Will L.A.'s Proposed Minimum-Wage Hike Harm Restaurants or Help Workers — or Both?

The staff prepares for dinner at Bestia, whose chef and co-owner, Ori Menashe, says that kitchen workers should be paid more.
The staff prepares for dinner at Bestia, whose chef and co-owner, Ori Menashe, says that kitchen workers should be paid more.
Photo by Timothy Norris

Diane Norem has been a waitress since she was a teenager, for more than 40 years. She has spent the last 20 at Canter's, the landmark Jewish deli on Fairfax Avenue.

It's a good job, worth the commute from Whittier. She works eight-hour days, five days a week. Canter's serves up pastrami and corned beef around the clock, so the restaurant needs full-time employees.

"This is the last eight-hour house that hires anybody over the age of 25 that weighs more than 110 pounds," Norem says.

A waitress at Canter's gets minimum wage plus tips, which is customary in the restaurant business. Norem says it's a crapshoot. Some days are flush and others she wonders whether it was worth the drive. Last year she made $39,000.

On that salary she supports her daughter, who is attending community college, and her 26-year-old son, who is autistic and lives with her.

"At the end of the day, I can pay my utilities, I can pay my mortgage and I can feed my family," she says. "We're not dripping in jewels."

Norem's mother also was a single mom. She raised five kids in the same small house where Norem lives. She worked full-time and took extra jobs when money was tight.

"My mother was the hardest-working woman ever," Norem says.

Norem has followed a similar course. She has cleaned houses, and sometimes makes a quick $100 by singing at funerals. She does not expect to retire. Instead, at 72 she will collect Social Security and cut back to working part-time. This is not uncommon. A cashier at Canter's in her 70s recently retired on doctor's orders. The oldest Canter's employee is 80.

As the city of Los Angeles plans to increase the minimum wage from $9 an hour to as much as $15.25 over the next few years, the goal is to alleviate some of the burdens of low-wage work for people like Norem.

But not everyone perceives their interests the same way their elected officials do. Norem, like most of the Canter's waitstaff, is against the increase. The owner has said that the expense of the higher wages might mean the restaurant can no longer stay open 24 hours a day. Norem is worried about layoffs and reduced hours.

"Giving me $15 an hour and getting my shift cut isn't helping me," says Norem, who averaged $18.75 per hour last year — roughly half of it from tips. "It's actually hurting me."

Norem is better off than most Canter's employees. Dishwashers and busboys earn close to minimum wage, and no tips. Cooks and deli men make a little more.

"I empathize with them," Norem says. But she isn't convinced that increasing the minimum wage makes sense, even if it benefits some of her co-workers. "I don't know, maybe it's just my mother. But all I hear in my head is, 'Adapt.'"

The movement to increase local minimum wages has swept the country with surprising speed in the last year. When L.A. Mayor Eric Garcetti campaigned for office in 2013, the issue did not come up. But since he was sworn in, Seattle, San Francisco, Oakland, Chicago and other cities have imposed higher minimum wages. Last fall Garcetti proposed increasing L.A.'s minimum wage to $13.25 an hour by 2017.

"He's responding as a politician and a liberal to pressure and to changes in public opinion, and growing activism," says Peter Dreier, a professor at Occidental College. "It's one of the more effective grassroots movements of the last 25 years."

Terri Bloomgarden, a third-generation owner of Canter's, says she can't force customers to spend more following a minimum wage hike.
Terri Bloomgarden, a third-generation owner of Canter's, says she can't force customers to spend more following a minimum wage hike.
Photo by Timothy Norris

The L.A. City Council is expected to act on the proposal sometime in mid-May. The council seems likely to go further than the mayor, instituting a $15 or $15.25 minimum that would phase in by the early 2020s.

The restaurant industry, which relies heavily on low-wage work, would experience the greatest effects of the increase.

Over the last few weeks a group of independent restaurants has organized to fight the proposal in its current form. Small Restaurants for Good Wages recognizes that some version of a minimum-wage increase is likely to pass and supports it. But it argues that tips should count toward the minimum. They argue that waiters and bartenders who already get more than $15 an hour when tips are included are not the intended beneficiaries of an increase and should not get a raise. Their proposal is called "total compensation," and it has become the most controversial element of the debate over the wage increase.

"We are on the side of the people who want to raise the minimum wage," says David Rosoff, a restaurateur (formerly of Mozza, now of the soon-to-open Bar Moruno in Grand Central Market) who is involved with the group. "If the city would adopt the total compensation provision, whether it's $13.25 or $15.25, I think we could all find ways to adapt without it being terribly noticeable. But without total compensation, it's not an adjustment — it's a diametrical shift. It's going to cause a lot of people to decide to close."

