Restaurant adds 'minimum wage surcharge'

Yahoo Finance

A Minnesota restaurant has begun charging a minimum wage fee – $0.35 on the end of every bill. The move is in response to Minnesota's decision to increase minimum wage to $8 an hour for large employers and $6.50 and hour for small employers.

The reaction to the "minimum wage fee" – as gauged by the Oasis Café Facebook page – has been mixed. Some commenters say they value the restaurant's transparency and support that it's taking a stand. Others, like Susan Sanders Wansbrough wrote, “Won’t be visiting a restaurant that thinks it needs to make a political statement on the backs of poorly paid employees.”

In response to the backlash, the owners of the Oasis Cafe, Craig and Deb Beemer, posted a statement on Facebook saying, "Our decision to offset the recent increase in minimum wage was what we believed to be the most honest and transparent way to communicate a significant increase in our operating cost. Rather than raise menu prices, we decided to charge a flat fee per guest check."

The Beemers also said, "It was never our intent to make some grand political statement about the minimum wage debate."

Few issues are as controversial and divisive as the minimum wage. Even business legend Warren Buffett has said that despite 50 years of thought, he’s not sure whether he supports an increase or not.

With President Obama’s push to raise the federal minimum wage to $10.10 an hour essentially dead in the water, a number of states and cities have taken the matter local.

Right now 23 states have minimum wages above the current federal level of $7.25.

So far in 2014, 13 states have either raised their minimum wage or seen an automatic increase kick in. (Minnesota's increase kicked in on August 1st, leading the Oasis Café to add a $0.35 line item on bills.) Analysis from Goldman Sachs and the Center for Economic and Policy Research showed faster job growth in these states.

But according to the American Enterprise Institute’s Robert Doar, hiked wages could add up to more than pocket change for consumers. He says a higher minimum wage could actually be a recipe for increasing poverty in the United States.

“I think it would be a bad policy,” Doar said. “It would hurt the people we really want to help the most, which are unemployed people seeking work who are often men, often very poor, often African American people in our inner city.”

Doar’s concern is that a higher wage would lead to fewer low-wage jobs – precisely the kind of jobs the nation’s poorest workers are looking for.

According to the Congressional Budget Office, a higher minimum wage would lead to about 500,000 fewer jobs, but would lift 900,000 people out of poverty.

But many minimum wage workers lean heavily on the same government welfare programs – like SNAP (formerly known as food stamps) – that Doar used to oversee in New York.

“Shouldn’t private employers be paying their workers enough so that taxpayers don’t have to subsidize them?” Yahoo Finance’s Lauren Lyster asked Doar.

“Well it might be nice if that was the case, but the economy in America is not built for that to happen right now,” Doar said.

“The fact that we supplement wages with various supports that make wages go further, like public health insurance or food stamp benefits is not a bad thing. It makes work more attractive to people who are working at low wages.”

It doesn’t follow, then, that Doar rejects cuts to these same programs. He emphasizes work as the most important factor to help alleviate poverty, and thinks the SNAP program could be more aggressive in its work requirements.

“I don’t think we’re encouraging work enough for food stamp recipients,” he said. And requiring more recipients to work could lead to a reduction in the overall need for the program, thus lowering costs to taxpayers.

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