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Opinion | What Would a $15 Minimum Wage Do to Small Businesses?

SAVANNAH, Ga. — Othel Plowden, a 32-year-old Georgian raised in the South, has been working in the food and hospitality industry for over 15 years. Since busing tables and flipping burgers in his teens, he’s been a food service assistant and a private caterer, and now he teaches hospitality classes at the Culinary Institute of the South. “Hospitality is one of, if not the biggest, industry in the South,” he told me. “Unfortunately, a lot of those jobs, whether it be in hotels, restaurants or bars, haven’t had a move forward for wages in over a decade.”

For the past month, progressive Democrats in Congress attempted to add a provision to the latest coronavirus relief bill increasing the federal minimum wage to $15 per hour by 2025. The Senate parliamentarian, who polices the chamber’s internal codes, ruled Thursday night that the proposed change violated budgetary rules for passing packages that only achieve a simple majority.

But the monthslong debate surrounding the effort has captured the attention of Mr. Plowden, thousands of service sector workers across the South and their managers. Though polling in the past few years has shown a majority of Georgians support a $15 minimum wage, many still find themselves torn between doing the right thing by workers and doing what’s good for businesses.

The federal minimum wage, which hasn’t budged since 2009, sits at $7.25 per hour; the federal minimum for tipped workers is $2.13 per hour. Those low wages keep overhead costs low for corporations and entrepreneurs. Yet almost 1 in 4 Savannahians live in poverty, more than 44 percent are unable to afford quality housing, and service sector workers make up a disproportionate share of those struggling. Depending on where you are in this state, those numbers only get worse.

A single adult must make at least $12.90 per hour to meet the basic cost of living in Savannah. But Georgia’s wage laws merely comply with the federal minimums; for many, that means finding multiple sources of income to survive.

“Most of my friends in the industry, whether they be managers or servers and bartenders, are working two jobs,” Mr. Plowden said. Yet he still has reservations about the Fight for $15, as it’s often called. “Of course, I think minimum wage should increase,” he said, “but I just don’t think there’s been a lot of thought to how everything would map out, especially if it was done so quickly.”

Some local businesspeople share that concern. Jennifer Jenkins, a 44-year-old artist originally from Texas, owns four businesses here: The Coffee Fox, Foxy Loxy Cafe, Fox and Fig, and Henny Penny Cafe. Chic yet welcoming, they are popular locations among natives and tourists alike, and thriving. Automatic increases in the minimum wage that are too big or come too soon, Ms. Jenkins says, would force her to make some difficult choices.

For tipped employees making the $2.13 minimum, if that hourly wage plus tips doesn’t add up to the $7.25-an-hour minimum, the employer is currently supposed to make up the difference. “As long as tips continue to be considered earnings to satisfy the $15 an hour, we’d be fine,” Ms. Jenkins said. But she’s worried about Henny Penny Cafe “because it’s mostly kitchen labor and few tips.”

She says she’s already paying her non-tipped kitchen employees above the $7.25 minimum, between $10 and $12. “I would absolutely love to pay them all $15 an hour, but if I was forced to do that overnight, I don’t know how Henny Penny would survive,” she said.

But there is good news for her and other small-business owners in the often-overlooked details of the current proposal: Its increases come in five annual increments, stretching from this June until June 2025.

The Democrats’ proposal does, however, get rid of the sub-minimum wage for tipped workers. So Ms. Jenkins would indeed have to pay workers who are eligible for tips a base of $15 per hour by 2025, regardless of how much extra they earn from customers.

Thinking of compromises, Ms. Jenkins wondered aloud whether the size of a business should make a difference in how wage increases are rolled out. “You’ve got to allow businesses under 500 employees to be more nimble,” she said. “Once you’re over 500 employees,” like many regional chains and multinational corporations, “I feel like you have ways of building backup capital to maintain those payrolls.”

Because Savannah’s economy is driven by a highly competitive hospitality and tourism industry — where the quality of service can be the difference between a packed house and going out of business — a lot of local business owners, like Juan Manuel Rodriguez, say they are already offering competitive wages to keep the best employees.

Mr. Rodriguez and his daughter Melody Rodriguez Schanely own and run Rancho Alegre, a popular Cuban restaurant. He says he quickly discovered the business value of higher wages after opening in 1999: “Years ago, when we paid minimum wage, we lost good employees, especially in the kitchen.”

Now his kitchen workers earn up to $17 per hour. But he is similarly ambivalent about a federal increase. “We will not close our doors if the minimum wage goes up, but we certainly would have to increase our prices,” he said. Timing is crucial: Considering the challenges brought on by the pandemic, he said he wouldn’t support an increase that came as soon as this summer.

In 2020, Ms. Jenkins and Mr. Rodriguez both received funds from the Paycheck Protection Program, which provides loans to help small businesses trying to stay afloat as along as they keep their work force employed during the crisis.

“I’m about to apply for the second round of the P.P.P.,” Ms. Jenkins told me. “When people see a line out on the sidewalk at Foxy, they think we’re doing just fine.” While she says the business is “making it through,” she would still probably go under after each payroll cycle without P.P.P. funds.

However, nobody in Savannah feels the struggles of low wages and increasing costs of living more than the natives systemically pushed out of their downtown neighborhood homes and into the suburban margins of town. Out there, public transportation is poor, the job opportunities are scarce, and people struggling can’t afford to tip as much.

In online brochures filled with the shimmering imagery of the city’s 22 oak-adorned, tourist-populated town squares, Savannah proclaims to be the Hostess City of the South. But how hospitable is Savannah to the hourly workers searching for a second job to make ends meet or the retail worker sharing a car with four roommates, who also all work part-time jobs? What about the essential worker making $10 an hour at Kroger, who earns too much to qualify for certain income-based housing and food aid but not enough to live beyond the next paycheck?

These aren’t hypothetical situations but the stark realities of people I listened to as I held group interviews with servers at bars, boutique shops and grocery stores throughout downtown and on the south side. Everyone expressed fears of not being able to keep up.

The abundance of stories like theirs is partly why the two newly elected U.S. senators from Georgia, Jon Ossoff and Raphael Warnock — whose addition to the chamber makes the passage of a wage increase even plausible — both support the Fight for $15.

Any given piece of legislation presents complexities that have to be dealt with responsibly. Still, the deeper question for Georgians, and the South at large, is whether we’ll continue to view a forced increase in the base standard of living as an unwelcome cost or, instead, as an investment in our communities.

All in all, “Scaling up the minimum wage is the best thing for the industry,” Mr. Plowden told me. “The South needs hospitality workers. That’s our highly skilled labor — it’s what we specialize in.”

New York Times



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