Have Minimum Wage Increases Hurt the Restaurant Industry? The Evidence Says No!

Abstract

Federal, state, and local laws in the U.S. specify the minimum wages to be paid in their jurisdictions. Recent years have seen an increased interest among many in raising those minimum wages, and there has been some movement at the local, state, and federal levels to do so.1 Proposals to increase the minimum wages have been opposed by the restaurant industry on the grounds that such increases would require restaurants to cut hiring, raise prices, or both.2 Either reaction is thought to reduce customer satisfaction and demand, as well as restaurant profitability and survival. Although this piece of conventional wisdom seems entirely plausible, we wanted to test whether this is the case, especially in view of studies that have found no such negative outcomes (or tiny outcomes, at worst). Consequently, in this report, we address the question of whether increases in the minimum wages have the negative effects widely expected by the restaurant industry.