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- Restaurants employ more minimum-wage workers than any other industry.
- With the movement to increase wages across the country, economists worried the policies would kill jobs and raise prices.
- So far, five cities that have raised wages had little change in employment after the policies went into effect.
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There were about 10.7 million Americans employed in the restaurant industry in May 2018, the most recent year for which data is available, according to the Bureau of Labor Statistics’ Occupational Employment Statistics program. Grocery stores employ the next highest number of low-wage workers at under 1 million.
The federal minimum wage is currently at $7.25, but some individual states and cities have enacted higher pay. As of this year, 29 states and two dozen major cities have minimum wages above $7.50, according to the Pew Research Center.
Many economists and restaurant owners worried a higher minimum wage would kill jobs and raise prices, but cities like New York and San Francisco haven’t seen much impact yet. A new report from the New School recently found the restaurant industry had thrived in NYC years after passing higher wages.
Here’s how increased minimum wages have impacted the restaurant industries of New York City, Seattle, the Bay Area, Chicago, and Washington DC.
New York City’s restaurant industry outperformed the rest of the US in job growth and expansion since it began raising wages in 2013.
New York City voted to raise the minimum wage to $15 this year, which represented a pay increase in 20% to 28% for the area’s restaurant workers. The pay hike had little impact on the city’s restaurant growth, according to a recent report out of The New School.
While some restaurants told The Wall Street Journal they had to cut staff this year, James Parrott, a director of economic and fiscal policies at The New School and an author of the study, attributes this to the city’s competitive food industry, as well as the rise of delivery apps.
“It seems disingenuous to attribute any change, any decline in employment of restaurants in Manhattan to the minimum wage because there are these other things going on at the same time,” Parrott told Business Insider.
Seattle voted to raise minimum wages to $15 an hour back in 2015. The hike had little impact on restaurant closures, but led to higher prices and shorter workdays.
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Vox reported that while many restaurant owners threatened to move shop after the $15 wage passed, few of them followed through on their threats. In fact, restaurant jobs in Seattle have been steadily rising since 2015, according to the Federal Reserve.
Yet businesses did raise prices and reduce employee work hours after the wage hike, Vox’s Matthew Zeitlin reported. Even with the shorter workdays, some research indicated workers still saw their pay go up.
The rising minimum wage had little to no effect on the restaurant industry in the Bay Area.
The Bay Area has some of the highest minimum wages in the country (in part due to the area’s high cost of living). San Francisco and San Jose currently have $15 minimum wages, and Oakland pays these workers $13.80.
While the impacts of the $15 is still yet to be understood, a 2018 study released by the University of California-Berkeley analyzed minimum wages in these cities in 2016, when they were all above $10.
The study could not find negative employment effects after minimum wages increased in the Bay Area’s restaurant industry. The researchers separated restaurants into full-service and limited-service (or “fast-casual” Chipotle-style chains), and could not find significant employment effects on either type of eatery.
“Our findings suggest that the low-wage community as a whole clearly benefited from minimum wage policies in the $10 to $13 range, particularly if labor-labor substitution effects are minimal,” Sylvia Allegretto, labor economist at University of California-Berkeley and lead author of the report, stated.
Washington, DC, voted to raise the minimum wage for restaurant workers, but city lawmakers stopped it from ever happening.
Despite the fact that DC voted to raise the minimum wage for tipped restaurant workers in June 2018, lawmakers repealed the referendum – called Initiative 77 – in October of that year.
The initiative would have ensured restaurant workers get minimum wage regardless of how much they make in tips. Restaurants can pay tipped workers less than $14 if they make up for the difference. Labor groups say this policy still does not ensure workers make enough money.
National Restaurant Association and the Restaurant Association of Metropolitan Washington opposed the wage increase, saying restaurants would lay off workers and raise prices to offset higher wages.
Economists at the liberal Economic Policy Institute say paying tipped workers the minimum wage increases earnings and reduces poverty among these employees. Since the law was never enacted, it’s impossible to know how the increased wage would have impacted employment.
Five years ago, Chicago voted to raise minimum wages to $13 by 2019. After increasing wages from $10 to $10.50, the city saw little change in employment.
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Earlier this year, Illinois governor J.B. Pritzker signed a bill to increase the state’s minimum wage to $15 by 2025. Back in 2014, the city of Chicago voted to raise the city’s minimum wage to $13 by 2019.
Since the city government began raising pay for low-wage workers five years ago, there were no changes to employment or the growth of private businesses as of 2016, according to a report out of the University of Illinois-Urbana Champaign.
While Chicago’s wage hike boosted incomes for workers in transportation, maintenance, and administrative services, restaurant employees did not see higher annual incomes due to the policy.
“The Chicago Minimum Wage Ordinance has been associated with positive impacts on incomes with little to no effect on employment,” the report stated. “Though the minimum wage should be expanded and enforcement should be improved, the minimum wage hikes – by raising standards in the local labor market – have been good for workers in the city.”