Wage Boost Fries Up Tension at Eateries

It’s going to get hotter than ever in the kitchen today at restaurants nationwide.

With the first part of the two-step federal minimum wage increase taking effect, fat will be thrown on the fire of workplace relations everywhere, from fast-food joints to upscale eateries.

The reason: The initial increase, boosting the minimum from $4.25 an hour to $4.75, is having the unintended consequence of antagonizing a lot of people already working at restaurants.

At many of the burger chains, new hires suddenly will be paid as much, or nearly as much, as the older kitchen hands who had worked their way a notch or two up the old pay ladder. The gut response from many of the longer-term workers will undoubtedly be, “What about me?” said Ron Paul, a Chicago-based industry consultant.

At full-service restaurants in California and the handful of other states where tipped workers must receive the full minimum wage, the mandatory boost could fatten the pay gap--and inflame tensions--between waiters and dishwashers.

And for restaurant owners, the increase in the minimum will present cost-management challenges as tough as an overcooked tenderloin. “It’s a very touchy issue,” said Ken Rausch, who runs the family-owned Edward’s Steak House in El Monte. No matter how his restaurant handles the increase, Rausch said, “it’ll eat into the profit margin.”

The generally low-paying restaurant business will probably be the industry most affected by the minimum wage increase. Government figures show that among the 4.2 million U.S. workers getting mandatory raises as of today, about 1.1 million are employed by eating and drinking establishments.

When the second installment of the increase takes effect next September, boosting the minimum another 40 cents to $5.15, many of the roughly 6 million additional workers expected to be helped also will be restaurant employees.

While the minimum wage debate dragged on for months in Washington this year, the restaurant industry--particularly the fast-food segment--was at the center of the attention.

Opponents argued that an increase would drive up the cost of French fries for all consumers and eliminate some jobs while largely benefiting part-time teenage employees who didn’t really need the extra money. (They apparently didn’t consult many teenagers.)

Meanwhile, supporters pointed to the example of adults trying to support families by working as minimum-wage busboys or dishwashers. Similar pro and con arguments are being made for Proposition 210, the proposal on California’s November ballot to boost the state’s minimum to $5.75 an hour.

But amid all of the hullabaloo, not much attention has been devoted to the more touchy-feely issue of on-the-job discord.

For 23-year-old Rachel Kaatz, a veteran McDonald’s employee and a senior majoring in psychology at Michigan State University, it’s not hard to predict what will happen. She was at the chain the last time the federal minimum was boosted in 1991, and also has seen the owners of her McDonald’s increase their starting pay levels several times.

“Every time we had a wage increase, everybody was unhappy,” Kaatz recalled. “There are new people making as much as the other people.”

The result, Kaatz said, is that the already legendary turnover in the fast-food business--some observers estimate that the average job turns over roughly three times in a given year--gets even worse.

Top managers of the fast-food chains are well aware of the potential for friction as newcomers and longer-term employees get bunched up at the bottom of a new pay scale. For example, about 45% of the 12,000 employees at the 406 company-owned Carl’s Jr. restaurants have been earning less than $4.75 an hour and thus are getting a mandatory raise.

But “crew,” or entry-level, workers who already were earning $4.75 to $4.95 also will be getting raises, albeit raises of no more than 10 cents an hour.

“By being proactive in making those adjustments rather than waiting and having someone get disgruntled, we nipped it [potential dissension] in the bud,” said Suzi Brown, a spokeswoman for the Anaheim-based Carl’s Jr. chain.

Operators of table-service restaurants in California also are worried about pay equity frictions because of a feature in state law that benefits waiters.

California is one of only seven states that prohibit restaurant owners from taking “tip credit” for waiters and others receiving tips--in other words, the restaurateurs can’t pay waiters less than the minimum and count on their tips to make up the difference, as they can throughout most of the country.

So, in California, waiters tend to be paid the minimum wage by their bosses but, with tips from customers, earn far more than other restaurant employees. With the newly increased minimum wage, the pay gap is expected to widen because, many restaurant owners say, they can’t afford to pass along similar increases to the likes of dishwashers earning $5 to $6 an hour.

Rausch, of Edward’s Steak House, said he hopes to raise his dishwashers’ pay, but the boost won’t be anything approaching the 12% increase in the minimum wage. Even so, he expects to raise prices about 40 cents per customer to cover the added expense.

Bob Spivak, president of Southern California’s Grill Concepts Inc. restaurant chain, expressed sympathy for low-wage workers, saying, “You can’t support yourself on $4.25 an hour. I just feel that so much of this increase is going to the wrong people,” such as food servers earning as much as $20 an hour.

Elsewhere, a major goal of supporters of the minimum wage increase--boosting the pay of workers in the $5 to $7 an hour range, along with employees right at the minimum--appears likely to be frustrated, at least in the short run.

For instance, the Seattle-based Starbucks Coffee chain offers entry-level workers generous benefits and stock options but in some communities pays new hires little more than the minimum wage. Even so, a company spokeswoman said the chain’s pay practices “won’t be impacted at all” by the higher minimum wage.

The mood among many workers already in the restaurant industry was expressed by a 19-year-old working behind the counter at a La Salsa Mexican restaurant in the San Fernando Valley this weekend.

The teenager, who asked not to be identified, said she already was earning $5.50 an hour, or $1.25 an hour more than the old minimum.

“I don’t know if they’ll still give me that [extra] $1.25 when they raise the minimum. . . . and I’m worried about it,” she said.