Jewish Businesses in Montgomery County Respond to Minimum Wage Hikes

Written by Gabe Aaronson on . Posted in Features

On July 1, the minimum wage in Maryland will increase to $9.25 an hour, and in Montgomery County it will increase to $11.50 an hour. Local Jewish businesses have responded in different ways to minimum wage hikes.

 

County officials voted in 2013 to raise the minimum wage from $7.25 an hour to $11.50 an hour over four years, and this is the final year of scheduled minimum wage increases.

Some businesses have made few changes other than increasing wages. Laurie Wexler, executive director of Sunflower Bakery in Rockville, Maryland, said they simply pay more to their minimum wage workers and try to keep sales robust enough to cover higher labor costs.

Sunflower Bakery may be a special case, however, because they are a nonprofit with a focus on offering job training to adults with learning differences. Many of their job trainees are interns who receive a stipend but are exempt from minimum wage. Additionally, according to their website, only 51 percent of their budget comes from sales; the rest comes from private donations and public grants.

Other businesses have made more fundamental changes to their business operations. Josh Katz, owner of Ben Yehuda Pizza and Cafe in the Kemp Mill neighborhood of Silver Spring, Maryland, said he has cut items from the menu, automated some kitchen work, reduced operating hours, and raised prices slightly. “If the labor costs are going to increase, then we have to find other savings to offset that,” he told Kol HaBirah.

Cutting the menu was the first step for Ben Yehuda. “A few years ago, we did an analysis of our menu,” Katz said. “We found that 93 percent of our sales were pizza and French fries, and seven percent was everything else.” Cutting less popular items like soup and baked ziti from the menu allowed the restaurant to save $30,000 per year on food ingredients.

Afterwards, the restaurant began cutting hours. “Someone just asked me why we close so early on Friday when Shabbos starts so late these days,” Katz said. He answered that since he must now pay his workers more, he had to eliminate operating hours that don’t generate enough sales.

He added that the minimum wage has actually meant higher wages for all workers. If the new employees receive a pay increase, then the veteran employees already making above minimum wage also want a pay increase.

Automation has also played a role. When Katz first acquired Ben Yehuda five years ago, a typical shift had seven employees on duty: two cashiers, two line cooks, two kitchen workers, and one dishwasher. Since then, Katz has bought a dishwashing machine and a dough machine (which cuts and rounds the pizzas) to mechanize work previously done by hand. While Katz said that he would never fire an employee due to automation, he admits that a new machine may allow him to eliminate a position when an employee leaves voluntarily. Now a typical shift includes five employees: one cashier, one line cook, two kitchen workers, and one busser.

The final step involved raising prices. Katz said he has resisted doing this as much as possible, raising prices slightly only twice in the past four years. However, Katz said, each time the minimum wage rises it is necessary to consider price hikes as one of several options for keeping the business running.

In many ways, Ben Yehuda’s responses to the minimum wage increase are exactly what most economic models predicted. A 2014 Congressional Budget Office analysis predicted that a minimum wage hike would lead to fewer jobs due to automation and cuts to worker hours. A 2015 Purdue University study found that minimum wage increases result in higher prices.

Katz would prefer to keep the extended hours and menu. “We are here to serve customers. It’s called the hospitality business for a reason,” he said. However, he feels the minimum wage increases forced his hand.

Nonetheless, Katz said he supports a higher minimum wage than the federally mandated $7.25 an hour. His main concern is that ramping up to $11.50 in four years is too much, too fast. He said it’s difficult to run a business when the minimum wage stagnates for almost a decade and then is suddenly raised by 58 percent over four years. Katz said businesses could better plan their costs if the government increased the minimum wage once and then automatically increased it each year based on inflation.

Indeed, the history of the federal minimum wage includes long periods without an increase punctuated by several straight years of eight to 13 percent increases. Most recently, the federal minimum wage stayed at $5.15 an hour from 1997 to 2007, increased three times from 2007 to 2009, and has remained at $7.25 an hour since 2009.

Since the passage of the Maryland Minimum Wage Act of 2014, Maryland is one of 29 states that sets a minimum wage higher than the federal minimum of $7.25 an hour. The law set a four-year timeline for increasing Maryland’s minimum wage to $10.10 an hour by 2018. In 2013, Montgomery County, Prince Georges County, and Washington, D.C., set a timeline to increase their own minimum wage rates to $11.50 by 2017.

Virginia’s minimum wage is equal to the federal one: $7.25 an hour. Lt. Gov. Ralph Northam, who won the Democratic nomination for governor on June 13, said he wants to raise the minimum wage to $15 an hour, but he has little prospect of getting the staunchly Republican House of Delegates to agree.

In Maryland, too, there is a push to raise the minimum wage to $15 an hour. On January 17, the Montgomery County Council passed a resolution raising the minimum wage to $15 an hour by 2020 for large businesses with 25 or more employees and by 2022 for smaller businesses. County Executive Ike Leggett vetoed the resolution, but said in his veto letter that he would support a $15 an hour minimum wage if it exempted small business and youth workers.

Businesses that have already been cutting costs to counter the higher minimum wage may find that there is no fat to trim if the minimum wage increases to $15 an hour. In this case, consumers can expect to see higher wages translate to higher prices. If customers aren’t willing to pay more for pizza, then a $15 an hour minimum wage could put Ben Yehuda out of business, Josh Katz told Kol HaBirah.

Non-kosher restaurants could have it even worse. Most Ben Yehuda workers already make more than the minimum wage, according to Josh Katz. However, a Domino’s Pizza delivery man in the University Towers elevator told Kol HaBirah that nearly all Domino’s workers make minimum wage. If the minimum wage does increase to $15 an hour, then pizza purveyors and patrons alike will need to pay more dough as workers take home a larger slice of the pie.

By Gabe Aaronson

Special Correspondent