Your claims are inconsistent. You say that government income will rise. But this will only happen if salary increases more than offset the loss of jobs (or if those workers find employment elsewhere). In other words, the government will only "rub their hands together with glee" if the policy is a success.

As for workers not being able to afford the restaurants, a moment of thought makes it obvious that for individual worker, the salary increase will more than offset the increase cost of food. A worker paid $3 more per hour for 8 hours gets $24 more per day. If she eats at the restaurant every day, she can afford to spend $24 more on food and still break even. Are you seriously suggesting prices will increase more than that? That would be what, a 100% increase in the price of meals as a result of a 25% increase in the cost of labour. That's absurd. The result is exactly the opposite. Restaurant workers will be able to eat there more often, not less!