Industry NewsRestaurant Industry Not Hurt by Minimum Wage Increase

Restaurant Industry Not Hurt by Minimum Wage Increase

ITHACA, N.Y.—Federal and state minimum wage increases over the past twenty years have not resulted in fewer restaurants or lower employment in the United States, according to an analysis published by the Center for Hospitality Research (CHR) at Cornell’s School of Hotel Administration (SHA) in association with the Cornell Institute for Hospitality Labor and Employment Relations (CIHLER). The study, “Have Minimum Wage Increases Hurt the Restaurant Industry? The Evidence Says No!,” was written by Michael Lynn and Christopher Boone, both SHA faculty members. The report is available at no charge from CHR.

“We evaluated the effects of minimum wage increases for both regular and tipped restaurant employees, and we did this for both full-service and limited-service restaurants,” said Lynn, the Burton M. Sack ’61 professor in food and beverage management at SHA. “We recognize that wage increases usually require restaurants to increase their prices or trim their service, but we could not find any consistent effect on overall industry employment or on the number of restaurants operating. We tested the effects of changes in the regular minimum wage between 1993 and 2014, and changes in the tipped minimum wage from 2003 to 2014. The results were similar, and they confirmed previous findings that the restaurant industry seemed to be able to adjust to the relatively modest increases that we have seen in that time.”

The federal minimum wage for eligible tipped workers is $2.13 and has not been changed since 1991, whereas the federal minimum for non-tipped workers has been raised five times since 1991 and since 2009 has stood at $7.25. Individual states have their own wage minimums. The minimum wage in New York State is $7.50 for tipped workers and $8.75 for non-tipped workers, for instance, while the California state minimum wage is $9.00 for both tipped and non-tipped workers. However, California’s minimum rises to $10.00 in 2016, and both New York and California, as well as Massachusetts and Oregon, have proposed increases to $15.00 for some workers (such as those on the state payroll or who are paid with state funds). Other states with more modest increases for non-tipped employees include Connecticut, Delaware, Hawaii, Maryland, Minnesota, Vermont, and West Virginia.

Boone, an assistant professor at SHA, added: “Most of the state wage increases are being phased in over time, so I’d expect the impact to be similar to what we’ve seen in the past: no big effects on employment, along with a clear increase in workers’ total earnings. But these results don’t tell us what the impact of a sudden large increase would be.”

Given that minimum wage increases have the effect of increasing overall staff payrolls, Lynn and Boone suggest that the restaurant industry support moderate increases, since that should improve staff performance and decrease turnover.

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