Wage hike a job killer at Hecky's

Hecky Powell.

Long-time Evanston restaurant owner Hecky Powell says he'll have to lay off three people next week as a result of the minimum wage increase that goes into effect on Saturday.

And Powell says he's thinking about closing his restaurant at lunch time because of the wage hike -- which would mean at least another four layoffs.

Powell, interviewed this noon at his Hecky's Barbecue at 1902 Green Bay Road, says there's a limit to how much he can raise prices -- especially when he faces increasing competition from supermarkets and other chain retailers who've started offering prepared foods.

"Because they do volume, they can be cheaper," Powell says.

And Powell says the type of people the city claims it wants to help most will be the ones hurt most by the wage hike.

Lunchtime isn't the biggest sales time for his business, he says. "The reason I was open at lunch was because I was training a number of people then."

"The city's always talking about giving jobs to help out ex-offenders and all that," he added. "I've been doing that for 33 years, and I haven't gotten a dime from the city for it. I've been using my own resources."

The untrained workers he hires now, at $8.75 an hour, 50-cents over the current minimum wage, aren't worth even that, Powell says, until after they've been trained -- a process he says can take as long as three to six months.

"I was telling Larry" Suffredin, the county commissioner who sponsored the minimum wage increase "why can't you do this. Let me bring a person in at  $8.75, and then after three or six month, bump them up to a higher scale," Powell said. "They should have to earn it."

"When I send these people I'm going to have to lay off to Larry's house and to [Mayor Steve] Hagerty's house, and have them ask for jobs, we'll see what they do for them," he added.

Powell said that for most, the restaurant industry can't provide what would really be a living wage. That's why he says he can give workers a start and teach them some basic job skills -- but after a couple of years they need to get out and get more training to move into a better career.

"You've got all those people packing that hall" at the Civic Center this morning, Powell said. "They're saying this is for the minority community -- but it's 99 percent white liberals over there. They're retired -- so they could be there. If you're going to have it on a Friday morning -- every small business guy is working."

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Comments

Go Hecky!

Well said Hecky. I'm with you 

Hecky's Got It Right!

After running a variety of Illinois small businesses for 40+ years, I finally threw in the towel and moved to Lee County, Florida, for precisely the reasons Hecky states. Imagine my surprise when I found that this county's largest source of population growth is Cook County, Illinois. So, Hecky, if you want be located in area with pleasant weather, no personal income tax, and extremely low property taxes, c'mon down! You'll find there's a need here for good BBQ, and plenty of folks who'd appreciate your effort. We also have the most progressive African-American community in the United States. A new Hecky's would be most welcome in Fort Myers-Sanibel-Cape Coral.

Someone do the math for me

Going from $8.75 to $10 an hour is an extra $50 a week if someone works 40 hours / week. To make up for that $50 / week ($150 for 3 people), he's laying off 3 people whose weekly cost at $8.75 is $1050 a week.

Of course, this assumes 40 hours a week. I'd be surprised if these folks all work over 30 hours a week. Over 52 weeks at 30 hours a week, that wage hike will cost Hecky $5850 / year. A small price to pay for such a well known and successful business.

Anyway, Hecky's is crazy popular, and I can't imagine he's really competing with the Whole Foods. Plus, that place is so small and un-updated, I can't imagine how he can't afford this.

Thank god unions won us the minimum wage. Yes, Hecky, you have to treat your "worth"[less] employees like they have a right to wages that keep pace with inflation.

If anything, this makes me want to go there less.

Seattle Study everyone keeps referencing has the same error

It's also important to read the abstract of the Seattle study that is being held up as a reason not to raise wages. I'm a little concerned at how numbers are being played with in the survey - for instance, it states that there was a 9% reduction in hours once the $13 wage increase went through.  

Keep in mind that 9% of 40 hours is 3.6 hours, or over a full year of employment would be a decrease of 187 hours - so I'm not sure how they make the leap to an 11 - person employer reducing their staff to 10 people (a reduction in 2,087 hours.)

Also important to note that if you adjust the minimum wage for inflation from when Hecky was probably first employed (let's guess 1968?) the minimum wage of $1.40 at the time had the purchasing power of $10.05 today.  Hecky's employees are getting paid *less* than he would have been paid at their age.

Math error

Hi Michele,

You forgot to multiply the 9 percent reduction in hours by the 10 (or 11) employees.

