A new study from researchers at Cornell University found that, over the past 20 years, raising the regular and tipped minimum wage for workers in the restaurant and hospitality industries “have not had large or reliable effects” on the number of people working in the industry. The research stands as yet another piece of evidence debunking restaurant industry claims -- frequently promoted by right-wing media -- that local, state, and federal wage increases harm businesses and weaken the job market.
On January 12, the food and nightlife news site Eater highlighted a December 2015 study from Cornell University's Center for Hospitality Research, which investigated the effect raising the minimum wage has had on business and employment activity in the restaurant industry. The study's authors -- social scientist Michael Lynn, and economist Christopher Boone -- looked at 20 years of data and “confirm[ed] previous findings” that “the relatively modest mandated increases in employees' regular and tipped minimum wages in the past twenty years have not had” large, negative effects on restaurants or jobs in the industry. Eater explained:
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.
Numerous studies on raising the minimum wage have found that legislated increases have a negligible effect on employment numbers. In spite of continued academic work showing little to no effect on employment, right-wing media have repeatedly pushed the myth that raising the minimum wage hurts businesses and destroys jobs. These media outlets often parrot the anti-minimum wage talking points of restaurant industry lobbyists without disclosing their conflicts of interest. Media Matters has debunked the myth that the minimum wage kills jobs many times, and specifically highlighted media's misguided fixation on the alleged negative effects of Seattle's decision to institute a $15 minimum wage.
The Cornell study, published in the December 2015 edition of Cornell Hospitality Reports, is in line with previous findings that modest minimum wage increases have had little negative effect on employment in the restaurant industry. According the Cornell study, and prior research, businesses pass costs on to consumers by modestly raising prices, which does not appear to result in a decrease in demand. The Cornell study also concluded "[t]here is strong evidence that increases in the minimum wage reduce turnover" and that “the restaurant industry should support rather than oppose reasonable increases in the minimum wage”:
The U.S. restaurant industry has consistently opposed increases in the regular and tipped minimum wages on the grounds that such increases would require restaurants to reduce staffing, raise prices to offset reduced revenue, or both. Either reaction is thought to reduce customer satisfaction and demand, along with restaurant profitability and even survival. To the contrary, however, 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. While prospective large increases in minimum wage mandates may have more noticeable effects, the evidence suggests that the restaurant industry should accept reasonable, modest increases in the minimum wage.
There is strong evidence that increases in the minimum wage reduce turnover, as mentioned previously. While no study has tested our belief that increasing the minimum wage will increase employee happiness and productivity as well, our reasoning is theoretically sound and consistent with more general research on compensation effects. Moreover, the research reviewed and reported here suggests that the industry has little to lose by acting on this belief. Thus, we contend that the restaurant industry should support rather than oppose reasonable increases in the minimum wage.