Labor groups have pushed back, arguing that restaurants are asking for a "sub-minimum wage" for tipped employees, which is against state law. California is one of just seven states where tipped workers do not have a lower minimum wage than non-tipped workers.

The labor groups argue that with a sub-minimum wage, waiters, valets and car-wash workers might not make enough in tips to get the full $15 an hour. It could prove next to impossible to get owners to make up the difference. They also argue that the restaurant industry's fears are overblown.

"Here's the thing about the sky-is-falling line — it's always baloney," says Roxana Tynan, executive director of the Los Angeles Alliance for a New Economy. "Every time the minimum wage has been raised in cities around the country, there has been a net benefit."

Garcetti has told the restaurant group that he agrees with it about total compensation.

"I'm supportive of that," Garcetti said when asked about it at a news conference last week. However, he pointed out that his hands are tied by state law, which excludes tips from minimum-wage calculations: "We unfortunately don't have jurisdiction over that directly."

Garcetti said he'd supported a bill to change state law to include tips. But two days later, the bill was withdrawn in the face of union opposition. The restaurant industry is not impressed with his response.

Higher wages might mean that Canter's can no longer stay open 24 hours a day.
Higher wages might mean that Canter's can no longer stay open 24 hours a day.
Photo by Timothy Norris

"It's the chicken's way out," says Bill Chait, a well-known L.A. restaurateur who is raising money for Garcetti's re-election. Chait argues that the city can set its own rules for its own minimum wage. "We believe it can be written so it can pass muster."

Chait is a co-owner of Bestia, an Italian restaurant in a gritty industrial corner of downtown L.A. Now two years old, the restaurant is arguably the hottest table in the city. For peak times it can take months to get a reservation.

Waiters at Bestia tend to be young, in their 20s or 30s. They must have a thorough knowledge of food and wine and the stamina to offer elite service in a packed house.

"Everyone here is conducting their own orchestra that is going at 100 beats a minute, and it goes for six to eight hours," says Nicholas Krok, a bartender.

"I think of it like the greatest mosh-pit experiences I've ever been in," says wine steward Ryan Ibsen, "where everyone in the mosh pit is in perfect harmony on the best nights."

They are well compensated. Including tips, they can easily make $35 an hour, or $70,000 a year, plus free health care.

"No one here could tell you they need to make more money," says waiter Brett Watson.

There is, however, a vast gulf between the "front of house" waiters and bartenders and the "back of house" cooks and dishwashers. Under state law, tipped employees are not allowed to share their tips with back-of-house staff.

Dishwashers make $10 or $11 an hour. Most of them work second jobs. Johnny Cirelle, a line cook who makes hot and cold appetizers, just got a raise from $11 to $12 per hour.

"The disparity between front of house and back of house is a huge deal," Cirelle says. "I think for a lot of back-of-house members it can be seen as pretty unfair."

Cirelle is a USC graduate who took a 50 percent pay cut to work at restaurants because he's passionate about food. "I knew it was a sacrifice that I was making when I was entering this industry," he says. "Down the line, the reward is going to be greater than all the sacrifices I've made."

Eventually he hopes to become a chef and open his own restaurant. But for many others in the back of the house, the job is just a job.

Ori Menashe, chef and co-owner at Bestia, agrees that kitchen workers should be paid more. In November, the restaurant instituted a 3 percent "kitchen appreciation charge," which went toward raises for the back of the house.

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Menashe himself earned $9 an hour when he was starting out. "I wasn't able to pay my rent until I had two jobs. I understand it," he says. "But from a restaurant point of view, it would be very difficult to be able to pay each employee that $15 rate."

Chait, Menashe's business partner, estimates that an increase to $13.25 across the board would cost the restaurant $400,000 a year.

If the current proposal becomes law, Chait says Bestia will switch to a service charge. Instead of paying tips, patrons will be charged an automatic 18 percent fee. That way, the restaurant can redistribute the money to the back of the house — and the front-of-house staff might make less.

Patrons typically don't like to be told how much they're going to tip, and waiters aren't thrilled about it either.

"It would take an element out of service," Krok says. "We might continue to give the same service we give, but at other restaurants I think people would phone it in."

Erick Gonsalez makes $11.50 an hour, or about $23,000 a year, at Canter's. "I like to do my job," he says. "I want them to see it, to see that I deserve a raise."
Erick Gonsalez makes $11.50 an hour, or about $23,000 a year, at Canter's. "I like to do my job," he says. "I want them to see it, to see that I deserve a raise."
Photo by Timothy Norris

"Tips are a huge incentive," says Genevieve Gergis, Menashe's wife, who is the pastry chef and a co-owner of the restaurant. "It's a reward-based job. There's nothing to motivate them except the money. That exceptional service is going to go out the window."

