EL PASO, Texas (KTSM)–With 50% capacity, mandatory masks and booths divided by Plexiglass, the Thirty 5ive Tavern and Grill in East El Paso is like many of the thousands of El Paso businesses trying to find their stride after facing pandemic hardships.
“The restaurant industry as a whole lost over two-and-a-half million jobs right now and one out of six restaurants have closed permanently,” Anthony Duncan, the restaurant owner said.
Duncan also serves on the board of the Texas Restaurant Association El Paso chapter and was the former president of the association.
He said a significant jump in the hourly wage could cause more problems for businesses trying to recover from the pandemic.
“So to come back and hit a minimum wage bill at the same time when we haven’t even recovered from the pandemic right now could be catastrophic for restaurants,” Duncan said.
Duncan explained in the restaurant industry, they traditionally work in a 3-5% pre-tax profit margin.
“So if you take a minimum wage and more than double it, it can put a lot of restaurants out of business and cause us to hire less people than before,” Duncan said.
The last time the minimum wage was changed was in 2009. The proposal would bring the current federal rate of $7.25 to $15 an hour.
However, Duncan said many of those in the hospitality professions, working on tips, such as bartenders and servers, most make more than $15 an hour because of tips.
“A lot of them are making $19-25 an hour and some making more than that,” Duncan said. “So if that minimum wage went through and the tip credit got eliminated, they would actually be making less.”
He also mentioned the deals on beverages and meals probably wouldn’t stick around either.
“You’re not going to see any $3 or $4 dollar drink specials on the menu anymore, not going to see a hamburger less than $10 anymore,” Duncan said.
One of Duncan’s biggest concerns is the risk for jobs altogether.
“You can’t replace cooks with robots, you can’t replace servers with robots, as people go out to eat they like to be taken care of and the fewer people doing it, the crummier service you’re going to have,” Duncan said.
However, he said he doesn’t think the issue is raising the wage, but more so raising it now with the pandemic still around and at such a high rate. He said for his businesses, he doesn’t anticipate sales will reflect pre-pandemic numbers until 2022 or even 2023.
Tom Fullerton, a UTEP professor of economics weighed in on the proposal. He said for the nation as a whole, a one-size-fits-all hourly wage mandate is not the best idea.
“There’s going to be a lot of workers that are either generally inexperienced workers or unskilled workers who do not produce 15 dollars an hour worth of output,” Fullerton said.
He said that rate might be successful for some areas such as Seattle, but will do more harm than good in an area like the Borderland.
“Two of the metropolitan economies that are most impoverished, are El Paso and Las Cruces,” Fullerton said. “So in El Paso and Las Cruces this could have the unintended consequences of having large scale layoffs as well as an increase in the unemployment rate,” Fullerton said.
However, Fullerton speculated the proposal could’ve been made by the Biden administration with no intention of it passing in order to score political points.
“They could’ve concluded that there is no way this bill can pass the Senate, therefore they are going to make the proposal and then there is not a risk of it passing and it might not pass the House of Representatives, in which case they score political points with their base, but they haven’t put the economy and business sector at risk,” Fullerton said.
Duncan said he believed something might pass with Congress on this issue, but he said the Texas Restaurant Association along with the National Restaurant Association would most likely discuss with lawmakers on options moving forward.