Restaurateurs to battle wage boost

A plan to raise the state minimum wage has irked several area restaurant owners and set off a drive to fight the proposal in Sacramento.

Newport Beach Restaurant Assn. members are organizing a May lobbying trip to northern California, hoping to persuade lawmakers to ditch a proposal to raise the state’s $6.75 hourly minimum wage by as much as a dollar over the next two years.

In the face of majority Democratic support for the measure and comments from Gov. Arnold Schwarzenegger that he might back a wage hike, restaurant owners will be lobbying for a compromise bill that would exempt waiters, bartenders and anyone else who makes tips from receiving a minimum wage boost.

“There are no servers in the restaurant industry that actually make $6.75 an hour,” said Dan Marcheano, owner of The Arches restaurant. A recent report from the California Restaurant Assn. estimates that servers make an average of $21.75 per hour.

Marcheano and other restaurant owners argue that because wait staff don’t earn minimum wage, they don’t need a state-mandated raise. As a compromise, Marcheano is asking the government to enact a tip credit ? allowing restaurant owners to pay employees who receive tips a lower base rate if their hourly tip average exceeds the minimum wage.

He said across-the-board raises would make it more difficult for business owners to pay increases to other employees like cooks and dishwashers.

While the compromise proposal has earned some support from restaurant owners, it doesn’t carry much weight with Sacramento labor attorney Douglas Silverstein. While the federal government has a tip credit in place, California politicians have never supported such a proposal.

“I think it will be very hard to undo that in California,” Silverstein said. “I don’t think there is sufficient political will.”

Opponents of the tip credit argue that restaurant workers are three times more likely than others to live under the poverty level and that many don’t have health insurance or retirement plans.

“The minimum wage today is so low that any talk about tips counting or not counting almost seems irrelevant,” said Cres Vellucci of the California Fair Wage Coalition.

Four California legislators have introduced minimum wage legislation, and several activist groups are considering propositions for the November 2006 ballot.

If any of the increases go through, small restaurants can expect an increase in labor costs of $30,000 to $50,000 a year, according to Jim Walker owner of the Bungalow restaurant.

“Am I supposed to reduce my income to comply with this?” Walker asked, explaining that he was opposed to charging more for menu items.

“Every time you raise your prices, you reduce your market share,” he said.

Marcheano said he planned to lay off three employees ? two bus boys and a waitress ? if the hikes go through. He predicted other restaurants would have to do the same and some smaller operations would close down.

Silverstein said he was skeptical of the claim, arguing that the minimum wage was increased by 50 cents in 2002 without much job loss.

“The exact same arguments were raised then and there were no wholesale layoffs,” Silverstein said, later adding, “Are there some places teetering on the edge? Yes, but they’re usually in a bad fiscal position whether the minimum wage is raised or not and [an increase] is prolonging the inevitable.”