Minimum wage change may take biggest toll on restaurants

LOS ANGELES -- Small-business owner Dale Ma figures it will cost him more than $100,000 a year to comply with the 90-cent-an-hour minimum wage increase signed by President Clinton.

Ma owns four Burger King restaurants in the suburban San Fernando Valley and employs 135 workers. As many as 40 of them fill minimum wage, entry-level slots at any one time.

Not only will payroll costs escalate, but costs associated with such things as workers compensation insurance premiums, which are tied to wages, will also rise.

It's the fifth minimum wage increase he's seen in 18 years of serving fast food. It will take some time, as Ma knows, to digest his higher operating expenses.

"It probably takes a minimum of two years to stabilize your business after a minimum wage increase," he said. "We don't have the opportunity of saying `I need to sell more burgers.' People can make the choice of either eating out or cooking at home."

Raising prices is not an option either. Ma tried that before, and sales fell.

Some small-business consultants say the restaurant industry will be hardest hit by the new wage.

"In the fast-food industry it will be a burden and I think there will be fewer jobs," said Mike Hurley, owner of Hurley & Co., an accounting and consulting firm in the Granada Hills section of Los Angeles.

Corporate burden or not, 10 million American workers -- more than 600,000 of them in California -- can look forward to bigger paydays. It's the first federal increase in five years.

The bill, passed by Congress on Aug. 2, raises the federal minimum wage -- at a 40-year low when adjusted for inflation -- from $4.25 an hour to $4.75, effective Oct. 1. It will get bumped up to $5.15 an hour Sept. 1, 1997.

To soften the blow, the wage package includes $21 billion in business tax breaks over 10 years.

Businesses can take a tax write-off on new equipment upfront rather than depreciating new equipment over seven years.

"It's excellent. What it will do is reduce the tax and increase cash flow, and it will be very positive," said Harvey Goldstein, a partner in the accounting and consulting firm of Singer, Lewak, Greenbaum & Goldstein, based in the Westwood section of Los Angeles.

But he doubts whether it will stimulate any capital purchases because businesses should only buy equipment when they need it.

Meantime, Clinton's action could intensify the battle over Proposition 210, a November ballot initiative that would ultimately increase California's minimum wage to $5.75.

Shirley Knight, assistant director of California's chapter of the National Federation of Independent Businesses, said the pay hikes will mean fewer jobs and a lackluster economy.

"A lot of these businesses are having a hard time making it now and can't withstand this kind of hit," said Knight.

But Richard Holober, campaign manager for the Livable Wage Coalition, thinks Clinton's action will boost his group's efforts.

"It's a down payment on the restoration of the value of the minimum wage," he said.

And Ron Pardo, owner of Gene Bliley Stationery in Chatsworth, said that he has no problem with the pay hike.

He won't get hit on the first installment, but will on the second.

"I don't believe it to be a livable wage," he said of the current minimum standard.

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