Gregory Stevens, owner and operator of Pat’s Italian Restaurants, remembers only a few years back when he paid his line cooks $15 an hour.
“And they were happy with that,” he said.
But legislation signed by Gov. Daniel J. McKee this year will boost the state’s minimum wage from $15 an hour to $16 on New Year’s Day, with a hike to $17 coming in 2027. Meanwhile in Connecticut, the minimum wage is set to climb 59 cents to $16.94 an hour on Jan. 1, and in Massachusetts, the rate will remain unchanged at $15.
In Rhode Island, the impending change led the Rhode Island Small Business Development Center to issue advice for local business owners facing potential financial pressures, suggesting that they pinpoint areas of overspending, adjust pricing, invest in point-of-sale systems and inventory management software, and expand into e-commerce.
Business counselor Maggie Longo is keeping busy.
“I personally have been advising engaged clients to protect margins with product mix, not a blanket price hike,” she said. “Lead with higher-margin items, cut underperforming menu items, work with vendors on pricing, tighten portions.”
When Stevens learned that the General Assembly approved wage hikes for 2026 and 2027, he mostly shrugged it off.
Those same line cooks now earn more than $20 an hour. And none of his employees make less than $16 an hour.
But his profits have dropped by 30% in the past three years.
He doesn’t oppose the minimum wage in principle; he recognizes the pressures associated with the cost of living in Rhode Island, where monthly rent for a small apartment in Warwick can be as high as $1,500 or more.
Even so, “I don’t think [the new minimum wage] was meant to be a living wage,” he said.
Christopher Carlozzi, the state director of the National Federation of Independent Business, sees the minimum wage increase as more evidence of the state’s poor reputation.
Economists generally agree that raising the minimum wage increases the earnings and family income of most low-wage workers and can lift some families out of poverty, but it also risks leaving certain low-wage workers jobless as businesses look to cut personnel costs, resulting in a decline in family income.
This can cause a ripple effect up the wage scale, leading to shifts throughout the job market with elevated pay scales. And some of the increase in labor costs is passed to consumers.
“Things don’t happen in silos,” Carlozzi said.
Indeed, the National Bureau of Economic Research found a “clear preponderance” of job losses as the minimum wage rose, particularly affecting teens, young adults and less-educated workers, with 60% of minimum-wage earners being under 25 years old.
“There’s a finite amount of money. At the end of the day, decisions have to be made,” Carlozzi said. “So those at the bottom of the scale are the first to go. This is where we really see people lose out.”
The state’s business climate has prompted Stevens to announce his run for governor.
“We need less lawyers and politicians,” he said.
State Rep. Mary Ann Shallcross Smith, D-Lincoln, supports people earning a living wage, but she said the minimum-wage hike could significantly impact the bottom line of small businesses, such as the child care business she operates. Dr. Day Care Inc. has 19 licensed child care centers with 257 employees. Labor costs make up about 72% of her business budget.
“As a Rhode Island small-business owner for over 53 years, I realize it is crucial for working individuals to earn a living wage,” she said. “They will undoubtedly appreciate the increase in their paychecks.”
But “wage compression” has pushed leadership to reassess pay for all employees, she said. And with approximately 105 employees set to receive a pay increase costing the company about $121,000 more per year, private-pay tuition rates will need to be reevaluated, and reduction or elimination of food service is also being considered, she added.
Michael Morin, chief financial officer of Russell Morin Fine Catering, is in a similar situation as Stevens, finding it more difficult to compete for what modern hospitality workers are demanding.
The company has adopted strategies to attract talent, such as referral bonuses and “getting creative with benefits.”
“Labor market demand for staff exceeds supply,” he said. “We are already operating above the price floor.”
Since 2018, when the minimum wage was increased to $10.10, Rhode Island has raised its minimum wage seven times in seven years, totaling a 39% increase.
“That’s not syncing with their sales,” Carlozzi said. “Especially for smaller businesses. They can’t spread that cost to lower-cost states.”
Carlozzi recounted a committee hearing in which a lawmaker boasted about Rhode Island having some of the highest tax burdens in the country.
“I was always taken aback by that,” he said. “There always seems to be a disconnect between cause and effect.”
Stevens is now expanding his business along the East Coast, with new Pat’s Italian locations planned for Maryland and North Carolina.
Not relying on changes in Rhode Island’s political dynamics, he hopes that expansion into other states may relieve some financial pressure and improve his profit margins.
“I’m not doing this to break even,” Stevens said.
I found this article very interesting. I would love to hear more about how higher wages might allow more households to have more discretionary income to be able to spend money at small businesses and therefore increasing the economy as well.