Minimum-wage hikes accelerating changes at restaurants, panel says

BY JOAN VERDON

STAFF WRITER | 

THE RECORD

Increases in the minimum wage that go into effect next year, along with a change in federal rules that make more managers eligible for overtime, could accelerate dramatic shifts in the retail and restaurant industries, including more automation and fewer stores, according to participants in a panel Wednesday hosted by the Teaneck-based Retail Marketing Society.

The organization, which includes retail professionals from the tri-state area, devoted its monthly meeting, held at a New York City restaurant, to the topic of wage hikes.
In the past, such panels would have focused more on the need to block minimum-wage increases. Now retailers and service industry professionals seem to agree that they are inevitable, but they also agree that is it hard to predict the impact precisely because the increases have introduced a new factor into their profit-and-loss equations.
"This is an unprecedented increase. We've never seen it go from $9 to $15 in just about three years," said Andrew Rigie, executive director of the New York City Hospitality Alliance.
While California and New York, as well 10 municipalities, have passed laws setting the minimum wage at $15, some two-dozen other states have raised the minimum wage above the federal requirement of $7.25 an hour.
Governor Christie last month vetoed a bill that would have set New Jersey's minimum wage at $15. Supporters have vowed to but it on the ballot as a referendum in 2017.
"We are seeing more minimum wage increases, at higher amounts, than I have seen in my whole career," said the moderator of the panel, Jan Rogers Kniffen, chief executive of the retail consulting firm J. Rogers Kniffen Worldwide Enterprises.
An even bigger uncertainty facing retailers, said Greg Melich, senior managing director and head of the consumer research team at Evercore ISI, is the overtime rule change, which changes the definition of overtime-exempt employees from those making $23,660 or less to $47,470 or less. "We haven't seen a big jump in that [salary level] in 20-plus years," Melich said.
The new rule means store managers who make less than $47,000 and who work more than 40 hours a week, as is typical in retail, would have to receive overtime.
Large national retailers will be better able to absorb increased labor costs because of wage hikes than regional chains or independents, panelists said.
In recent years the market share of large grocery chains such as Walmart and Kroger has been increasing, most likely at the expense of small mom-and-pop chains, said Alvin Concepcion, vice president of Citi, who covers U.S. food retailers. National chains can get vendors to reduce wholesale prices to make up for increased labor costs, "but if you're a smaller guy or a two- or three-store supermarket, you're not going to have that option," Concepcion said.
Panelists said a $15 minimum wage could convince retailers and restaurant chains to speed up adoption of technologies that would eliminate jobs, such as touch screens for ordering and automated checkout stations.
"This transition to technology was going to happen whether wages were increased or decreased, but this certainly accelerates the process," Rigie of the hospitality association said.
He expects more growth in the fast-casual category, with limited service, while full-service restaurants will continue to close. "You will see a consolidation of the restaurant group phenomenon where you have an umbrella group that operates multiple different concepts and fewer and fewer of the independent mom-and-pop restaurants because they can't spread their costs to the different businesses," Rigie said.
Retailers, also, are expected to transition away from opening hundreds of new stores each year and shift their money and attention to online sales, panelists said.