Minimum-wage increase, while a blessing for workers, proves a challenge for small businesses during high inflation
Connecticut’s minimum wage increased from $13 to $14 an hour this month, offering respite from record-high inflation for low-wage workers but adding another challenge to small businesses struggling in the post-COVID economy.
Approximately 200,000 workers will see their wages rise as a result of the July 1 increase, according to the Connecticut Department of Labor. Full-time minimum-wage earners can expect an extra $2,080 in their paychecks this year.
Roger Senserrich, the communications director of the Connecticut Working Families Party, said that for the majority of minimum-wage workers, many of whom have families to support, the minimum-wage increase will provide more than extra dollars in each paycheck. The higher pay will open opportunities to access better health care and nutritious food, improving livelihoods and helping families make ends meet, he said.
“The vast majority of minimum-wage — or just above minimum-wage — workers are not high school kids. The vast majority have families, the vast majority have kids, and they need every dollar that they can make,” Senserrich said.
Scott Dolch, the president and CEO of the Connecticut Restaurant Association, said that the restaurant industry in Connecticut relies largely on the disposable income of the middle class. When the middle class can’t keep up with inflation, businesses suffer from fewer customers in addition to increased business expenses.
“If we can’t alleviate some of these added costs over the next three or four months, or [we reach] a tipping point for disposable income for families, you’re gonna see as many restaurants [close] as we saw close during the pandemic. I think you’re gonna see a lot of others have to bow out just because they can’t pay their bills,” Dolch said.
Dolch said that 73% of Connecticut’s restaurants are independently owned. While these businesses have handled $1 wage increases yearly since the state passed its minimum-wage legislation in 2019, Dolch said this year’s increase places added strain on businesses fielding inflation costs, supply-chain failures and labor shortages.
“They’ve been prepared for this. They knew it was coming … but it’s just another thing that they’re like, ‘OK, this is going to have an effect on my bottom line, this is going to have an effect on whether I could turn a profit,’” Dolch said. “I would say that our owner and operators are working harder over the last, probably, six months than they’ve ever had to work in their lives.”
For “Miss Lulu” of Lulu’s Ice Cream Cafe in Hartford, the minimum-wage increase has left her searching for ways to support her single part-time employee. In the past, Lulu’s employed up to six workers, but Miss Lulu said that’s just not possible in the current economy.
“I’m now looking at my books to see if I can at least support having my current employee that’s working about 30 to 35 hours a week to see if I can even manage that, because I may have to potentially cut her hours,” Miss Lulu said. “I don’t want to close my doors for a day or two just to support the hours. But I gotta look at that and see if I can, because right now I’m still underwater and I’m just managing.”
After a long pandemic, Miss Lulu hoped that this year her seasonal ice cream shop would open for year-round service, but the money is just not there, she said.
“I was looking at COVID decreasing, [saying] the summer’s gonna be good. And then we got inflation and then we got high cost and then we got high gas. So all of that is kind of like COVID all back, you know? It’s not COVID in the sense of the virus, but the impact, the financial impact is still there,” Miss Lulu said.
Her customers are also feeling the impact.
“They’re watching their pockets,” she said. “I’ve had several customers come in and say ‘Oh, it’s too expensive,’ but it’s really not. It’s just too expensive for their pocket right now. And so those treats that were maybe two, three times a week are now once a week … I’m seeing regular customers who were regular come in, not so regularly.”
In an effort to reduce costs, Miss Lulu said that she cut back on marketing and started putting more time into the business herself. Miss Lulu is a single mother and works a full-time job but to cut back on labor costs she started putting in up to 25 hours a week at the ice cream shop.
State Director of the National Federation of Independent Business in Connecticut Andrew Markowski said that he is seeing many more small-business owners make sacrifices.
“They do whatever they can to survive. In some cases that means having to reduce staff or reduce hours,” Markowski said. “For many small business owners, they are putting in more hours in the business themselves and in many cases not taking a paycheck or reducing their own take-home pay for the greater benefit of keeping their business open.”
Markowski said that as all businesses “weather this storm” of inflation, businesses employing entry-level workers and seasonal operations will take the biggest hit from the minimum-wage increase.
“The businesses that are really feeling the pinch from inflation are likewise going to be businesses that will feel a pinch from higher added costs anywhere, whether it’s energy prices in overall inflation or mandated wage increases,” Markowski said.
For Miss Lulu, keeping Lulu’s Ice Cream Cafe open is not about the money, it’s about the impact on the community. Her parlor is the only ice cream shop in the Clay-Arsenal neighborhood, and she sees it as a “beacon” in a community where the people don’t always see a Black woman running her own business.
“As far as I’m concerned, Lulu’s is gonna hold out as long as she can. If I get to a point where it’s just eating into my actual income to support and provide for my family, I have to make a decision. As hard as it may be, I will have to make a decision.”