February 22, 2021

Raising Prices Won’t Cover Higher Labor Costs, National Restaurant Association Says

The National Restaurant Association released the findings of a nationwide survey of 2,000 restaurant operators asking what impact passage of the Raise the Wage Act would have on their ability to recover this year. The association sent a letter to congressional leaders citing the survey results to urge that the measure be removed from the $1.9 trillion stimulus plan.    

“Passage of this bill this year would lead to job losses and higher use of labor-reducing equipment and technology,” said Sean Kennedy, executive vice president for public affairs for the National Restaurant Association. “Nearly all restaurant operators say they will increase menu prices. But what is clear is that raising prices for consumers will not be enough for restaurants to absorb higher labor costs.” 

Highlights of the survey findings in the letter include:

  • 82 percent of operators say the initial wage increases would have a negative impact on their restaurant’s ability to recover from the coronavirus pandemic. For franchisee-owned restaurants, 90 percent say the initial wage increases would have a negative impact on their ability to recover. 
  • Raising the federal minimum wage and eliminating the tip credit would force nearly all (98 percent) restaurant operators to increase their menu prices; 84 percent would have to cut jobs and employee hours from normal levels; and 75 percent would have to cut employee benefits. Full-service and franchisee-owned restaurants are most likely to have to make changes that impact their workforce if the federal minimum wage is increased or the tip credit is eliminated. 
  • 65 percent of operators are likely to add labor-reducing equipment or technology.

“The survey results make it crystal clear that the restaurant industry and our workforce will suffer from a fast-tracked wage increase and elimination of the tip credit,” Kennedy concluded. “Restaurant jobs will be critical to every local community recovering from the pandemic, but the Raise the Wage Act will negate the stimulative impact of a worthy plan. We share your view that a national discussion of wage issues for working Americans is needed – but the Raise the Wage Act is the wrong bill at the wrong time for our nation’s restaurants.”

The Raise the Wage Act would gradually increase the federal minimum wage to $15 an hour, more than double the current $7.25 an hour, over five years. It also eliminates a separate minimum wage for tipped workers. Most tipped servers make between $19-$25 per hour under the current tipped credit system, according to the National Restaurant Association.