Minimum Wage, Maximum Concerns
On Sept. 10, New York Gov. Andrew Cuomo made a push to have the Empire State become the first in the country to adopt a $15-per-hour minimum wage for all industries. The proposal came on the same day Acting State Labor Commissioner Mario J. Musolino signed an order making the $15 mark the statewide minimum wage for fast-food workers.
Under Cuomo’s proposal, which has the backing of Vice President Joseph Biden, the all-industry wage would be phased in to mirror the fast-food wage order, taking full effect by Dec. 31, 2018 in New York City and July 1, 2021 for the rest of New York State.
While Cuomo’s proposal is still just that, the increase in the fast-food minimum wage is a reality that convenience stores in New York have to face — either directly or indirectly.
Included in the final report by the state’s Fast Food Wage Board, which was approved and adopted by the state Labor Department, there is a list of some of the establishments that would be subject to the new wage. None of them are convenience stores.
However, some of them are branded foodservice establishments that have franchise locations within the four walls of many New York c-stores, and that’s where the uncertainty lies, according to Jim Calvin, president of the New York Association of Convenience Stores.
“What remains unclear is whether a store that has a Dunkin’ Donuts or a Subway inside would have to abide by the fast-food minimum wage and, if so, would they have to abide by [the wage] only at that food counter or throughout the store?” he said.
In New York, some convenience stores operate their food franchise locations, while others lease space to independent franchisees, in which case the independent franchisee and not the c-store operator pays the employees at the food counter. Neither example has been addressed — so far anyway — in the wage order, Calvin explained.
Still, the issue of whether that store with a branded food franchise is subject to the fast-food minimum wage may not be as critical to the industry as the indirect impact on convenience stores because c-stores compete with McDonald’s for the same labor pool.
“Even if no convenience stores under any circumstances will be covered by the fast-food minimum wage mandate, they all are going to be indirectly impacted, and severely impacted, by the fast-food wage,” Calvin pointed out.
If McDonald’s has to pay its part-time, entry-level workers $15 an hour, the competing convenience store will have to pay a higher rate in order to measure up. “As one of my board members pointed out, even if we’re not included, we’re included,” he said. “While, on the one hand, we are still trying to get clarification about whether the convenience store with a Dunkin’ Donuts inside is required to pay the higher fast-food minimum wage, the bigger concern is how does the fast-food minimum wage that is implemented in other retail formats impact the labor costs for convenience stores across New York State?”
$15 ACROSS THE BOARD
If Cuomo’s proposal to increase the minimum wage to $15 across the state is implemented, the effect would be very similar to the situation convenience stores are presented with right now.
“Because of the nature of our business and because of the labor pool that we draw from, the reality is either way wages are going to be driven artificially upward; sharply upward,” Calvin said. “Either way, the result is sharply higher labor costs, not only for wages but for payroll taxes, workers compensation insurance, unemployment insurance, and on and on.”
Either way, the wage increase is going to have “an unprecedented impact” on convenience stores and small businesses of all kinds in New York, he added.
As it is, New York employers face a $9 minimum wage as of Dec. 31. This is the third step in a multiyear phase-in that’s already seen the state’s hourly wage rise from $7.25 to $8, and then to $8.25. While Calvin acknowledged these increases are not as steep as the $15 proposal, he said they are still significant especially when there’s no corresponding increase in productivity.
“Convenience stores have had to take a hard look at staffing, how many positions, how many hours and the rate of pay. In a fair number of cases, the decision — as difficult as it is to make — has been to reduce the number of positions and to reduce the number of hours for remaining employees. In some cases, stores have decided to reduce the number of hours they are open,” Calvin explained. “None of those things are good for business, but those are the realities we have been confronted with.”
THE BIGGER PICTURE
New York is certainly not the only state pushing for higher wages; it’s just the latest. And the movement is not limited to the state level either. (See “On the Horizon,” right).
“The minimum wage is part of a bigger trend. This, what I would call an increasingly popular trend to get whatever your agenda issue is enacted at the local level, is very difficult, frustrating and annoying for businesses to comply with,” said Tom Robinson, president of Santa Clara, Calif.-based convenience store chain Rotten Robbie.
“What we end up with is a patchwork system of different ordinances, which creates compliance problems, competition problems, and additional costs to businesses and quite frankly to consumers,” he stated.
Rotten Robbie, which has 34 locations in Northern California, views “governmental burdens” as par for the course. But most importantly, “we also [try] not to punish, not to hurt our employees as we attempt to deal with ordinances or legislation that can be very anti-business and anti-consumer,” Robinson said. “And a lot of the times, these things that are anti-business are really anti-job legislation.”
According to Robinson, the retailer’s main driver when it comes to the company’s wages is San Jose, Calif., which has a minimum wage rate of $10.30 an hour. Rotten Robbie pays above minimum wage and that differential expands and contracts over time.
“It really has made it more challenging to deal with, especially as it evolves every year,” he noted. So far, the company has not gone to geographic starting wages. However, Robinson said he would not be surprised if the chain started doing that, and he expects more companies will start doing it as well.
Generally speaking, he said, when there is an increase in the minimum wage, service companies with local competition — like Rotten Robbie — either pass along those costs to the customers or the company doesn’t survive, depending on how much cost is involved.
A bigger concern for convenience store retailers is when wage boosts drive other businesses out of town, taking with them c-store customers. “That’s really the big thing. For service companies like us where our competition is local, we more or less pass the costs along, but the problem is complying with the patchwork,” Robinson said. “What’s really bad is [when] it’s bad enough that you start to see more significant companies that don’t have local competition move. That’s really where it hurts us.”
This is not to say Robinson is against increasing wages, but he believes the tactic is a “poor substitute for generating more jobs.”
“It’s not a bad deal for folks that are making the minimum wage and have a job, that won’t lose their job. It is a bad deal, I think, for workers who don’t have a job or have a part-time job. It makes it harder for them. There are winners and losers in that game,” he said.
$7.25 The current federal minimum wage