When restaurants raise prices to offset moderate increases to the minimum wage, the industry as a whole is not adversely affected. Like, at all. This, the conclusion of a study (see below) released last month by the Cornell University School of Hotel Administration entitled "Have Minimum Wage Increases Hurt the Restaurant Industry? The Evidence Says No!". After an exhaustive audit of tipped and non-tipped minimum wage scenarios at state and federal levels over the course of a decade, professors Michael Lynn and Christopher Boone believe the industry needs to be more receptive to modest hourly pay hikes.
The industry needs to be more receptive to modest hourly pay hikes
The key word is modest. "The industry may be justified in opposing immediate, large hikes in the minimum wages, but data do not support opposition to all minimum wage increases," Lynn told the Cornell Chronicle in the wake of the study’s publication. For the study, Lynn and Boone looked at minimum wage hikes enforced between 1995 and 2014 across the country. The duo’s hard data suggests, not shockingly, that when restaurant owners pass expenditures, reasonably, on to customers, the sun tends to rise the next day. To put it less glibly, the sheer number of restaurants and restaurant employees did not fall over time in parts of the country that legislated minimum wage increases.
There's another important aspect to the study: increases to the minimum and tipped minimum increased not just minimum wages, but aggregate wages. In markets where few outside of fast food make the minimum wage, this matters.
There are some caveats, however. The study did not consider the likes of New York's 50 percent tipped minimum increase (from $5.00 to $7.50). Indeed, the authors warn that bolder boosts to base pay, such as the $15 minimum wage recently adopted in Los Angeles, San Francisco, and Seattle, and put forth by New York Governor Andrew M. Cuomo, may hurt the industry. This is a widely held fear; a fear that powerful interests tend to monger.
The National Restaurant Association, a juggernaut mouthpiece handsomely funded by the likes of Disney, McDonald’s and YUM! Brands, has taken steps to fight the $15 minimum wage in New York. (Representatives with the NRA were not available for comment.) Last month the D.C. lobbyist called Cuomo's proposal a case of "blatant executive overreach" that was discriminatory "against the hard working men and women that own New York’s restaurants." Want to truly understand America’s minimum wage battlefronts? Your comprehensive, interactive guide is here.