Restaurants to Eliminate More Waiters in Response to Minimum Wage Hike

waitress photo

Photo by SanFranAnnie

Colorado was among the four states where voters approved a minimum wage hike in November. Among the specific provisions for the new wage hike was the stipulation that tipped workers — such as waiters who receive tips and are paid below the standard minimum wage — will receive a mandated wage hike of 99 cents.

Naturally, this will lead to an increase in costs for restaurant owners who will then seek to raise prices and/or reduce costs. KDVR in Denver reports:

Kanatzer owns The Airplane Restaurant in Colorado Springs and said he has already increased his kids menu prices. …

“I increased it a dollar — my kids menu prices went from $4.99 to $5.99,” Kanatzer said.

Raising prices can only go so far, however. Contrary to what many non-economists seem to believe, it is not possible to simply “pass on the extra cost to customers.” As any economics-major undergraduate knows, it is only possible to pass on a portion of the increased cost to the customer because higher prices and competition from other firms will lead to fewer sales if the owner simply attempts to “pass on the cost.” And even if all restaurants are subject to the same wage hike, there are always substitutes in the form of take-out and other types of dining.Specifically, in response to the forced wage hike we can expect to see more food-service business go the way of so-called “fast casual dining” which include brands such as Chipotle and Noodles and Company. These are restaurants where patrons order food at the counter, and then take their food to their tables themselves…