The most polarizing issue facing the restaurant industry in recent years has arguably been the minimum wage. While fast-food workers and labor groups such as Fight for $15 campaign for what they say is simply a fair living wage, many business owners and pundits argue that wage hikes don’t just hurt bottom lines, they’re job-killers that will lead to overall fewer people being employed.
But a new study from the University of California Berkeley focused on Seattle’s food service industry reveals that’s simply not the case: Not only has the city’s increased minimum wage achieved its goal of boosting pay for restaurant workers, but it’s done so without costing jobs.
Conducted by UCB’s Center on Wage and Employment Dynamics, the study compared seven years of city and county data on employment and wages from the Bureau of Labor Statistics to a “synthetic control” group. The study’s authors created a simulated picture of what Seattle’s current economy would look like without the minimum wage hikes, constructed by an algorithm that uses weighted data from other areas that have not instituted such increases.
As the Berkeley team summarizes, “The evidence collected here suggests that minimum wages in Seattle up to $13 per hour raised wages for low-paid workers without causing disemployment.” This flies directly in the face of all the countless headlines and hot takes claiming that such wage increases will surely lead to fewer jobs.
The study notes that employment was not affected “even among the limited-service [read: fast food] restaurants, many of them franchisees, for whom the policy was most binding.” That last bit is significant, as fast-food franchisees have been particularly outspoken in their opposition to Seattle’s minimum wage increases, with some even filing a 2014 lawsuit against the city claiming that the law unfairly discriminated against franchisees because it lumps franchise owners in with big corporations rather than independent businesses. (The court ruled in favor of the city.)
So how can it be that employers are paying each worker more, but are still able to employ the same number of people? As one analysis of the UCB study notes, the long-held economic theory that many fall back on when speculating that wage hikes will lead to job cuts fails to acknowledge one simple but important fact: “when workers make more money, they spend it, thereby promoting the local economy.”
Seattle was a pioneer in the wave of minimum wage increases that have now been adopted in numerous cities from coast to coast; its minimum wage law went into effect in mid-2015, and minimum wage now ranges from $11 to $15 an hour depending on the size of the employer, whether they provide health insurance, and whether employees receive tips.
Of course, what’s true for Seattle may not necessarily apply in other parts of the country; the study’s authors submit that the city’s “hot labor market” may have had a positive effect on low-wage employment numbers. But numerous other cities including San Francisco, Chicago, and New York City have also followed in Seattle’s footsteps by adopting similar minimum wage laws, and the CWED plans to conduct similar studies on these other cities as more data becomes available. In the meantime, don’t expect the debate over minimum wage to subside anytime soon.