Just waiting for @SLUPSU to give me some hack "research" article as a rebuttal. This is what, the 497th study showing that the $15 minimum wage hike hurts those it is supposed to help the most? This study was released just last month.
Interestingly, there are critical differences in the magnitude of the effect on different parts of the industry depending on the conditions in the local economy and the structure of the minimum wage policy in place. Specifically:
1. The State of California has a vibrant, growing restaurant sector. Over the period 20102017, total employment in the state’s economy grew by 21%, compared to 27% and 35% in the full-service and limited-service restaurant sectors respectively.
2. At the same time, there is evidence that hikes in the real minimum wage may have slowed the rate of growth in these sectors. There is a statistically significant negative impact on employment growth in both the full-service and limited-service restaurant industries. The type of impact differs. For limited-service restaurants, a higher minimum wage leads to a modest one-time decline in employment growth. For full-service restaurants the impact is much more substantial – a higher real minimum wage creates both a one-time negative impact on employment growth as well as a long-run impact on employment growth in the industry.
3. The impact of the minimum wage hike is greater in lower income communities than higher income communities, presumably because restaurants in high-income areas can pass on the additional costs to customers more easily. The impact of a higher real minimum wage on employment growth is roughly twice as high in low income compared to higher income communities in full-service restaurants. We find the impact of a higher minimum wage on employment is significant in lower income economies, but we find no statistically significant impact for limited-service restaurants in higher income communities.
4. We used these findings to estimate the impact of the hikes to the minimum wage from 2013 to 2017. We also forecast how future hikes will impact employment growth in the industry from 2017 to 2022 when the minimum wage will eventually hit $15 per hour. We do so for six higher income metropolitan areas including San Diego, Los Angeles, Ventura, San Jose, Sacramento, and San Francisco. We also look at three lower income economies, Fresno, Bakersfield and the Inland Empire.
5. The full-service industry in high-income communities added 55,421 jobs over the period 2013-2017. The model suggests that the full-service restaurant industry would have created 9,453 more jobs over this period had the minimum wage increased at the rate of inflation rather than the quicker rate that occurred.
6. According to the model, 63,000 full-service jobs would be added over the period 20172022 if the minimum wage increased at the rate of inflation, rather than the projected increases. The model suggests that there would be 30,000 fewer jobs in the industry from
3
2017 to 2022 as a result of the higher minimum wage. Over the period 2013-2022, therefore, the number of new jobs in the full-service industry will grow by 120,000, but would have grown by 160,000.
7. Lower income economies are more dramatically affected. The full-service industry in low-income communities added 7,018 jobs over the period 2013-2017, but would have added 9,327 if the minimum wage increased at the rate inflation, rather than the projected increases, a difference of 2,309 jobs.
8. While these losses are mitigated by the strength of the overall economy, it should be noted that losses will be exacerbated in a downturn. If the U.S. economy were to slip into a recession this year, we would expect the industry to lose about 8,000 more jobs than it otherwise would have because of the higher minimum wage.
9. The minimum wage doesn’t just reduce employment growth, it also reduces growth in the number of restaurants in a local economy. For full-service restaurants the impact on the number of establishments is smaller than on employment. For limited-service restaurants the impact on establishments is larger than on employment. This implies fewer restaurants than would have been the case and a consolidation in the industry for larger establishments – those that represent major national chains at the expense of small restaurants.
10. Significantly, we find that states with a lower minimum wage for tipped employees see a smaller impact on full-service restaurants. Job losses caused by an increase in the minimum wage will have slightly over half the impact if the tipped minimum wage is not raised as well.
11. We do find that a higher minimum wage raises average incomes in the industry. For limited-service restaurants, a 20% increase in the real minimum wage leads to a 4.2% increase in annual earnings, while the same increase leads to a 2.7% bump in the fullservice industry’s average pay. One explanation for a relatively small increase in wages is that lower paid workers end up working fewer hours as a result of the higher minimum wage, thus offsetting the increase in their hourly rate.
12. The higher minimum wage has consequences for the types of workers employed in the industry. Specifically, we see a decline in the employment share of low-skilled workers, disabled workers and part-time workers in the sector.
The policy implications of these findings are clear. First, while the state may want to raise minimum wages in pursuit of a broader social goal, they should consider some potential costs of the policy. There are tradeoffs to any policy and policies can be constrained or altered to mitigate the harm that may be caused.
The restaurant industry should also recognize the implications for the industry itself and make some basic modifications to mitigate harm to both the industry and the labor market overall.
