A $15 Minimum Wage in Craft Beer

An Argument for the Craft Beer Industry

by John Nelson

Source: https://craftbeeraustin.com/in-the-weeds-and-oasis-texas-brewing-release-collaboration-pale-ale/

Oh, the 2021 American news cycle: Vaccines, lingering election discourse, inhumanity at our southern border, seemingly routine and tabloid-ish videos of anti-maskers, and on and on. The 2021 brewery news cycle, like most industries, has the pandemic at the forefront too with continually turning stories of taproom restrictions easing up, to-go sales, CO₂ shortages, can shortages, seltzers, hops, and plenty more.

Amidst the sigh of relief coming from declining Covid deaths was another positive story; a $15 an hour minimum wage gaining more recognition and support among the American public. While the increase did not materialize in the most recent stimulus bill, the media coverage surrounding the issue has nonetheless got Americans thinking about livable wages in the world’s richest country. And, though no federal minimum wage legislation passed, it is crucial that we don’t let this dire issue slip through the fingers of American politicians, and that workers are repeatedly reminded what is at stake.

The effects of a $15 an hour minimum wage obviously vary considerably from industry to industry, and outcomes could range from extreme to perhaps unnoticeable. All industries would benefit to indulge a hypothetical increase, asking ‘How would this affect us?’ And, so I ask: How does a $15 minimum wage affect the craft brewing industry?

Before that can even begin to be answered though, a quick breakdown of the industry is certainly in order. And, for that, let’s trust in the always appreciated research and statistics from the experts at the Brewers Association (BA).

Source: https://www.brewersassociation.org/statistics-and-data/national-beer-stats/

When assessing ‘craft’ beer, the BA segments ‘craft’ into four main business models: “Regional breweries”, “microbreweries”, “taproom breweries”, and “brewpubs” (“contract breweries” and “alternating proprietors” make up a smaller percentage) (Brewers Association).

Put simply, the differences between the models are as follows (with quotations from the BA):

Microbrewery: Produces a small amount of beer (compared to overall US craft beer production) and “sells 75% or more of its beer off-site.”
Brewpub: “A restaurant-brewery that sells 25 percent or more of its beer on-site and operates significant food services.”
Taproom Brewery: “A professional brewery that sells 25 percent or more of its beer on-site and does not operate significant food services.”
Regional Brewery: Produces just above the ‘small’ amount of beer, or significantly more: Producers like Boston Beer Company, Yuengling Brewery, or Sierra Nevada Brewing Company would be examples of ‘large’ regional craft breweries.

For more specific information, find the BA’s “Craft Beer Industry Market Segments” here:

https://www.brewersassociation.org/statistics-and-data/craft-beer-industry-market-segments/#:~:text=Microbrewery,of%20its%20beer%20off%2Dsite.

Okay, so why is this important? Well, with differing models comes different employee roles, and thus varying wages. For instance, a regional brewery likely has a large number of production workers (brewers, packagers, warehouse personnel, etc.), a marketing team, an accounting department, logistics, managerial staff, and on and on. A brewpub, on the other hand, may have just one or two brewers, and an overwhelming amount of kitchen staff, servers, and bartenders.

With that in mind, and speaking with some industry experience, I would venture to guess that most positions at regional breweries pay at or above $15 an hour, with perhaps some exceptions being bartending or various production-based roles. So, a hypothetical $15 an hour increase would likely affect microbrewery, brewpub, and taproom models significantly more, where service and production positions under $15 an hour, are more common. Before we continue playing out this hypothetical increase though, let’s put a bookmark there, and first address why the issue is important.

Historical Increases

Introduction of a minimum wage dates back to 1912, with certain states enacting various minimums. A federal minimum wage however, took decades longer to implement, when it was brought to the forefront as a component of ‘The New Deal’, known as the ‘Fair Labor Standards Act’ in 1938.

