Battered by the pandemic and the collapse of exhibition windows, the movie theater industry now has one more thing to worry about: a hike in the minimum wage.
The industry relies heavily on part-time workers who make at or near the local minimum rate. Cinema operators say that an increase to $15 an hour nationwide — which Democrats in Congress are pushing for — would make it much harder to turn a profit.
“That would kill us,” said Byron Berkley, owner of Foothills Entertainment in Kilgore, Tex., where workers make $8 an hour. “We couldn’t justify raising our admission prices and concession prices to compensate for that kind of increase and still expect people to patronize the business. It would be disastrous.”
Congressional Democrats want to raise the federal minimum from $7.25 an hour to $15 by 2025. Their plan would also phase out the minimum wage for tipped workers — currently $2.13 an hour — which would impact restaurants and theaters that offer food service. Sen. Bernie Sanders is pushing to include the increase in the $1.9 trillion COVID rescue package, though President Biden has said it likely will not survive in the final bill.
Even so, a hike in the federal minimum remains at the top of the Democrats’ agenda. The federal minimum has not been increased since 2009, and supporters see it as a broadly popular way to help the poorest workers and improve the quality of their lives. Several states are already on track to reach a $15 minimum over the next few years, including California, Illinois, New York and Florida.
Many other states are also pursuing incremental increases. In New Mexico, the statewide minimum went up in January to $10.50. Russell Allen, president of Allen Theatres in Las Cruces, has not had to pay that rate yet — his theaters are still closed under state COVID mandates. He said that wage increases will heighten competition for low-skilled jobs, which typically go to teenagers.
“I think it’s a real disservice to the young, unskilled employee when we start pricing them out of the market,” Allen said. “We’ve hired 16 year-old kids that don’t know what a broom is, much less how to use it.”
The theater industry’s chief lobbying group, the National Association of Theatre Owners, has not taken a position on the federal minimum wage increase. But in the past, the organization has been adamantly opposed. In 2014, NATO opposed a plan to raise the federal minimum to $10.10 an hour, noting that theater workers tend to be in their first jobs.
“While cinema owners and operators laud efforts to improve the standard of living for all Americans, NATO believes that applying a universal wage increase to economically disparate regions would stifle both the nation’s economic growth and employment prospects for first-time workers,” the organization said.
The organization also warned that the increase would force theaters to raise prices and cut staffing levels.
The larger chains — Cinemark, AMC and Regal Cinemas — are in a better position than independent theaters to absorb higher costs, said Kendrick Macdowell, former general counsel of the Independent Cinema Alliance.
“The big circuits have larger margins, and buying power that enables them to keep costs to a minimum,” Macdowell said. “The independents are operating on such a slim margin.”
The big chains regularly warn investors that higher minimum wages would lead to higher labor costs. In 2018, Cinemark advised investors that that its labor costs had increased by $17 million in one year due to increases in local minimum wages, and because it needed more staff to handle upgraded food and beverage services.
A nationwide increase could prompt some theaters to move toward greater automation of ticketing and concessions, said Mark O’Meara, owner of the University Mall Theatre in Fairfax, Va.
Virginia currently adheres to the $7.25 federal minimum, but that is set to increase beginning in May. O’Meara hopes that any additional increase from the federal government will be spread out over time.
“I’m conflicted,” O’Meara said. “I don’t want people living on $7 an hour. On the other hand, if I have a more than doubling of my payroll in two or three years, that’s inflationary.”
He said he would likely raise prices in response. But theaters are constrained in how high they can push prices, given the explosion of streaming services and shrinking theatrical windows, which make it more and more appealing for movie lovers to stay home.
“We’re kind of caught in a vise here between external factors we have no control over,” Berkley said.
Before the pandemic, Berkley’s company operated four theaters. Three of them are now closed — probably permanently — leaving only the 4-Star Cinema in Kilgore still in business. He said almost all of his employees are high school or college-age kids.
“None of them support anybody other than themselves,” he said. “The money they do make is for gas for their car and whatever entertainment they have. When we talk about a living wage, there’s nothing wrong with that. I don’t disagree with that philosophy. But when you come to businesses like this, it doesn’t make any sense.”