A long-overdue hike in the federal minimum wage should be nothing but good news.
But the 40-percent increase to $10.10 per hour on Jan. 1 for all employees on federal contracts is causing problematic ripples among a business sector very close to the hearts — and stomachs — of service members: on-base fast food restaurants.
Because products sold under most exchange service contracts can’t be priced higher than what off-base competitors offer within a three-mile radius, higher wages will have to come completely out of current profits.
Military officials are concerned that will reduce the incentive for restaurants to operate on base — along with cutting the dividends they return to military morale, welfare and recreation programs.
The Labor Department, which just issued its rules on the new minimum wage, dismisses such concerns, contending higher wages will increase efficiency and quality of services, which will “attract more customers and result in increased sales.”
But already, four restaurants on Navy bases that were renegotiating their contracts have decided to shut down instead. Officials fear many more may follow.
The near-term options for defense officials are few.
The more dire — and, frankly, heartless — option would be to renew the Navy’s call for outright exemption to the new higher wage. That would shortchange thousands of employees, many of them military family members.
A slightly less damaging possibility would be to relax the exchange services’ pricing rules. Troops would pay more at the register but maintain the convenience of on-base fast food.
Both options have downsides. But either seems preferable to simply watching fast food restaurants vanish from military bases.