Source: https://www.statista.com/chart/18728/history-of-minimum-wage-in-the-united-states/

The orange line in the graph above depicts the actual amount of implemented minimum wages. You’ll notice a recent orange ‘flat lining’ of the minimum wage from 2009 to now; subsequently showing the longest period the minimum wage has not been increased since its inception. The blue line ‘2019 dollars’ takes into account inflation, which paints a clearer picture of the ‘real value’ of the federal minimum wage for a specific year (for instance, in 1968 the minimum wage was worth almost $12 an hour in ‘2019 dollars’).

Effect on Race and Poverty

The ‘Fair Labor Standards Act’ (FLA) in 1938 sought to improve wages for many working Americans, but it inevitably excluded significant portions of the population. Referring to the 1938 FLA passage, authors for the Washington Center for Equitable Growth (WCEG) write that “congressional compromises over the federal minimum wage excluded male and female workers in industries in the South that were disproportionately Black. Thus, despite Progressive Era and New Deal legislation intended to improve the conditions of work, Black workers, and Black women in particular, were largely left out.” (Kate Bahn, et al., WCEG).

Initial and prolonged exclusion of a minimum wage for much of the African American workforce, is a prime example of systematic racism, of which we can still witness long-term effects today. It was not until 1974 that FLA expansion legislation fully included all predominantly African American industries. As you can imagine, before such legislation passed the racial income divide between white workers and African Americans was quite dramatic. And, racial disparities in wages, housing, and prison incarcerations all contributed to higher incidences of underrepresented communities living in poverty.

Source: https://www.census.gov/library/stories/2020/09/poverty-rates-for-blacks-and-hispanics-reached-historic-lows-in-2019.html

Source: https://www.epi.org/blog/workers-of-color-are-far-more-likely-to-be-paid-poverty-level-wages-than-white-workers/

Regarding minimum wage correlation and poverty: “Six of the 10 states with the highest poverty rates use the federal minimum wage ($7.25) and two have a minimum wage of $9 or less.” (Kimberly Amadeo, The Balance). It is indisputable that a $15 an hour minimum wage would bring a large number of Americans out of poverty. Numbers range in estimation, but the Congressional Budget Office (CBO) estimates that this specific minimum wage increase could bring 900,000 people out of poverty. (‘The Budgetary Effects of the Raise the Wage Act of 2021’, Congressional Budget Office).

“Raising the minimum wage would turn back the declining real value of the minimum wage, reduce racial wage gaps as long as Black and Latinx workers are more likely to be low-wage workers, and reduce the higher likelihood of poverty for Black and Latinx families.” (Kate Bahn, et al., WCEG).

Effect on Craft: Tipped Wages

After seeing that important historical and racial context of the minimum wage, let’s take that bookmark out, and now look at how a $15 an hour minimum wage could affect craft beer. As mentioned early, we can likely assume that a wage increase would affect brewpubs, taprooms, and microbreweries the most, as these models often incorporate service and some production positions with wages under $15 an hour. In fact, many service positions fall into the ‘tipped minimum wage’ category.

The current federal tipped minimum wage is at $2.13, which assumes that workers will make at least $5.12 extra an hour in tips, to total the normal federal minimum wage of $7.25 an hour. Bartenders and servers are commonly hired with a tipped wage structure. However, under the proposed ‘Raise the Wage Act of 2021’ the federal tipped minimum wage would gradually be increased until eventually being eliminated.

Just as states using the federal minimum wage (or slightly above) have a higher prevalence of poverty; “A recent study from the Center for American Progress found that workers who are paid the $2.13 federal tipped minimum wage are more likely to live in poverty than tipped workers in states that have eliminated the subminimum wage for such workers.” (Julia Rock and Andrea Perez, Jacobin).

