Chinese Restaurateurs React to Min Wage Hike

Zengyun Li of Spicy Village in Chinatown, at right. (Photo via World Journal)

The minimum wage for businesses with 11 or more employees in New York City was raised to $15 from $13 on New Year’s Eve, and for businesses with 10 or fewer employees, from $12 to $13.50. Restaurant owners in Chinatown said this further pushes their already struggling businesses onto the edge. They are vying to making changes in order to keep their heads above water. Other than raising prices, some are coming up with innovative ideas such as offering employees some shares in the business so that they can be turned into “owners” and exempted from the wage law.

Zengyun Li, who has been running Spicy Village in Chinatown for eight years and also is one of the owners, said since she opened the restaurant, the business has been struggling. She said the restaurant industry is very competitive and she works very hard but is barely able to break even. “Now the minimum wage raise makes us suffer even more,” said Li, whose number of employees is fewer than 11.

Li said raising minimum wages doesn’t help low-income workers because it boosts the prices of everything and the workers eventually have to pay the extra money they earn back to the economy. “We have to raise our prices too starting next week, and there is an average hike of 50 cents on each dish,” said Li. “The prices of all things go up. So the benefits of raising minimum wages provided to the workers are only on the surface.”

Li said restaurant owners have a harder life compared to their employees. “If the workers don’t like the job or the salary, they can leave whenever they like. But the owners have to stay to keep the business going because if they shut down their business, they’d lose more,” said Li. “The most challenging thing about running a restaurant these days is the recruitment. We are already short-handed and we don’t even have the buffer of reducing employees or cutting their work hours to balance the costs.”

Li said she is considering an alternative solution – to offer most employees who are capable to take some shares. This way, workers will become owners. The number of employees protected by minimum wages will be minimized. “I have been pondering this for a while. And I think this is the only way to offset the effect of the new law of minimum wages,” said Li. “But I still need to figure out the nuts and bolts, such as how to allocate the shares.”

Mrs. Chu, who runs Old Shanghai Deluxe in Chinatown, agrees that minimum wage increases are another blow to the business of restaurants which were already in a tough situation. Like Li, Chu plans to raise prices. She said the current menu has remained the same for eight years. And the new minimum wage standards make the adjustment of the menu unavoidable.

Chu admitted she had some concerns over an across-the-board price increase. She said tourists or non-Chinese may not notice it but regular patrons in Chinatown are normally sensitive about it. A price rise may drive some patrons away.

However, Chu doesn’t think Li’s idea of distributing ownership stakes is a good one. She worries that multiple ownership may make the management of the restaurant hard. “The owners may not agree on the future direction of the business. A lot of resources would be wasted on the wrestling among the owners,” Chu said.

[The owner of one restaurant based uptown, Zai Lai, has a different view, and believes that the higher minimum wage will help to retain employees.]

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