Low-income workers rallied across the country to turn the minimum wage into a livable one in 2015. As servers and fast-food workers gained political support, restaurant executives cautioned that an increase in pay could backfire and force employers to cut back on hiring or shutter their doors if they couldn’t keep up with the costs. But a new study says otherwise.
“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,” Michael Lynn, a food and beverage management professor at Cornell and co-author of the study, said in a statement to Hospitality Net. “The restaurant industry seemed to be able to adjust to the relatively modest increases [in wages].”
Researchers combed through two decades of state and federal minimum wage increases for both regular and tipped workers to see how the establishments fared when they paid cooks, servers, and cashiers higher wages. Even when restaurant owners raised their food prices to coincide with pay increases, it did not significantly deter customers or damage restaurant profits.
The Fight for $15 Changed How We Talk About—and Raise—the Minimum Wage
Lynn and his colleagues’ findings defy statements from the National Restaurant Association, the main trade association for the $683 billion restaurant industry, which has lobbied against an increase in wages increase for both regular and tipped employees.
“Many restaurateurs would be forced to limit hiring, increase prices, cut employee hours or implement a combination of all three to pay for the wage increase,” the National Restaurant Association states on their website.
The federal minimum wage has been stuck at $7.25 since 2009 and the tipped minimum wage has been $2.13 since 1991. But several city and state governments have taken measures into their own legislatitve bodies, thanks to the Fight for $15, a labor movement that made significant strides in 2015. More than a dozen cities and states approved a $15 per hour minimum wage this year, although the implementation will take years to become fully realized.
Cities like Seattle and Los Angeles, where minimum wage increase will commence in 2016, won’t hit $15 per hour until 2017 and 2020 respectively. Fast-food workers in New York won’t earn $15 per hour until 2021.
While this slow pace may dissatisfy workers ready to take home a fatter paycheck, Lynn and fellow study author Christopher Boone note that these incremental changes will help keep the industry stable.
“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,” Boone told Hospitality Net. “No big effects on employment, along with a clear increase in workers' total earnings.”