In the weeks leading up to the New York Wage Board’s recommendation on Wednesday to raise the minimum wage for fast food workers to $15 across the state, 35-year Burger King franchisee David Sutz had an unfamiliar feeling: Helplessness.
“We were the enemy,” says Sutz, remembering the board’s hearing in Buffalo, where he owns four restaurants. “There was no control in the meeting. Every time one of the franchisees got up to speak, they were booed and hissed, and the board did nothing. So how do you fight that?”
Some franchisees who showed up to testify ended up not testifying at all, intimidated by the boisterous crowd. After a three-year campaign by unions and activists to raise his employees’ wages, Sutz figures their perspective wasn’t welcome.
“Nobody wanted to hear our stories. Nobody called us before this,” he says, frustrated. “Now that it’s sort of a done deal, all of a sudden people are saying ‘Wait a minute, what’s happening?’ ”
That’s a feeling common among businesses nationwide, as minimum wage increases steamroller their way through cities and states. Emboldened by their victories, minimum wage backers are planning a slew of new bills and ballot initiatives in the coming election cycle. The private sector is used to being a powerful force in politics. So how has it been so impotent on the issue of the minimum wage?
First of all, business groups say, it’s important to point out that the activists — and in particular the Service Employees International Union, which has pumped tens of millions of dollars into the “Fight for $15” campaign — have so far picked the low-hanging fruit. In liberal cities like Seattle, Los Angeles, and San Francisco, where the issue of economic inequality is front and center, much of the civic establishment supports boosting the wage floor. That’s created a swift drumbeat of victories that might not carry on through across the rest of the country.
“The SEIU is picking its targets very deliberately, in places where they know [a minimum wage hike] can pretty easily pass, or bypass the legislature,” says Michael Saltsman, director of the Employment Policy Institute, which is funded in part by the restaurant industry. “The fact that it’s passed in some of these places does create a sense of momentum, but it’s not necessarily more broadly based.”
And in fact, business interests have managed to tamp down threats in a few places. Michigan Gov. Rick Snyder, for example, recently signed a law prohibiting local jurisdictions from raising wages on their own. A bill that would raise the minimum wage in Delaware to $10.25 hasn’t gone anywhere. An effort in St. Louis, where activists have been pushing strongly for $15, has stalled.
But those victories are rare and perhaps fleeting, at a time when 71 percent of Americans favor raising the minimum wage nationwide to $10.10. With wages stagnant even as corporate profits soar, the idea that businesses won’t raise pay on their own as their earnings recover — and that minimum wage hikes, rather than killing jobs, actually help the economy by putting money in the pockets of those who are most likely to spend it — has proven compelling.
"The reason that business has not been able to stop these minimum wage hikes is that they have completely lost the public argument about how the economy works and where growth comes from,” says Nick Hanauer, a venture capitalist who has campaigned for minimum wage hikes around the country. As an example, he points to his hometown of Seattle, where business has boomed under the highest minimum wage in the country.
“The key to winning this was to create a new kind of argument about how capitalism works that’s both true and beneficial to 99 percent of the people who participate in the economy,” he says. "So literally, when we took [the issue of] growth away from the business community, they went dark, they were silent.”
Well, not quite. Business-backed groups still protest that while the economic research suggests that minimum wage hikes haven’t historically led to job loss, there aren’t any studies yet on what happens when the floor goes all the way up to $15. As that happens, they predict that businesses in the fast food industry especially will find ways to cut jobs through automation.
"I think it’s complex,” says Carrie Sheffield, who covers the issue for the Competitive Enterprise Institute, a free-market think tank. "It’s very easy to demagogue something when you don’t have a good grasp of the underlying economic theory. That’s why the minimum wage polls very well.”
In an attempt to change the narrative, CEI has supported Opportunity Lives, a media project that emphasizes personal initiative as the path to prosperity, rather than social programs and government mandates. And in the shorter term, Saltsman’s group is working to surface the stories of businesses that are impacted by the first wave of $15 wage hikes as soon as possible, while there’s still time to stop the momentum.
“No one knows how bad it’s going to be," Saltsman says. “What the SEIU is trying to do is before that unflattering evidence starts to come in, get it passed in as many places as possible.”
Still, the industries that care about minimum wage hikes face a more fundamental problem than public perception: The private sector itself is far from united against raising the minimum wage. Some corporate leaders — especially at tech companies in liberal Silicon Valley, whose business models don’t depend on low-cost labor — have have actually come out in favor of raising it.
That’s made it difficult for the largest business groups, which have to balance the interests of all their members, to put much effort into opposing minimum wage hikes. Glenn Spencer, who leads the U.S. Chamber of Commerce’s Workforce Freedom initiative, says the national Chamber has not been active in local fights on the issue. The California Chamber of Commerce, which has watched Los Angeles and San Francisco vote to raise wages to $15, declined to comment on the record about the issue.
Solidarity is even hard to find among small businesses. While some could be mortally wounded, like the San Francisco bookstore that made headlines for announcing it would shut down as wage hikes take effect, many already pay well above the minimum wage.
“You can’t get a united front of the business community, because small businesses say it’s not their issue,” says Scott Hauge, president of Small Business California. At the same time, few businesses wants to stick their necks out and oppose something that has so much support among their potential customers. “Businesses that are impacted are nervous about getting out there and saying 'we can’t afford it,' because of the PR.”
Unions and community groups have effectively exploited those divisions. Often, before campaigning for across-the-board minimum wage hikes, they’ve pushed the raises for specific industries — like in Los Angeles, where the City Council first passed an increase for hotels, and in New York, where Gov. Andrew Cuomo targeted fast food. Each industry that gets saddled with higher wages often turns around and supports a minimum wage increase for everyone to help even the playing field.
That’s why the franchisors have tried to build alliances, arguing that an injury to one is an injury to all.
“Part of our message from the coalition has been, who’s next?” says Matt Haller, senior vice president for public affairs with the International Franchise Association, which represents franchisors like McDonald’s. "Businesses in other sectors can continue to keep their head in the sand, but at a certain point, SEIU is coming after the entire service sector, and business needs to get involved.”
The IFA, which has historically focused on federal policy, is now shifting attention towards states and cities. The trade group has hired lobbyists, run ad campaigns, and mobilized franchisees to make their case to lawmakers in person. In some places, the organization has won small victories, like persuading Kansas City not to target franchises specifically.
But sometimes it’s still hard to get everybody engaged. Even with the arguments that the IFA has made about the SEIU pushing a higher minimum wage as part of an overall strategy to unionize the industry, that threat strikes some as remote. And in the meantime, not all franchisees seem terribly concerned about the rising minimum wage itself.
Take Dennis Kessler, who last year sold off his interest in 21 Burger King franchises and 48 Friendly’s. He doesn’t like the way Cuomo singled out the fast food industry, but ultimately doesn’t think many franchisees will go out of business because of it.
"This $15 thing is being phased in over quite a few years, so I don’t think it’s going to have much of an impact,” says Kessler, who teaches at the University of Rochester. “People are going to have to pay a little more. It really isn’t too much more complicated than that.”