This report reveals that the worst effects of minimum wage increases can be hidden in the context of a strong economy, but will be felt more intensely in the event of an economic downturn. It also contains some clear policy advice for lawmakers on how to reduce these impacts. Namely, minimum wages should be set relative to local incomes, and there should be a specific exemption for tipped employees. In both cases it can reduce the impact of the higher minimum wage on the local industry and still achieve higher incomes in the broader economy.
https://ucreconomicforecast.org/wp-content/uploads/2019/04/Minimum_Wage_4-17-19_FINAL.pdf
Interestingly, there are critical differences in the magnitude of the effect on different parts of the industry depending on the conditions in the local economy and the structure of the minimum wage policy in place. Specifically:
1. The State of California has a vibrant, growing restaurant sector. Over the period 20102017, total employment in the state’s economy grew by 21%, compared to 27% and 35% in the full-service and limited-service restaurant sectors respectively.
2. At the same time, there is evidence that hikes in the real minimum wage may have slowed the rate of growth in these sectors. There is a statistically significant negative impact on employment growth in both the full-service and limited-service restaurant industries. The type of impact differs. For limited-service restaurants, a higher minimum wage leads to a modest one-time decline in employment growth. For full-service restaurants the impact is much more substantial – a higher real minimum wage creates both a one-time negative impact on employment growth as well as a long-run impact on employment growth in the industry.
3. The impact of the minimum wage hike is greater in lower income communities than higher income communities, presumably because restaurants in high-income areas can pass on the additional costs to customers more easily. The impact of a higher real minimum wage on employment growth is roughly twice as high in low income compared to higher income communities in full-service restaurants. We find the impact of a higher minimum wage on employment is significant in lower income economies, but we find no statistically significant impact for limited-service restaurants in higher income communities.
4. We used these findings to estimate the impact of the hikes to the minimum wage from 2013 to 2017. We also forecast how future hikes will impact employment growth in the industry from 2017 to 2022 when the minimum wage will eventually hit $15 per hour. We do so for six higher income metropolitan areas including San Diego, Los Angeles, Ventura, San Jose, Sacramento, and San Francisco. We also look at three lower income economies, Fresno, Bakersfield and the Inland Empire.
5. The full-service industry in high-income communities added 55,421 jobs over the period 2013-2017. The model suggests that the full-service restaurant industry would have created 9,453 more jobs over this period had the minimum wage increased at the rate of inflation rather than the quicker rate that occurred.
6. According to the model, 63,000 full-service jobs would be added over the period 20172022 if the minimum wage increased at the rate of inflation, rather than the projected increases. The model suggests that there would be 30,000 fewer jobs in the industry from
3
2017 to 2022 as a result of the higher minimum wage. Over the period 2013-2022, therefore, the number of new jobs in the full-service industry will grow by 120,000, but would have grown by 160,000.
7. Lower income economies are more dramatically affected. The full-service industry in low-income communities added 7,018 jobs over the period 2013-2017, but would have added 9,327 if the minimum wage increased at the rate inflation, rather than the projected increases, a difference of 2,309 jobs.
8. While these losses are mitigated by the strength of the overall economy, it should be noted that losses will be exacerbated in a downturn. If the U.S. economy were to slip into a recession this year, we would expect the industry to lose about 8,000 more jobs than it otherwise would have because of the higher minimum wage.
9. The minimum wage doesn’t just reduce employment growth, it also reduces growth in the number of restaurants in a local economy. For full-service restaurants the impact on the number of establishments is smaller than on employment. For limited-service restaurants the impact on establishments is larger than on employment. This implies fewer restaurants than would have been the case and a consolidation in the industry for larger establishments – those that represent major national chains at the expense of small restaurants.
10. Significantly, we find that states with a lower minimum wage for tipped employees see a smaller impact on full-service restaurants. Job losses caused by an increase in the minimum wage will have slightly over half the impact if the tipped minimum wage is not raised as well.
11. We do find that a higher minimum wage raises average incomes in the industry. For limited-service restaurants, a 20% increase in the real minimum wage leads to a 4.2% increase in annual earnings, while the same increase leads to a 2.7% bump in the fullservice industry’s average pay. One explanation for a relatively small increase in wages is that lower paid workers end up working fewer hours as a result of the higher minimum wage, thus offsetting the increase in their hourly rate.
12. The higher minimum wage has consequences for the types of workers employed in the industry. Specifically, we see a decline in the employment share of low-skilled workers, disabled workers and part-time workers in the sector.
The policy implications of these findings are clear. First, while the state may want to raise minimum wages in pursuit of a broader social goal, they should consider some potential costs of the policy. There are tradeoffs to any policy and policies can be constrained or altered to mitigate the harm that may be caused.
The restaurant industry should also recognize the implications for the industry itself and make some basic modifications to mitigate harm to both the industry and the labor market overall.
This report reveals that the worst effects of minimum wage increases can be hidden in the context of a strong economy, but will be felt more intensely in the event of an economic downturn. It also contains some clear policy advice for lawmakers on how to reduce these impacts. Namely, minimum wages should be set relative to local incomes, and there should be a specific exemption for tipped employees. In both cases it can reduce the impact of the higher minimum wage on the local industry and still achieve higher incomes in the broader economy.
https://ucreconomicforecast.org/wp-content/uploads/2019/04/Minimum_Wage_4-17-19_FINAL.pdf
