Highlights from the Wage, Benefit and Operational Survey on Seattle Restaurants

Highlights from the Wage, Benefit and Operational Survey on Seattle Restaurants https://wahospitality.org/wp-content/uploads/2014/04/minimumwagesummary-503x198.jpg

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The data contained in the Wage, Benefit and Operational Summary comes from a survey completed by over 400 restaurant locations inside the city of Seattle. It was conducted by the Washington Restaurant Association during the first quarter of 2014. There were more than 200 full service and 200 quick service restaurants that responded. The purpose of the survey was to respond to the Mayor’s office and many City Councilmembers who requested Seattle-specific information about the restaurant industry and our workers.

Respondents were asked to calculate tip data by using Line 4b of IRS Form 8027 divided by total server and bartender hours. By doing this, we are only including reported net tips (after any tip-outs) on which employers ar
required to pay payroll taxes. To view IRS 8027, see www.irs.gov/pub/irs-pdf/f8027.pdf.

Small Margins

It is difficult for restaurants to turn in a profit. As of 2013, Seattle full service restaurants had an average net income of four percent before taxes.

Heavy Debts

Fifty-eight percent of an average restaurant’s annual total revenue equals debt service. Sixty-two percent of restaurants that responded to WRA’s survey did not earn enough profit, in 2013, to meet fundamental capital
investment “pay off” plans.

Findings from Wage Survey

Directly tipped employees, such as bartenders and servers, average more than $28 in hourly income. In Seattle, the average hourly tipped income for servers and bartenders equals $18.82 per hour according to tax data from
line 4b of IRS Form 8027. Add wages on top of that income and it’s easy to see why servers and bartenders are not minimum wage employees.

Impact of $15 Minimum Wage on Labor Costs

If the minimum wage jumps to $15 per hour, the effects of this mandate would be far reaching. The cost of labor, in restaurants would increase an average of 34 percent, moving the cost of labor to 47 percent of the restaurant
dollar. This minimum wage increase would lead to annual operating losses of under existing models. No business can sustain such losses. Restaurants would need to make big changes in order to survive.

Unintended Consequences of $15 Minimum Wage

Some restaurants would respond by raising prices. Fifty-five to 69 percent of restaurants in the survey would reduce benefits and/or hours. Eighty percent of the full service respondents would either lay off employees, close a location, declare bankruptcy or close their business.

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