A key driver of higher labor costs has been lawmakers in numerous jurisdictions persistently hiking the minimum wage rate that employers must pay employees. According to The Wall Street Journal (WSJ), higher labor costs are the biggest source of inflation for 59 percent of small-business owners. In January, 22 states raised the minimum wage for hourly workers. “We are just keeping our head above water,” Karen LuKanic, owner of Chef Zorba’s Restaurant in Denver, told WSJ. Since the 2020 pandemic, Denver has increased its minimum wage each year — most recently to $18.29 per hour. LuKanic says that roughly half of her restaurant’s sales now go to payroll and other employee-related costs, WSJ reported. Chef Zorba’s charges $15.75 for a bacon cheeseburger, $5 more than in 2018. Even with the price increase the restaurant cannot turn a profit. LuKanic says that she would consider closing if her loan from the Small Business Administration was not secured to her home. Barrett Dabbs, owner of Johnny Roger’s BBQ & Burgers in Concord, N.C., told WSJ that his restaurant has had to raise the cost of a bacon cheeseburger from $8.50 to $12.50. “Customers aren’t going to come visit you if you are charging $14, $15 or $16 for a burger,” he said. “With margins so tight, Dabbs has had to get creative to cut costs, like getting rid of the television, which saves the restaurant $80 per month, and by cutting $50 off of his $90 monthly storage bill,” WSJ reports. “The profit percentages are so low,” he said. “For that $50, I’d have to do $600 in sales.” Small restaurants aren’t the only ones getting creative to drive down costs. A major chain was recently embroiled in controversy when it was revealed the company cut a sweetheart deal with state officials to keep workers’ pay down. In California, Panera Bread was exempted from a new $20 per hour minimum wage after Greg Flynn, the company’s billionaire CEO, made political donations totaling at least $164,000 to Gov. Gavin Newsom. This January, more than 40 restaurants in New York closed because of rising operating costs. “Food costs are up. The minimum wage is up. Unless you have tons of money, it’s not going to work,” Johnny Huynh, owner of Lucy’s Vietnamese in Brooklyn, and a Glizzy’s hot dog shop, told digital media brand Eater.Restaurant owners are struggling to balance making a profit with the need to keep prices reasonable for guests as labor costs across the U.S. continue to rise.
