Local Restaurants Can’t Keep Up With Minimum Wage Hikes, Inflation

Minimum wage hikes in many states around the country and sky-high inflation are crushing independent restaurants that don’t want to raise prices on their customers, according to the Wall Street Journal.

In January, 22 states raised their minimum wage for hourly workers, according to the WSJ. Around 59% of small business owners said that higher labor costs were the biggest source of inflation in January, requiring price hikes to maintain current revenue levels.

“Customers aren’t going to come visit you if you are charging $14, $15 or $16 for a burger,” Barret Dabbs, owner and chef at Johnny Roger’s BBQ & Burgers in Concord, North Carolina, told the WSJ.

Local restaurants are also facing competition from a tight labor market that is exacerbated by accessible positions in the gig economy like being an Uber or Lyft driver, according to the WSJ. To retain and attract workers, Evan Kelamis, who runs a restaurant in Tulsa, Oklahoma, increased his labor costs by 16% in just 2023, despite the minimum wage staying the same in the state.

The National Restaurant Association estimates that fast food chains and limited-service restaurants like McDonald’s and Chipotle have managed to improve their sales on average by more than one-third from 2019 to 2023, which is double the rate of sit-down restaurants, according to the WSJ. Restaurants like fast-food chains have been better able to absorb costs due to the mass manufacturing of their food as opposed to independent restaurants that have to make food from scratch, the outlet reported.

Despite raising prices by $5 on a bacon cheeseburger since 2018 to keep up with inflation, Karen LuKanic’s Chef Zorba’s Restaurant in Denver still can’t turn a profit, according to the WSJ. The cost of food away from home for consumers has risen by 30% since January 2019.

Inflation has risen 18% since January 2021, when President Joe Biden first took office, and remains well above the Federal Reserve’s 2% annual target, rising 3.1% year-over-year in January. Following the sustained high inflation report for January, many investors reacted by pulling their money out of stocks, leading the Dow Jones Industrial Average to have its worst day in nearly a year.

The labor market remained tight in January, as unemployment came in at 3.7%, with the economy adding 353,000 jobs, far higher than expectations of 180,000. Despite the increase in jobs, there was a 136% jump in job cuts in January compared to the previous month.