Do that and you're at either 36 or 40 hours per week of lost work time -- or roughly the equivalent of one full-time employee.

That doesn't necessarily mean the study is accurate, but the math works.

-- Bill

The hypocrisy is appalling

Steve E., are you a business owner? You talk as if Hecky is made of money and can afford the minimum wage hike. 

Every small Evanston business owner should send their laid off employees to the homes of all our elected fat-cat tax-raising politicians. 

What about you,Anon Al?

Al, you challenge Steve about his personal credentials.  How about you.  Are you a small business owner?  How many people do you employ?  Do you pay them a living wage? 

So out of touch

I'm not the one calling Hecky Powell, a successful business owner, a liar.

No, I am not a small business owner although we have looked into it but the business environment in Evanston and Illinois is precarious at best. It's hard enought to start a business especially in the retail or food service industry and make it. It's much harder to do it in Evanston with high taxes and  the minumum wage hike, which now you'd have to compete with Wilmette and likely Skokie businesses because those towns opted out of the wage hike.

Then again, if I were a lawyer/community activist I guess I wouldn't have to worry as much about the minimum wage hike because what paralegal or mitigiation speclialist is going to work for minimum wage?  Folks like Hecky don't rely on goverment pay to earn a living: He has to provide a valuable service and compete in the private food service sector.

The argument for the wage hike is similar to what businesses along the edge of Cook County have been saying. Peeps cross the border into a neighboring county with a lower sales tax to avoid the 10 percent sales tax in Crook County. Don't forget that many Evanstonians like myself make it a habit to purchase liquor and gas outside of Evanston because those products are cheaper since Evanston charges additional taxes on booze and gas. The same applies to the food service and retail industry. We usually eat out in Skokie or Wilmette in part because it's less expensive. Considering the huge tax hike we're getting this month we have to watch our spending. We can't rely on government food vouchers or rent subsidies to help us because we both work.

But some businesses make a living off of government contracts. Right, Betsy? You might have a worthy cause looking out for the poor and indigent but you're really not looking out for the best interests of most of us who make sacrifices each day raising families, working hard and suffering the daily slings and arrows of outrageous fortune on our own without goverment assistance.

I choose the freedom of less government over the shackles of a small band of imposing shadowy government figures that think they always know what's best for us and expect us to pay more and more for their inherently self-indulgent wisdom.

If he has to raise ...

Steve E. ... if he has to raise pay for all his employees, then in your first paragraph, it's not $50 times three people, it's $50 times the number of people in his entire workforce.

a different result.

Math

You're correct. It is said that the new wage will provide minimum wage earners $1000 more a year. Hecky is proving to be another Jimmy Johns, only caring about "his" profits and not the well being of his staff. His over priced menu has lost many local customers. The clientele he servers will pay the increase he needs to continue profiting "himself."

The Math

Uh, yeah, those confused with the math in this thread are missing four very key things.

1. The cost doesn't go up $50 per week, it goes up by $50 per week for ALL minimum wage employees. If there's 10 employees, that's an increase of $500 per week, not $50. Huge difference. Ditto for the Seattle study. You have to consider that the raise goes for all employees, not just one. In most cases, that can explain the biggest chunk of the math discrepancy.

2. In addition to increasing wages, payroll taxes would also increase. Things like Social Security, for one example, are matched by the employer (in addition to the amount deducted in the paycheck). So any matched taxes would increase total costs for the employer as well.

3. When you layoff an employee, there's additional costs, so you don't save the full amount of that employees wages because you cannot provide as many services. For example, in the article, he says he may have to stop doing lunch. That results in lost revenues. More generally, less workers means less revenues due to fewer services and/or the ability to serve less people at once. So that imposes costs, meaning the business doesn't save the full amount of wages.

4. Small businesses already have pretty small profit margins, generally, and specifically for many in the restaurant industry, where competition compels prices to be about as low as the restaurant can handle and stay profitable enough to be worth running. It's more than a simple numbers game. You have to figure out how much you can offer with a given number of employees, what the marginal cost of hiring is (including both explicit and implicit costs), what the marginal revenues of hiring is, and figure out what you can and cannot do from there.

And it's not just the Seattle study that has found this. Minimum wage studies for the past 20 to 30 years have generally found that when minimum wage does have an impact, it results in lower employment among low wage populations. It hurts those it is supposed to help, if it does anything at all.

