Restaurant industry unharmed by modest minimum wage hikes

In the past 20 years, whenever federal, state or local laws have modestly raised minimum wages, the U.S. restaurant industry has opposed them. Restaurateurs say higher wages force them to cut staff and jack up prices to offset reduced revenue, which in turn makes their customers unhappy, slashes profits and even puts their restaurants' survival in jeopardy. Now a new study finds that modest increases to the minimum wage have not had those negative effects. The boosts have had neither a large nor reliable impact on the number of restaurants or employees, even when restaurants have raised prices directly in response to wages increases, the authors said. "There is no doubt that restaurateurs face higher expenses as a result of minimum wage increases, but if restaurants are raising prices to compensate, those increases do not appear to decrease demand or profitability enough to sizably or reliably decrease either the number of restaurants or the number of employees," said co-author Michael Lynn , the Burton M. Sack '61 Professor in Food and Beverage Management and professor of consumer behavior and marketing at the School of Hotel Administration (SHA). Lynn co-wrote the piece with Christopher Boone '05, M.S. '09, assistant professor of employment relations, human resources and law at SHA. The study, "Have Minimum Wage Increases Hurt the Restaurant Industry? The Evidence Says No!", appears in SHA's Center for Hospitality Research Reports.