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Our home for bold arguments and big thinkers.

man holding avocados
AP Photo/Damian Dovarganes
Yes, I know guac is extra.
AN AD-GUAC SOLUTION

Restaurants need to stop treating low-wage workers like avocados

Jonathan Schleifer
By Jonathan Schleifer

Executive director, The Fairness Project

It’s not unusual to see a la carte charges for guacamole at restaurants when avocado prices surge. But low-wage workers are not avocados.

In Nov. 2017, 2.1 million working Americans in Arizona, Colorado, Maine, and Washington state had their wages raised by varying degrees and another 6 million workers in California and Washington DC had their wages raised to $15 an hour.

When low-wage workers won higher minimum wages, restaurant owners reacted in three ways. Those who already paid their workers at or above the minimum wage shrugged. Others accepted the fairer wages and adjusted their business models accordingly. But a third group decided to protest the cost by adding “labor surcharges” to customers’ bills. These surcharges sit at the bottom of the bill with the itemized taxes and tip line. The Wall Street Journal reported that this extra charge is often between 3% and 4% of the bill.

Managing shifting costs isn’t anything new to restaurant owners. When faced with adverse conditions such as harvest yields, businesses sometimes choose to pass on this cost to consumers in the form of higher prices or a more limited menu. For instance, in 2012 when drought conditions in ranching states like Texas and Oklahoma caused ranchers to pay more for livestock feed, McDonald’s customers were forced to pay more than a dollar for items on the legendary dollar menu. This is a global phenomenon: After Cyclone Yasi devastated Australia’s banana crop in 2011, popular smoothie chain Boost Juice Bar reworked their menu to give customers less fresh banana in their drinks for the same price—and then charging more if you wanted the original mix.

Restaurant owners want customers to be upset that the wait staff serving their meals is the reason their bill is slightly higher.

These supply-based surcharges are considered acceptable—consumers can choose to pay them or simply get a little less. But instead of using other business models to adjust costs to accommodate for higher minimum wages, restaurant executives have chosen to pit their customers against their employees by highlighting the cost of their staff’s hard work. Rather than seeing a restaurant server as a person with a family to feed or student loans to pay, they want customers to be upset that the wait staff serving their meals is the reason their bill is slightly higher.

It’s important to keep in mind these minimum-wage increases are coming when the restaurant industry is, on the whole, doing very well. In 2016, the National Restaurant Association reported menu prices rose 2.7%, yet grocery store prices dropped 0.9% in the same period. In fact, the decreasing cost of food helped the restaurant industry post a nearly 5% increase in sales from the year before.

Despite increasing margins and profitability, the industry has done everything it can to keep hourly wages as low as possible. The restaurant and hospitality industries have more minimum-wage workers than any other industries and have been consistent opponents of increasing the national minimum wage, which has remained frozen at $7.25 per hour since 2009.

Restaurant executives and owners have been doing quite well over the years, too. Salaries of fast-food company CEOs have increased dramatically: Between 2000 and 2013, the average fast-food CEO compensation went from $4 million per year to $24 million. In fact, the average CEO-to-worker salary ratio has increased by a factor of 15 since the 1960s.

Paying workers decent wages isn’t just the right thing to do—no one with a job should have to struggle just to make ends meet—but restaurants that do pay a fair wage also find themselves better off in the long run. Study after study shows that higher wages, while increasing labor costs, also increase productivity and decrease worker turnover. A 2015 study from the University of Warwick found that worker happiness led to a 12% spike in productivity, while unhappy workers proved 10% less productive.

The spokeswoman for the California Restaurant Association told the Wall Street Journal that labor surcharges are emerging as “the new norm,” but we can’t let that be the case. We all need to pitch in and take the labor surcharge head on before it becomes normalized. No one should be shamed for wanting fair pay for a day’s work.

So next time you see a “labor surcharge,” maybe ask if you can get a summary of what the owners and salaried executives are making. Or see if you can get an itemized receipt that includes what percentage of your bill covers National Restaurant Association dues. Or, ask them how much they’re paying for avocados.