Minimum Wage

Hecky, I would be happy to pay $1.00 more for a bottle of your BBQ sauce...and pay a little more if you raised the prices for your food to keep your employees. I am sure I am not the only one who wants to keep your business viable and to train and keep your employees and the valuable job educating them that you do (put a "CONTRIBUTIONS HERE FOR JOB EDUCATION" jar at the counter!! :-) Don't forget - my grandson said when his grandpa made homemade ribs (even with your sauce) "Grandpa, I don't want to make you feel bad, but Hecky's Ribs are better!" Sigrid

The problem isn't whether you

The problem isn't whether you would pay an extra $1.  It's whether a few thousand people will pay the extra.  I would guess he knows whether his market can accept a price increase.

Patrons are always free to give

Patrons can always Tip [more] or leave a contribution at the counter if they feel the employees are not making enough.
Not doing so reminds me of Warren Buffet's [who is always saying tax rates are too low and unfair] comment that he does not send extra to the IRS to make up for what he thinks the rates should be even though he could well afford it [out of his $billions]. Apparently he also does not give to the government for educational/charities---he learned private groups spend much more wisely than the government.

I also think of the many uber liberals who call for more taxes and government education/charity but when you ask about extra IRS payments or them giving to charity, say they don't because their taxes pay for them [aka 'enough'].

Can't pay a living wage? problem's your business model

Seven people work with my business.  When our relationships started, I paid each of them more than the market rate for similar positions.  I try hard to find opportunities for them to grow professionally (although they usually teach me more than I teach them).  I try to value their personal and professional satisfaction as well as the monetary value they bring to me.  I don't know whether I've succeeded---you'd have to ask the folks I work with.  But I do know that no one has ever quit.  And each person I work with has become more skilled, more committed, and more fabulous over the years we've worked together.  

Over the past few years, my business has grown stronger and more successful.  I'd like to think that that is partly because I value the people I work with for their humanity and potential as well as for the immediate monetary gain I can get from them.

Goodness...that is a

Goodness...that is a beautifully self-indulgent post.

Different industries have different sensitivities to overhead. Hecky doesn't have the liberty of inventing a new business model independent of a consideration of how his business will compete against everyone else in his space of the market.

Aren't you sweet?

Aren't you sweet.  When your only employees are lawyers, paralegals, and legal assistants, you don't have to worry about the minimum wage. Thank you for offering to give away other people's money.

You're not in restaurants.

You're not in restaurants. Apples and oranges when we're talking entry-level positions for unskilled workers, which is what the fast food/quick-service restaurant industry provides. As Hecky predicts, this is going to bite well-meaning people in in the behind. Restaurants will move to automated ordering (as McDonald's has begun to do) and these business will be employing fewer people, not more, and employing the higher-skilled versus the lower. 

Putting Together Several Parts to Accomplish the Goal

There’s no problem with Hecky's business model, nor his successful track record of launching young people into the work world.   And, there’s no problem with ensuring that adults working full-time earn enough to feed their families without relying on government handouts.  The problem, or opportunity, lies in adjusting the wage hike to accommodate  generous, inspired entrepreneurs like Hecky who create an “on ramp” for unskilled, inexperienced youth. We need to focus on our significant the common ground, and move forward.

Minimum wage, monetary justice, food businesses

A.  MONETARY JUSTICE.  While I support the Cook County minimum wage law primarily on principle, it’s important for Americans to understand that our entire operating system — money + banking — is manipulated at its core operation: the creation of U.S. money.   No minimum wage law is going to be very effective until the U.S. government takes back its sovereign right to create U.S. money (i.e., the dollar).  This is why I work primarily on monetary justice and support major monetary reform, such as former Cong. Dennis Kucinich’s NEED Act, which puts the Federal Reserve Bank under complete and direct control of the U.S. Treasury.   Anyone interested in learning more about money and monetary reform might be interested in attending the Sept. 2017 annual conference of the American Monetary Institute, in downtown Chicago.   And anyone wanting to talk to Cong. Jan Schakowsky about taking up sponsorship of the NEED Act, let me know.  I’d be happy to organize a meeting.

