East Aurora Restaurant Closes, And Owner Blames Minimum Wage Increase

Impacts of Higher Wages For Tipped Workers

EAST AURORA, N.Y. - John Rooney claims he made a decision based on survival.

He could no longer operate two restaurants, he says, because his expenses had grown too high. He could either close The Yelling Goat in Lancaster, a restaurant he opened a year ago, or Medici House in East Aurora, which opened under a different name 14 years ago.

Rooney chose the latter: Medici House shut down this weekend.

He places the blame squarely on the state of New York.

"I've got employees that have been working for me for 14 years, that we had to say goodbye to, for no other reason," Rooney said, "than that increase in the minimum wage."

Rooney is referring to the minimum wage for tipped workers, which increased by 50 percent starting on Dec. 31, 2015. At the recommendation of a Wage Board created by the Department of Labor, the state increased the wage from $5.00 per hour to $7.50 per hour for these workers.

Rooney claims this policy change added $100,000 in extra costs for his overall business, since many of his 40 employees at both restaurant locations earn tips and qualify for that base wage. The restaurant in Lancaster was smaller, more manageable and had a more appealing location, he said, so he salvaged the Yelling Goat and closed Medici House.

He believes his restaurant may only be the first casualty.

"This is a broad swipe at employers, and employees. And this might be the first, most high-profile version of what's coming," Rooney said. "And it's happening, as we speak, this process of folks literally shutting down because they can't afford to go on."

Restaurant associations across the state railed on this proposal last year, predicting it would cause closures such as Medici House.

But Sam Magavern, the Co-Director of the Partnership for the Public Good, said the evidence suggests otherwise.

"I'm sure individually, there will be restaurants that might close, but big-picture, the restaurant sector does seem to be able to absorb higher wages for its workers," Magavern said, "and still flourish."

Magavern points to research published by Cornell University in December, which studied minimum wage increases across the country, including those for tipped workers, and concluded that it does not typically result in job loss.

The Partnership for the Public Good advocated for the minimum wage increase for tipped workers, noting in a report that Western New York's work force includes more than 20,000 of these employees. Their median income is less than $20,000 a year with tips.

"That's just not a family-sustaining wage here in Western New York," Magavern said. "If we want to really have this region thrive, we need to make sure that if you work full-time, you can make enough to keep your family out of poverty."

Rooney, meanwhile, claims his employees all made at least $15 to $20 an hour in tips at his restaurants, which would place them substantially above the $20,000 range. He also notes that his non-tipped employees, such as dishwashers and cooks, make much more than the normal minimum wage set by the state.

"Brutal reality, that it has to come to an end," Rooney said, "because we can't come up with that extra nut that we've been given."

Magavern, however, argues that only a small minority of restaurants servers would be able to make a substantial amount of money in tips. His organization estimates that these employees are three times as likely to be impoverished compared to other workers.

"Obviously higher-end restaurants, the workers are making a lot more in tips, but that's a small number of the restaurants overall in the sector," Magavern said. "And that's why the median wages are so low for tipped workers."


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