A recent Forbes article claims that increasing labor costs, burdensome regulations, and high rents are putting unprecedented economic pressure on New York City’s small business owners. New York Governor Cuomo, along with other state legislature members, have been considering getting rid of the restaurant industry tipping system. “If NYS Governor Andrew Cuomo and the state legislature don’t want more vacant storefronts lining our city streets, and lost jobs, they must preserve the restaurant industry tip credit in its current form,” the Forbes article states.
New York’s Department of Labor states that in 2018, full-service restaurants recorded a -1.6% job loss (which is their first recorded annual job loss in almost two decades). Even during the Great Recession, restaurants posted a +.1% job growth in 2009. The year 2018 was worse for restaurant jobs than the years during the Great Recession. After the recession, the city’s restaurants saw annual employment growth – which slowed after the state’s restaurant tip wage increased in 2015 (these tip wage increases have since doubled).
According to the 2019 New York City Hospitality Alliance Survey, when the tip wage increased 50% in 2015, annual employment growth dropped from 6.67% to less than 1% as of November 2018. The State Department of Labor’s data for employment at limited service restaurants show a similar downtrend. The decreases in growth, the results of this survey, and other industry trends signal that a once growing industry (which is responsible for hundreds of thousands of jobs and billions of dollars in economic impact) has become stagnant.
The survey also states that according to 300 surveyed restaurants:
- 76% of full-service restaurant respondents reported that they reduced employee hours in 2018.
- 36% eliminated jobs in 2018, in response to mandated wage increases.
- 74% of respondents reported they will reduce employee hours in 2019.
- 47% of respondents will eliminate jobs in 2019 because of mandated wage increases that took effect on December 31, 2018.
But, There Is Some Good News
New York Eater reported last March that even though the NYC restaurant industry saw a loss of 6,000 jobs last year, over 2,000 new eateries have opened up in the city. Full-service restaurants were affected most by this job loss. “Critics of the governor’s plan to eliminate the tipped minimum claim it will lead to more job losses, while proponents claim the benefits for workers counter those losses,” NY Eater reports.
How have recent regulation changes in New York affected your business?