REPORT: Local Minimum Wages REALLY Hurts Restaurants
Low-wage businesses like restaurants experience a range of issues in cities that increase their minimum wage, according to a report released Friday by the American Action Forum.
The report, titled “2015 Local Minimum Wage Increases and Restaurant Employment Trends,” looks at several major cities that have increased their minimum wages in the past year. What it found is those cities often show negative trends in employment. The consequences are often worse for low-profit industries like restaurants.
“Restaurant employment in metropolitan areas with cities that raised the minimum wage in 2015 has lagged behind employment in the rest of the states,” the report details. “This year restaurant employment in the metropolitan areas with major cities that raised the minimum wage only grew 1.1 percent through September. In the surrounding state areas, however, restaurant employment grew 2.8 percent.”
The slow growth in the restaurant industry can be seen almost across the board. The report, though, does cite a few exceptions where growth is the same in the city that raised its minimum wage compared to the rest of the state.
“In particular, restaurant employment in Chicago grew at about the same rate as in the rest of Illinois,” the report notes. “Also, restaurant employment in Oakland grew faster than the rest of California.”
Several cities in California increased their minimum wage above the state law — some cities as far as $15 an hour. A national movement backed by labor unions argues the $15 minimum wage is what policymakers should pursue. In comparison Oakland is the exception, with other cities showing the usual sluggish growth.
“Despite the faster growth in Oakland, however, restaurant employment in the three major cities of the San Francisco Bay Area only grew 1.9 percent,” the report states. “That is 1.7 percentage points slower than the 3.6 percent growth in restaurant employment experienced in the rest of California.”
Currently, the federal minimum wage is $7.25 an hour. Twenty-nine states and the District of Columbia have gone higher. Seattle led the way in passing the $15 minimum wage back in June 2014. San Francisco and Los Angeles followed not long after. Each local ordinance phased in the new wage over the course of several years. Thus far, no state has passed a $15 minimum wage. New York, Florida and Massachusetts are all considering it.
Experts and lawmakers are fairly divided on the issue. Supporters say the $15 minimum wage will help the poor by allowing them to more easily afford basic necessities. The increased spending will then stimulate economic activity. Critics, though, say such an increase will actually hurt the poor by limiting job opportunities.
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