to guests,” and for shareholders to make a profit. He still advocates for the elimination of a tipped minimum wage, but believes “it’s the inability to share tips that is the problem, not the tips themselves.”

“I don’t believe it’s possible to charge the correct price to make tip-free work,” Mike Fadem of Ops, a pizzeria in Brooklyn, told Eater earlier this year. “People are happy to pay $25 for a pizza if it’s $20 plus tip, but if the menu reads $25 for a pizza, you’re looked at as ripping people off, even if it’s the right price for the cost of getting the food to the table.”

But for restaurants that have instituted living wages for all their employees, fairness can be a fundamental part of the business plan. Claire Sprouse, owner of Hunky Dory in Brooklyn, makes it clear that the restaurant is “gratuity free,” which doesn’t mean an automatic gratuity is added to the bill, but that everyone makes a living wage, eradicating the need for tipping entirely. “We clearly state on all of our menus, on our website, that we’re gratuity free,” she says, and while some people have commented on the higher prices, many more have been thrilled to dine at a restaurant that tries to be accountable to its workers and community.

Zazie in San Francisco also puts an explanation for higher prices at the forefront. “All of our menu prices include a living wage, revenue share, paid family leave, fully funded health and dental insurance, ​paid time off, and a 401(k) with employer match for all of our hard working employees,” it says on the menus. Megan Cornelius, who bought Zazie with two other longtime employees in January, says it’s turned regulars into even more dedicated customers, and made new customers excited about dining. “I can’t tell you how many people come here and are taking pictures of that on the menu,” she says.

Cornelius says prices also had to rise because of the pandemic, as the restaurant’s suppliers raised the cost of ingredients, and initially she and the rest of the Zazie staff weren’t sure whether or not to tell that to customers. The conventional wisdom around restaurants and hospitality is that they are places to escape the harsh realities of the world, and that no one wants to consider the living conditions of the dishwasher or the server over their dessert. But sharing the details of pricing, whether it’s the price of gas that gets the meat to the restaurant or the average cost of rent in that ZIP code, has been a powerful tool to get not only diners’ support, but their enthusiasm about paying higher prices.

“I think restaurant owners tend to underestimate how much customers want to know about how restaurants operate,” says Sprouse. They may balk at higher prices if they go unexplained, but the pandemic has created a moment in which diners are motivated to support the restaurants they love, and willing to learn exactly how they work. For example, in October Hunky Dory posted about how third-party delivery costs eat up their already slim profit margins, after accounting for employee pay and food and beverage costs. And instead of saying they should go back to a tipped wage system, customers rallied and pledged to order from them directly. “If [customers] actually care about small businesses and they say they care about equity and people in general, then shielding them is only doing everybody on every level a disservice,” says Sprouse, “but the people that are being hurt the most are the people that are making those hourly wages.”

According to Sprouse, one of the reasons a tip-free space has worked for Hunky Dory is the stability it’s provided for her employees during the pandemic. “My employees, they know what they’re going to make every day, every week, instead of having to worry if it’s going to rain.” But the competition for fair wages is one of the things that allows the tipped minimum wage, and a low federal minimum wage, to thrive. Restaurants with living wage systems often lose servers to tipped jobs because under a tipped system, there’s the potential to make hundreds in one shift. The lure is that the individual has the potential to make more money, rather than the guarantee that everyone makes something.

A higher federal minimum wage, and the elimination of a tipped minimum wage, would even the playing field, especially for those most vulnerable. If a restaurant can’t lure waiters with the promise of extra tips, it has to lure them with better benefits and wages. Mireya Loza, a visiting assistant professor at Georgetown University who specializes in food studies and labor, also notes that minimum wage and tipped minimum wage workers are overwhelmingly women and people of color. “In the moment where we’re all saying we need rethink racial justice, I think one of the calls is to actually have entrepreneurs see the fight from the minimum wage is a fight for racial justice,” she says. And, as numerous economists note in a letter in support of a $15 federal minimum wage, the increase would “stimulate consumer demand, business activity, and job growth,” because more people might be able to afford a night out.

“I think as Americans, we really, really love to make individual entrepreneurs heroes,” says Loza. She recalls teaching students who wanted to open their own restaurants, who balked at proposals for higher minimum wages because it would make it harder for them to realize their dreams. “We rarely get to see that often their dreams are dependent on the poverty of workers,” she says. “And if you ask me, if my ultimate dream really relies on the subjugation or poverty of employees, then it’s not a dream worth having.”

But there is an implicit threat from restaurant owners of both small bistros and national chains, who wring their hands about a living minimum wage or doing away with tipped wages: Bad jobs, they want you to remember, are better than no jobs. When Seattle-based restaurant group Restaurants Unlimited went bankrupt, it said the “company’s profitability has been significantly impacted by progressive wage laws along the Pacific coast.” Walt Ehmer, CEO of Waffle House, told customers to blame higher menu prices on higher minimum wage: “Ultimately in any business, the customer pays for everything,” he said. “We don’t have any other source of revenue other than the customer.”

Sprouse is skeptical when those messages are coming from large restaurant groups and chains. “You can see what food chains are spending in political donations and things like that,” she says. “You can’t tell me that there’s not excess money to pay your servers and your cooks more than the bare minimum.” But even independent restaurateurs will argue that the margins are already so thin that no restaurant could survive even the slightest change. That’s just not true. And coming to the understanding that dining out has long depended on another food supply person’s poverty should emphasize the fact that the restaurant system is already broken, and that it requires some rebuilding. “I think oftentimes we think that entrepreneurs are creating jobs and that’s the important thing, but we’re not asking what kind of jobs they’re creating,” says Loza. “And if they’re not creating [good] jobs, it’s worth questioning: is their business valuable to society, to everyone?”

Loza, Sprouse, and Cornelius all hope the pandemic will provide the opportunity for an overhaul. “We now fundamentally can really see that all of these individuals that hold up our food system are not only essential workers, but they are highly, highly exploited and marginalized workers,” says Loza. “And if this doesn’t convince us that we need to double down and rethink what it is that we prioritize within this food system and how we can reimagine a more just food system, I don’t know when we’ll have another opening like this.” By prioritizing workers, and being honest and transparent with customers, restaurants can become spaces of true community and hospitality. Maybe food will cost more. Maybe some people won’t be able to eat out as often as they used to. But, says Sprouse, “if it comes with people making a real minimum wage, it is, I think, definitely worth it.”