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August 25, 2015
A new Harris Poll finds that a significant majority of U.S. adults—72 percent—think the minimum wage should go up. They might look at it differently if they traveled to Australia, where government tinkering with wage rates has resulted in many restaurants choosing to stay closed on Sundays rather than pay staffers 200 percent of their weekday wage.
That number’s not a misprint. Some industries in Australia, including restaurants, are required to pay workers “penalty rates,” i.e., double-time wages on Sunday and holidays. The controversial measure has been in place since 2009. But now the Australian government is looking to scale back this mandate because of unforeseen consequences.
“In a draft report earlier this month, the government’s Productivity Commission recommended that Sunday rates in hospitality, retail, restaurants and cafes be pared back in line with Saturday levels,” Bloomberg Business reported last week.
“That would see the pay for some employees drop from 200 percent of their weekday hourly rate to 125 percent.” Workers there also get a 25 percent wage supplement on Saturdays.
Why the rollback? Restaurant operators aren’t playing along. Some have chosen not to open on Sunday rather than pay the government-mandated wage premium. The result: In certain areas, there aren’t enough places to eat on a Sunday.
“Tourists come here and they complain that nothing is open on a Sunday,” Canberra chef/owner Ben Willis says. “It’s a bad look.” Similar complaints are made about a shortage of Sunday eating options in Sydney.
A survey of 1,000 Australian operators conducted for Australia’s Restaurant and Catering Industry Association finds that “penalty rates” affect operators in multiple ways, few of them good.
Of operators that stay open on Sundays, only 23 percent said they do so “because it’s a profitable day.” Of operators who close on Sundays, 70 percent said they do so “because of the penalty rates or an inability to trade profitably.”
The Australian experience shows that mandated wage increases can in some cases result in fewer restaurant choices for the consumer, fewer hours for restaurant staffers and reduced profitability for operators. The 2,054 respondents to the Harris Poll, queried online during the last week of July, may not have give full consideration to similar unintended consequences a $15-an-hour minimum wage might produce if implemented in the U.S.
But they seem to have a sense that $15 represents a hefty boost from the current $7.25 federal standard and that a smaller increase might be better. Fifty-nine percent think the proposed $15 rate is higher than it should be. When asked directly whether the federal minimum wage should be increased to $15 nationwide for all jobs, respondents were split 50-50.
Those proposing government-mandated minimum wage hikes for U.S. restaurant workers assume that everything else in the industry will stay the same and that restaurant operators will simply pay the higher wage out of their presumably generous profits. They won’t or, in many cases, they can’t. $15 an hour would give every minimum-wage restaurant worker a 200 percent-plus pay boost every day, not just on Sundays. Shorter hours or simply not opening on slow days could become a routine practice, reducing dining options for consumers.
Let’s hope policy makers take a look at how a mandated pay boost worked out in Australia before imposing one on restaurant operators in the U.S.
Contact Bob Krummert at [email protected]
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