Discussions of raising our nation’s poverty-level federal minimum wage are often met with the objection that paying workers more would kill the profitability of businesses like restaurants. Not so, says a new study.
“Increasing the minimum wage will cause more unemployment” is the prototypical “Econ 101" trope that turns out to be much less straightforward (or wrong) in real life. The new study, out of Cornell University, examines the effect of minimum wage increases on the restaurant industry specifically—an industry that is labor-heavy, employs lots of low-wage workers, and can be relied upon to lobby intensely against any sort of minimum wage increases.
Here is your bite-sized takeaway of the findings:
[The] results of this study confirm previous findings, namely, that the relatively modest mandated increases in employees’ regular and tipped minimum wages in the past twenty years have not had large or reliable effects on the number of restaurant establishments or restaurant industry employment levels, although those increases have raised restaurant industry wages overall. Even when restaurants have raised prices in response to wage increases, those price increases do not appear to have decreased demand or profitability enough to sizably or reliably decrease either the number of restaurant establishments or the number of their employees. Although minimum wage increases almost certainly necessitate changes in restaurant prices or operations, those changes do not appear to dramatically affect overall demand or industry size. Furthermore, there is strong evidence that increases in the minimum wage reduce turnover, and good reason to believe that it may increase employee productivity as well.
There may be a point at which the minimum wage could get so high that it would have diminishing returns. But the evidence tells us: we ain’t there yet. We’re a long way away, in fact. So raise it up! Whether by listening to the $15 an hour movement, or by more elegant means.