How Will an Election Year Impact the Restaurant Industry?
While hair care products and teeth whitening’s might see a jump in sales as politicians prepare for face time with America, the rest of the post-recession economy is still lackluster. Our sluggish economy is going to be the highlight of many debates throughout the election year. Here are a few economic topics that will be affecting the restaurant industry.
Minimum Wage Increases
In 2009 the federal minimum wage increased to $7.25, but for some states, that wasn’t enough. On January 1st, eight states saw their minimum wages go up. In Washington, 70 percent of businesses said they would have to cut hours or shifts and reduce employees to compensate for the increased wages. The Center for American Progress argues that higher minimum wages lower turnover, create more experienced and productive workers and flush more money into the economy. Restaurant owners should keep an eye on their home state politics during election years as the debate over minimum wage is sure to pop up.
The American Jobs Act
President Obama’s $447-billion American Jobs Act will continue to draw attention through the election year. A small part of the bill has already been passed that offers tax credits to restaurant owners who hire U.S. veterans:
- $2,400 credit for hiring a veteran that has been unemployed for at least one month.
- $5,600 credit for hiring any veteran that has been unemployed for six months or more.
- $9,000 for hiring a disabled veteran that has been unemployed for six months.
This is just a small part of the bill that can be taken advantage of now. Other aspects of the bill, if passed, that could impact the restaurant industry include:
- Cutting payroll taxes in half for 98 percent of businesses.
- Expanding small business administration backed loan limits.
- A $4,000 tax credit for employers who hire long-term unemployed workers.
The true impact of these changes is still up for debate, and the GOP are the ones that are going to be doing that debating. They have issued their own bill, the Jobs Through Growth Act, which seeks to create a simplified tax system that will help restaurants hold on to more of their profits. Both bills could greatly affect the restaurant industry and will continue to come into focus as the year progresses.
Business Meal Deductions
There was once a time when business meals were fully deductible. In 1986 the business meal deduction was dropped to 80 percent, and then in 1992 it was dropped to 50 percent. Rep. Shelley Berkley (D-Nev.) introduced H.R. 468, a bill that proposes to raise the business meal deduction back up to 80 percent. The National Restaurant Association estimates that the bill would increase business meal sales by $7 billion and add 244,000 jobs. Turning restaurants into conference rooms could be a great success for the restaurant industry, as long as they don’t turn off the game to give a power-point presentation.
Immigration reform always grabs a lot of attention during election years. It’s a polarizing issue that’s backed by some staggering statistics.
- There are about 38 million immigrants in the United States1.
- Immigrants make up 23 percent of the service industry1.
- 12 million immigrants are here illegally1.
- 8.3 million undocumented immigrants are currently a part of our workforce as of 20081.
- 700,000 undocumented workers currently work in the restaurant industry2.
The main issue facing the restaurant industry is the inconsistency of immigration reform. The lack of reform on a federal level has led to state and local governments taking matters into their own hands, creating an increasingly complex and fragmented approach to immigration.
Alabama, Arizona, Mississippi, and South Carolina have all passed bills that require the mandatory use of E-Verify for all restaurant owners. E-Verify is a federal worker-screening program that requires employers to collect documentation from new hires and submit it online to E-Verify where it is cross-referenced with the Social Security Administration database. The process can be time consuming, and in some cases is proving to be costly to restaurant operators.
Last year, Chipotle was the target of a federal raid that resulted in the Denver-based company having to let go of over 500 undocumented workers in Minnesota. Now that Chipotle is part of a federal worker-screening program their turnover rate has climbed to more than 125 percent3.
The best thing to come out of election years is political awareness. Understanding the issues facing the restaurant industry will better equip you to adapt and succeed in the coming years.
1 National Conference of State Legislatures. “Snapshot of U.S. Immigration 2008.” Accessed January 19, 2012. http://www.ncsl.org/issues-research/immigration/us-immigration-snapshot-2008.aspx#12.
2 Lowell, Lindsey B. and Suro, Roberto. “The Numbers Behind The U.S.-Mexico Migration Talks: How Many Undocumented.” March 21, 2002. http://www.pewhispanic.org/2002/03/21/how-many-undocumented/.
3 Jordan, Miriam. “Crackdown turns Chipotle boss into immigration-reform advocate.” The Denver Post, December 20, 2011. http://www.denverpost.com/business/ci_19582142?source=most_viewed.
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