Restaurant industry unharmed by modest minimum wage hikes

http://www.eurekalert.org/pub_releases/2016-01/cu-riu011416.php

Public Release: 14-Jan-2016
Restaurant industry unharmed by modest minimum wage hikes
Cornell University

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 increase 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 Cornell University study published by the Center for Hospitality Research 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, professor of consumer behavior and marketing at Cornell's School of Hotel Administration. Lynn co-wrote the piece with Christopher Boone, assistant professor of employment relations, human resources and law.

The research looks at the impact of federal and state minimum wage laws, which vary considerably from state to state, and between tipped and not tipped workers.

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The study found that the restaurant industry appears unharmed by modest minimum wage hikes.

"While we don't see strong impacts on employment, we do find consistent evidence that raising the minimum wage increases the total earnings of the restaurant workforce. Restaurants are likely to see some benefits as well, since better compensated employees tend to be happier, more productive and less likely to quit their jobs. So we think the restaurant industry should support reasonable increases in the regular and tipped minimum wages," says Boone.

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