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Raising the minimum wage will have severe consequences, especially for those working in the restaurant industry.

A higher minimum wage will result in a challenge for restaurants, which depend heavily on hourly workers. The increased cost of labor will likely cause higher costs to customers. Restaurants could also cut hours or the number of employees they have while relying more on computers to service customers, or ownership will be forced to take on shifts themselves to defray costs or significantly raise the price of their product. Some restaurants may even be forced to close.

In Los Angeles, instead of increasing menu prices some restaurants are eliminating tipping and instituting a “service charge.” A service charge is restaurant property, whereas tips are the property of the server. Currently, servers average 20% tip. After paying out support staff they usually take home about 14% of the total sales for the night. This would prevent businesses from passing the cost onto the customer. If businesses keep raising prices, the consumer loses and eventually may stop consuming. With nowhere for business owners to hide from the minimum wage increase (say, in other neighboring municipalities) except out of state, Los Angeles could be in the same boat, for better or worse, as every other city in the state.

It is important to contact your attorney to make sure you understand and are in compliance with the new minimum wage laws that have been enacted in the city of Los Angeles.

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