Still, most of Bestia's waitstaff is on board with the total-compensation proposal. Many servers say the back of the house deserves a raise but they themselves don't need one.

"The whole payment system created in the casual dining business absolutely sucks," Chait says. "It's a screwed-up system. This will push it over the edge."

Terri Bloomgarden is a third-generation owner of Canter's. Her grandfather and great-uncles opened it in Boyle Heights in 1931. Her parents opened Canter's on Fairfax in 1948. There are still a few kosher bakeries around the Fairfax location, but the street is changing.

"It's not quite yuppie-yuppie yet," she says. She points out a store up the street. "They're selling a pair of tennis shoes for $200-plus."

What's worse, people park in her lot to go buy them. Bloomgarden looks upon all this with baffled amusement: Can you believe these people?

Right now she's dumbfounded by the proposal to raise the minimum wage. She has spoken out against it at City Council hearings and is frustrated that the council members seem not to understand that an unskilled worker can't make $15 an hour.

"If somebody says, 'I'm making minimum wage, I can't feed my five children,' well, I didn't have five children," she says. "There are choices in life."

Bloomgarden notes that she has always looked out for her employees. When the health care law took effect, she says she reminded staffers four times to sign up for coverage. But she can only pay what the business can afford. And she believes she can't force customers to spend more.

"We're charging $13 for a sandwich," she says. "Am I going to get $20 for a sandwich?"

A lot of it, she says, comes down to people's expectations.

"In the olden days you didn't have a TV. And if you had a TV, there was one TV and everyone sat around and watched the one TV," she says. "Now you have people who are minimum-wage people, and they probably have a bigger TV than the average house had even 10 years ago. And they'll pull out their cellphone to tell you a number to call them."

Bloomgarden agreed to allow several of her lower-wage employees to be interviewed.

Erick Gonsalez, 33, works as a deli man. He makes $11.50 an hour, or about $23,000 a year. He sends money to his sister in Zacatecas, Mexico.

"I think it will be a good idea," he says of a minimum-wage hike. "Sometimes the rent goes up and we need to get more money. And then the cable goes up and we need to pay more money."

Gonsalez lives with a roommate in a studio apartment. He says he lives comfortably. And while he would like more money, he wants to earn it.

"I don't like to be, like, 'Oh, can I get a raise?'" he says. "I like to do my job. I want them to see it, to see that I deserve a raise."

In the mornings, he takes adult ed classes. Eventually he hopes to work in computers or nursing.

"I'm not trying to spend the rest of my life here," he says.

Juan Lafarga, 46, has been working at Canter's for 23 years. He is a busboy, and he has always earned minimum wage. It works out to $18,000 a year. He rents a studio apartment on Normandie Avenue for $500 a month and takes the bus to work. Every couple of weeks, he sends $100 to $150 to family in Sinaloa. He is fully in favor of an increase.

"It sounds wonderful!" he says, in Spanish. "The money I'm making now is OK but it's not enough. If they give me a raise I can save a little bit, because right now I can't save anything."

Ricardo Jasso has five kids, ages 6 to 18. He makes $11.50 an hour as a deli man and delivery driver.

He commutes from Lynwood because he likes the job and gets 40 hours of work a week.

"I don't think I'm gonna find another place like this. The owners are very cool people," he says. "Right now it's good, but it's better if they give you some raise. It's better for everybody."

Bloomgarden reminds Jasso that he's overdue for a delivery. She has overheard some of his comments and points out that, even with a wage increase, housing in L.A. would still be unaffordable.

"It's just, 'Gimme more, gimme more, gimme more,'" she says. "The mentality of many people is that no matter what it is, it's not enough."

If the minimum-wage increase goes through, she says, she likely would close Canter's doors at night, at least on the weekdays. She also expects to lay off a substantial chunk of the workforce.

"The busboys would be hit first and hardest," she says. "The servers would pick up a lot of their work."

Skip Bockenfeld, a waiter, did some back-of-the-envelope calculations and figures Canter's owners will have to lay off more than 50 people of the 160 who work there in order to keep costs level. He expects that if he's still around, he'll be doing more work.

If the proposed minimum wage increase becomes law, Bestia will switch to a service charge, according to co-owner Bill Chait.
If the proposed minimum wage increase becomes law, Bestia will switch to a service charge, according to co-owner Bill Chait.
Photo by Timothy Norris

"We'll become waiters, bussers, hostesses and bartenders. Nobody's going to be getting good service," he says. "I'm not for this."