Source: https://edlabor.house.gov/imo/media/doc/2021-01-26%20Raise%20the%20Wage%20Act%20Fact%20Sheet.pdf

What would elimination of a tipped minimum wage mean for servers and bartenders at breweries? Well, at first glance, many would view these positions to be significantly higher wage earners with a minimum of $15 an hour, plus tips. Indeed, even Ray Blanchette, CEO of the well-known restaurant chain TGI Friday, chimed in with his skepticism regarding this policy change and its effects on servers and waiters: “If the cooks are making $15 to $18 an hour and then suddenly the waitresses are making $40 an hour, that doesn’t make any sense to me,” Blanchette said. (Amelia Lucas, CNBC).

Sure, a waiter or waitress could make ‘$40 an hour’ with this change, or the establishment’s tipped structure could simply be adjusted to prevent these large in-house wage discrepancies. Perhaps, Mr. Blanchette is unfamiliar with the practices of ‘tip sharing’ or ‘tip pooling,’ which are actually quite common in the hospitality industry.

‘Tip pooling,’ where tips are strategically split amongst employees, incentivizes all positions (cooks, dishwashers, servers, bar tenders, etc.) to achieve the common goal of providing an excellent product and service. “In my experience, pooled tipping definitely encouraged a more supportive and collaborative atmosphere; I didn’t mind helping someone else with their tables because we were all sharing the tips so it benefited me as well” (Isabelle Hahn, Toast). A system like this provides far more pay stability than the $2.13 minimum in place, where tipped workers are subject to slow seasons, sporadic customer flow, or even global pandemics.

Effect on Craft: The ‘Floor’ Wage

If the lowest paid workers were to see an increase to $15 an hour, it can reasonably be inferred that positions paid at or above this mark may see an increase too. For instance, raising the wage floor to $15 an hour, would likely increase the hiring rate for brewers, which would more appropriately reflect the educational or workplace training needed to work successfully in this position.

Brewers earn $37,553 on average annually, and many work their way up to become a Brewer, or complete 2-year associates programs or achieve 4-year undergraduate degrees before starting their careers. By comparison, Heavy Equipment Operators (think bulldozers, excavators, cranes) typically complete 1-year programs and earn $42,145 on average annually, and CDL drivers earn $47,339 on average annually, often with just 7 weeks of training needed to begin a career (Estimates from Glassdoor).

Effect on Craft: Job Loss and Higher Prices

Critics of the $15 an hour minimum wage are quick to point out the negative effect it may have regarding total job loss. Indeed the 2021 CBO report concluded that an average of 1.4 million positions would be cut. (‘The Budgetary Effects of the Raise the Wage Act of 2021’, Congressional Budget Office).

It’s worth noting that there is quite a bit of legitimate pushback from various economists to this ‘1.4 million’ figure reported by the CBO though. Citing a few studies he personally authored, Arindrajit Dube (Professor of Economics at the University of Massachusetts, Amherst, and a Research Associate at the National Bureau of Economic Research) provides data and reasoning from state- and city-conducted research on the issue: In these studies, he shows that these jobs are often not necessarily cut, but instead are improved into slightly higher paying positions: “Understandably, jobs paying below the minimum decreased — since wages rose. But at least as many jobs were added at the new, higher wage — meaning jobs were upgraded, not destroyed. All told, the number of low wage jobs barely budged.” (Arindrajit Dube, Washington Post).

More on those studies’ findings here: https://www.washingtonpost.com/outlook/2021/02/24/minimum-wage-economic-research-job-loss/

As for the brewing industry, it’s possible a decrease in jobs comes with a $15 an hour minimum wage, though this seems unlikely given that low-skill, automatable positions are often discussed as the first jobs cited to be cut (but again these ‘cuts’ are quite speculative at best).

While bartenders or servers may make the low ‘tipped’ wages discussed earlier, they are highly necessary employees, and I don’t see robots providing this very personal service anytime soon (but who knows, this could be the next brewery’s niche). Breweries may seek to cut back on hours for servers or lower-paid production workers to address higher wage and payroll expenses, but this is obviously demand dependent: Should product demand remain or increase, employers will still rely on these workers.

