White Castle could soon be forced to increase prices by 50 percent in response to New York raising its statewide minimum wage to $15 an hour, the company announced Monday.
New York became the second state April 4 to raise its minimum wages to $15 an hour. California beat New York to the announcement by just a couple hours. White Castle Vice President Jamie Richardson warned the increase could leave the fast-food chain with no choice but to increase prices and hire far less workers just to overcome the added cost of labor.
“There is a better way to get people out of poverty than hiking the minimum wage.” Richardson said to National Review Online. “We think we’d need to increase menu prices by something like 50 percent. It’s not something we’ve done before. It’d be catastrophic.”
White Castle opened its first location in 1921 and has since become an iconic fast-food establishment. The restaurant was even the subject of the 2004 hit movie Harold & Kumar Go to White Castle. The Kansas-born establishment opened its second location in New York, which has since expanded to numerous locations throughout the state.
“Some people think that we can just raise menu prices to cover the increased labor costs,” Richardson said. “But it’s a ripple effect. We’re not the only place to eat, we compete with other restaurants.”
Those in support of the policy say it could help address income inequality, but critics aren’t so sure. While people may end up earning more money employers may also cutback on their workforce or increase prices to overcome the added cost of labor. Richardson adds the policy is particularly troublesome for young workers who depend on low-wage jobs to launch their later careers.
“We know that Millennials aren’t thinking they’ll stay at White Castle for 30 years,” Richardson said. “We view it as the start of the path. That’s true if you stay at White Castle or move on to something else. The skills you gain, you can take to the next role: learning how to apply for and get a job, learning how to show up, learning a work ethic, making a paycheck, and having fun.”
Richardson also notes it could push White Castle and other businesses to automate their services with computers. Low-profit businesses like restaurants usually have more difficultly absorbing the increased labor cost from a higher minimum wage. Richardson notes that White Castle aims for a net profit between 1 and 2 percent.
The union-backed Fight for $15 movement among others have helped make the $15 minimum wage an important political issue. It has utilized rallies and media campaign to push the increase. Advocates have also seen numerous state-level victories starting with Seattle in June 2014.
The nonpartisan Congressional Budget Office has found both positive and negative results from increasing the minimum wage. It found any increase in the minimum wage will likely result in at least some job loss. The University of California, Berkeley found in a recent study that having less people in poverty outweighs the potential job loss.
New York will gradually increase its minimum wage from $9.00 an hour to $15 by 2022. Minimum wage increase tend to be phased in overtime to help mitigate the financial stress it puts on businesses.
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