There are more and more academics, independent scholars, and journalists  looking into debt, debt cancellation (Jubilee), public banking, credit unions, local currencies.   Grassroots activists like me are doing some wonderful learning and trying to come up with local pilot projects, mainstream messaging, etc.  My participatory budgeting petition to allocate the Evanston-NU Good Neighbor Fund is one such project.

B.  FOOD BUSINESSES.  Per comments about Hecky’s comments, it’s important to make three major distinctions when talking about food-and-farm businesses vs. most other businesses:

1.  A restaurant, diversified farm, grocery store, food wholesaler, etc., deals constantly and directly in two things that shoe stores, IT companies, and car dealerships don’t:  (a) highly perishable inventory, and (b) health and safety of customers.

2.  Food-and-farm businesses in the U.S. and now globally operate on an economic playing field that not only isn’t level in any direction but is full of discontinuities, contradictions, and frequent fluctuations.

3.  Food-and-farm businesses are directly affected by the weather.

So, even though I always want to see the income tax returns of any business owner who says they can’t pay living wages, I’m willing to give a temporary pass to most small food-and-farm operations  -- until we can get the entire operating system level, true, and fair -- for all (including non-humans).
 

Minimum wage Heckys layoffs

Raise your prices. All citizens committed to a minimum standard of living must share the burden. Or maybe you don't make such a profit. There are choices

Is there no place for entry

Is there no place for entry-level positions for unskilled workers? No place for jobs for high schoolers to learn the value of a dollar and to be paid commensurate with their experience level? No wonder college graduates feel so entitled...

Have you even read the Cook County ordinance?

Have you even read the Cook County Ordinance?

It doesn't apply to employees under 18 years old, and it doesn't apply if the employee is still in the first 90 days (a "training period" according to the ordinance) of their employment.

At least learn what you're arguing about.

People today aren't willing

People today aren't willing to pay for antything.  What makes everyone believe that the kind folks of Evanston would just gladly pay extra to support these low wage earners?  The study released a few months ago showed most people weren't willing to give any money to help stop climate change yet we believe this is the cause that will rally the troops?  Restaurants already operate on slim margins, it is one of the main reasons that most go out of business.  

debt cancellation (Jubilee)

So I guess you are going to give back your house and land to the Indian tribes who had lived there ?

And you, who I assume are rich, will payoff the college and others, debts even if they majored in Early American pottery of 'gay' tribes ?

There are still a few countries who have that motto "To each according to their need, from each according to their ability"--though one such major country(s) [USSR] gave up on that in the 1990s.

Harvard study shows wage hike causes low end restaurants to shut

Hecky is right.  This minimum wage increase will probably not effect the higher end restaurants that folks who can protest on a Friday morning will visit.  But according to this 2017  Harvard business school study, it does impact less expensive restaurants.  Once again,  Evanston residents have hearts in the right place, but prove themselves economically illiterate-

  http://www.hbs.edu/faculty/Publication%20Files/MW_Exit_7a89f82f-b2fa-42f2-9a0e-f8a61e95b679.pdf

A Case in Point---Burger King

Remember four or five years how many employees they had per shift and how fast the service was ? Well since then they cut shift staff by 25+%. A Manager said costs were eating them up.
For years the city wanted them to close for a number of hours each night. A Manger said they could not survive in Evanston if they did.
Remember the Chase Cash Station ? They had to remove it to trim costs.
Remember McDonalds ? They said they could not afford to operate in downtown Evanston. Apparently ETHS does provide enough students for the one on Dempster to survive.
Remember KFC---they use to be several in Evanton [Dempster, Chicago Ave] or near [Howard and Western and Greenbay in Wilmette]. Remember Browns Chicken ? Remember Sherman Ave. Cafe ? Remember hours Golden Olympia use to have ?
Of course some would say that it is good they are gone. But beside those who liked them---they had jobs esp. for 18-21+ not going to college or such.

Red herrings?

What I see here is a list of businesses whose products became so lousy that I and many others simply stopped walking in the doors.  Then KFC on Dempster would have been an exception (food quality stayed high) except for the fact that they were so poorly managed that I just gave up on trying to get my orders filled.  For the Olympia and Sherman ave. they weren't covered by minimum wage laws for 90% of their staff.  

The really hilarious part is the comment about the cash machine - are you actually trying to imply that a cash machine was being paid too high of a wage?  Ho ho ho!  I guess we'll just have to put that one in the "Management failures" collumn ( on the top I think...)