Bockenfeld lives in a rented room in West Hills and sends $600 per month to his mother in Las Vegas for trailer rent.

"I'm a poor man," he says. "I can't afford to live in this city."

He wishes civic leaders would focus on affordable housing. And he thinks his co-workers who support a minimum-wage hike aren't thinking through the implications.

"You get a lot of romanticizing going on about that with your lower-skilled people who think, 'Oh finally, I'm going to be able to raise my family on a dishwasher wage,'" he says. "As opposed to, 'I gotta get my ass out of here and learn about how to be a computer programmer or a nurse or an engineer and make six digits a year.' You got a lot of folks that will just become ... 'sloth' is the word I'm looking for."

At a recent City Council meeting, Small Restaurants for Good Wages was encouraged when a couple of the council members suggested that the door is not completely closed on total compensation.

Councilman Gil Cedillo, a labor ally, said the minimum-wage proposal should not be "one size fits all." Councilman Paul Koretz, also very pro-labor, argued that the city should use a "scalpel" in crafting the policy.

The L.A. City Council operates as a mini-legislature, so the opinions of the individual members are less significant than those of the speaker, council president Herb Wesson.

"The people most likely to drive the issue are the mayor and the council president," Koretz admits. "I don't know that it's likely to be me driving this."

Koretz says he'll be focused on another element of the law that is still up for grabs. Some workers are paid less than the minimum wage now, which is illegal — and if the wage goes up, the ranks of illegal underpaid workers are likely to increase. San Francisco and Seattle have established city enforcement agencies that can investigate claims and levy judgments against employers who underpay their workers. Labor leaders have made this a key part of their campaign, calling on the city to approve "$15 and enforcement."

Currently the investigation and punishment of wage theft is not the city's responsibility; those tasks fall largely to the state labor commissioner. Activists say the state agency does not have enough funding to adequately enforce the issue.

Maria Guadalupe Vazquez Garcia took her wage-theft claims to the state commissioner last year. Garcia worked for 11 years at Art's Wings & Things, first on Crenshaw Boulevard in Leimert Park and later at a franchise in Inglewood.

Garcia worked seven days a week, cooking, cleaning and clearing tables. She says her boss, Arthur Boone, never paid her overtime, even though she often worked 80-hour weeks.

"He was too strict," Garcia says, in Spanish. "If we didn't clean something well, he would pick up things and throw them on the ground."

Garcia worked to support her six children. She says she couldn't get days off to go to therapy appointments with her daughter. The final straw came when Boone tried to cut her pay by $1 an hour. She quit, and with several other employees pursued a claim through the labor commissioner.

Last fall the state ordered Boone to pay her $84,832. So far, she has not collected a penny. Boone did not participate in the commission proceedings. A person who answered the phone at Art's Wings & Things said Boone is no longer there and the business is now under "corporate ownership."

"There are a lot of people who come to this country without knowing anything," Garcia says, "and we go into one place to work and we experience a lot of abuses like this."

Asked about the minimum-wage increase, she says, "It would be really, really good for the community."

Danielle Lang, the attorney who handled Garcia's case through the nonprofit group Bet Tzedek, says that a total-compensation ordinance would make it harder to pursue such cases because in many industries, tips are not well documented.

She also pointed to San Francisco as a model of a city that's serious about enforcing the law.

"The cities that are on the vanguard of ensuring a higher minimum wage are also paying attention to wage-theft enforcement," Lang says. "We don't want Los Angeles —- the wage-theft capital of the world — being willing to raise the minimum wage without doing anything about enforcement. It would send a message about how seriously we take that promise to all the workers in Los Angeles."

Michael Reich, a UC Berkeley researcher who helped craft Garcetti's plan, has called for an enforcement agency with at least 25 investigators.

"Obviously if you are going to raise the wage in the way they're talking about, you have to beef up that enforcement agency bureau in a meaningful way," says Rusty Hicks, executive secretary-treasurer of the L.A. County Federation of Labor.

This is a point on which labor activists and most restaurant owners agree. Law-abiding restaurants are in favor of the city cracking down on their less scrupulous competitors.

But Garcetti's budget for the coming fiscal year does not include funding for such an agency. Money is tight, as always. And the city is locked in a tense contract negotiation with its civilian workers, who are not likely to welcome a new bureaucracy if it's at the expense of an existing one.

"I don't want to hold up raising the minimum wage until there is a robust enforcement mechanism in place," Garcetti said at the press conference. Right now, he said, "We don't have resources."


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