When an economy is in recession, our politicians must get creative in order to help small business create jobs. One creative solution for California is to reduce the minimum wage for full service waiters at every restaurant in the state. Every restaurant owner and server knows that a server earns an hourly rate through tips that is grossly higher than the minium wage. I've heard average as low as $25/hour to as high as $400/hour depending on the restaurant. Nevetheless, the minimum tips is well about the state's minimum wage.
In Arizona for example, the minumum wage for servers is $4.35/hour. This gives the restaurant owner two incentives: (1) to higher more servers to provide better service, and: (2) to encourage the restaurant owners to collect the tip income information and have the employees report the tips so that taxes are paid on those tips. This incentive is through tip credits.
There are a total of about 90,000 restaurants in California. I'd estimate that 30,000 of them are full sevice and use waiters. If lowering the minimum wage for these employers casued each restaurant owner to hire two more servers, that 60,000 new jobs. Those 60,000 new jobs would trickle down to create even more jobs.
Then the state would collect more income tax revenues since the owners would report those tips as income.
And everyone is happy, right. Wrong. Unfortunately I spoke to a high level person at the EDD who was obviously liberal. She was shocked that any one could live on $4.35 hour. That's the only number she heard and was obsessed with that number. She tuned-out and never bother to understand the business model.
But if you're in California you can send lettes to your assemblypeople to get them on board here and truly have the government help create jobs.
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Mel Jones is one of the premier restaurant brokers in the nation having published hundreds of articles on buying and selling a restaurant and bar business, selling thousands of restaurants in CA., WA and AZ and building one of the most copied business models in the brokerage industry. Mel started SellingRestaurants in 2004 with the one simple concept, give the buyers the information they need to make intelligent buying decisions without being pestered by a broker or hiding information, prepare the business for market by researching key details that make or break deals and educate the buyer on the buying process to create an intelligent buyer. Prior to SellingRestaurants, Mel was a Chief Financial Officer for Universal Music Group, the largest music company in the world. There he participated in more than $11.5 billion of merger and acquisition transactions. He also work for top companies such as Nestle Foods, USA. He hold a Bachelors in Business Administration Finance as well as attened Law School at Gonzaga University. Give Mel a call at 480.274.7000 or e-mail him at [email protected] if you have any questions.