Businesses brace for minimum wage increase

With the state minimum wage rising to $15 per hour Jan. 1, completing its steady climb from $9.25 in 2021, Mike Yilmaz, the owner of a Lewes diner, said he has no choice but to pass the increased cost on to his customers.

“It’s going to make us have to raise prices,” said Yilmaz, who has owned Lewes Diner and Family Restaurant for 10 years. “When you raise prices, you’re going to lose some business.”

“I think its an issue for anyone who hasn’t already done it,” said Carol Everhart, president and CEO of the Rehoboth Beach-Dewey Beach Chamber of Commerce.

“It’s going to hurt a lot of businesses,” Yilmaz said, sitting at the bar in the dining room after the morning rush. “All your vendors are going to raise prices. They all have employees.”

He expects many costs will increase, including ingredients for making meals and other things needed to run his diner.

But Yilmaz said he believes his customers will understand his predicament, as the burden of a struggling economy in recent years and the long business slump during the COVID-19 pandemic affect so many people.

The minimum wage increases came at a time when inflation was driving up prices for people and businesses, Yilmaz said. Those financial burdens left people with less money to eat at restaurants and make some other purchases, and fewer customers meant less revenue to pay wages and other rising expenses. 

He said he was able to maintain staffing at the restaurant, which has eight to 10 employees, with more people working during the summer. Yilmaz said he plans to create more jobs soon when he opens an indoor sports and trampoline park in Millsboro on Route 24, called Game On Sports Complex.

Despite the increasing financial burdens, the effect on business is blunted in the beach communities of Sussex County, where tourists flock in the summer, and look to frequent restaurants and shops. But even this advantage has diminished somewhat in recent years, Everhart said, as a growing number of short-term rentals of residences has cut into restaurant business because people who rent houses make some of their own meals. Yilmaz said he has seen this trend, as well.

The increase in the minimum wage will have less of an effect on shops and restaurants in beach communities, where employers have already been paying at least $15 in a tight job market.  

Among them is Nasko Ivanov, co-owner of Critter Beach in Rehoboth Beach, which sells gourmet treats and gifts for pets and the people who love them. The shop has three full-time employees.

“We have to stay competitive,” Ivanov said. “It’s not going to make a difference for me. We’ve been paying that amount and more.”

The company, however, struggled with loss of sales during the COVID-19 pandemic and inflation that increased costs from about 2020-21 until this summer, when costs leveled off, he said.

The minimum wage is increasing from $13.25 per hour this year. The minimum cash wage for tipped employees has remained at $2.23 per hour for years and will not change next year. 

A bill passed in 2021 scheduled annual increases, ending with the one next month.

Exempt from the minimum wage, according to the state Department of Labor, are:   

• Employees in agriculture
• Employees in domestic service in or about private homes
• Employees of the United States government
• Outside commission-paid salespeople
• Bona fide executives, administrators and professionals
• Employees engaged in fishing and fish processing at sea
• Volunteer workers (for educational, religious or nonprofit organizations)
• Junior camp counselors employed by nonprofit summer camp programs
• Inmates participating in Department of Correction programs.

Illinois and Rhode Island are also increasing their minimum wage to $15 per hour Jan. 1. Florida, Nebraska and Missouri will follow the next year.

Alaska increases its minimum wage to $13 on July 1; $14 in July 2026; and $15 on July 1, 2027.

The states with the highest minimum wages in the nation, come Jan. 1, will be: $16.35 in Connecticut; $16.50 in California and New York (New York City, Long Island and Westchester County and $15 elsewhere); and $16.66 in Washington.

Alabama, Louisiana, Mississippi, South Carolina and Tennessee have no minimum wage, but the federal minimum wage of $7.25 per hour applies. The federal wage has not increased since 2009, when it rose from $6.55 per hour. 

Tipped wage minimums vary greatly by state, according to Economic Policy Institute figures updated Nov. 26. Washington has the highest at $16.28 per hour, as it is among seven states that match the state’s non-tipped minimum wage. Sixteen states have no minimum tipped wage, but the federal minimum of $2.13 per hour applies. 

Even with Delaware’s Jan. 1 increase, the minimum wage of $15 falls below the living wage for Sussex County, calculated by Massachusetts Institute of Technology at $21.13 per hour for a single adult. The figure – based on 2,080 hours worked per year – changes with additional adults and children in a household. A living wage is the income necessary to meet minimum living standards in a community.

Yilmaz said he understands the financial situation of employers, employees and customers who all struggle with expenses, such as rent and gas prices. 

“You just try to survive as best you can,” he said, predicting some mom-and-pop businesses will close due to increasing financial struggles.