The above points are highlighted further with the recent (2021) Princeton study regarding minimum wage increases at McDonald’s. Researchers for this study found that their evidence “based on highly consistent comparisons across time and space, is in line with the growing literature suggesting that recent minimum wage increases did not affect employment in the non-tradable sector, including restaurants and retail, a sector that employs the majority of minimum wage workers in the US.”

And, regarding using automation or technology to address higher wage and payroll expenses: “We also find that McDonald’s restaurants do not introduce touch-screen ordering, a potential labor-saving technology, in response to increases in labor costs driven by minimum wage hikes” (‘Wages, Minimum Wages, and Price Pass-Through: The Case of McDonald’s Restaurants’, Orley Ashenfelter and Štěpán Jurajda).

So, the most likely option for brewery employers to address paying higher wage costs is to pass that expense on to the consumer, simply by raising menu prices (known as ‘pass-through’ pricing). Which perhaps unsurprisingly was the same conclusion reached in the Princeton study as well, though in the form of Big Macs, not beer.

Price raising is yet another piece of the minimum wage conundrum that often receives heated debate. As you can imagine, the percentage of the wage increase has a tremendous effect on how much menu prices would theoretically increase. Referencing the Princeton study on the McDonald’s Franchise, and a study regarding Seattle’s minimum wage increase researchers saw that “a 10% minimum wage increase led to a 1.4% increase in the price of a Big Mac — an unnoticeable increase. And, a 2019 study found that, two years into implementation, grocery store prices were not affected by Seattle’s minimum wage policy.” (Annie Fadely, Business Insider).

Conclusion

There’s no doubt about it, the wage debate is a tough issue. Regardless of how one feels about a $15 minimum wage, the current $7.25 minimum wage, and the $2.13 tipped wage simply do not cut it: Were these minimums not so destructive toward the nation’s poorest, these rates would be laughable comparative to today’s everyday costs. ‘Scraping by’ (if even that) is all these wages can provide, and we as a country (and the craft brewing industry) should champion higher living standards.

Brewpub, taproom, and microbrewery models would likely be most affected by an increase, especially if many of their employees are currently paid a tipping wage. Let’s remember that the ‘Raise the Wage Act of 2021’ laid out staggered increases though (see chart from earlier). Staggered increases like this provide businesses a chance to consider all options to address increased costs directly associated with wage increases.

And, if ‘pass-through’ pricing, like menu item price increases, is determined to be the only option as a counteractive measure by breweries, then so be it. Past evidence suggests that these menu price increases are minute anyway. Craft beer is already a premium beverage, and if a $5.20 or $6.10 pint price (compared to the classic $5 or a $6 pint) means better wages, and hence better living conditions for nearly 17 million people, then that seems like a no-brainer.

Additionally, the implications the $15 minimum wage has on decreasing racial wage disparities and addressing institutional racism are far too important to ignore: “Civil rights leaders more than half a century ago knew that the minimum wage was a critical tool for addressing racial wage gaps and higher poverty levels by race. The coronavirus recession now brings into stark relief how structural racism still influences economic outcomes of workers and families, elevating calls once again to raise the minimum wage as an important tool for racial justice that will foster broadly shared economic growth in the post-pandemic recovery.” (Kate Bahn, et al., WCEG).

Lastly, in regards to race, we are always asking: How do we increase diversity in craft beer? In a Brewers Association presentation discussing craft brewing consumer demographics in 2014, Bart Watson shared that: “The median consumer is male, roughly 39 years in age, white, has a high education, a relatively high income, and is geographically concentrated.” (Watson, BA). It’s 2021 and the 2014 median consumer has barely changed!

So, how do we move craft beer past this ‘high earning, predominantly white’ crowd? Well, a higher minimum wage is certainly a start in bringing about this much needed change: Not only does it lift Americans out of poverty, decrease the racial wage gap, and provide better living conditions for millions, but it would also afford the impoverished in our societies the far too rare justification to purchase a ‘premium’ product, like craft beer.