Two unions that pushed for the $15 minimum wage celebrated an Aug. 7 study that showed that, despite fears that increased labor costs would kill the restaurant industry, food establishments were “thriving.”
A report released by the New School's Center for New York City Affairs and the National Employment Law Project that assessed how restaurants fared between 2013 and 2018 found gains in restaurant sales, employment, pay and the number of full-service and limited-service establishments.
‘Greater Job Growth’
“We’re not saying that New York’s sharp minimum-wage increase caused restaurant employment to soar—that’s likely due to the city’s faster private job growth,” said James Parrott, director of Economic and Fiscal Policies at the center. “But our research is clear that the large wage-floor rise did not diminish various indicators of restaurant performance, including job growth.”
In 2016, Governor Cuomo enacted a law that allowed the city’s minimum wage to incrementally be raised to $15 an hour by the end of last year. The Economic Policy Institute estimated that 80 percent of city restaurant workers were affected by the minimum wage increase.
The study was based on data from the U.S. Department of Labor’s Bureau of Labor Statistics, the state Department of Labor and the state Department of Taxation and Finance. It found that employment gains were generally larger in city restaurants compared to those in a dozen large cities that did not raise their minimum wage, particularly among limited-service restaurants (which don’t offer table service), with only Dallas outpacing New York City. Limited-service restaurant workers saw their average wage increase at a rate that was more than twice that of their counterparts in these other cities.
The researchers also argued that the industry was strong enough to eliminate the state’s subminimum wage for tipped workers, which disproportionately affected women.
Prices Didn’t Skyrocket
Various reports have drawn conflicting conclusions about how raising the minimum wage affects restaurants. Earlier this year, the New York City Hospitality Alliance, which represents restaurant, bar and lounge owners, surveyed 574 restaurants and found that 76 percent of full-service restaurants cut hours, while 36 percent eliminated jobs. But Mr. Parrott and his co-authors, Lina Moe and Yannet Lathrop, questioned the survey’s methodology because it was not made available. Meanwhile, a University of California, Berkeley report that studied six cities that were among the first to raise the minimum wage found no significant negative effects on employment.
Critics also argued that customers would see significantly higher prices. The New School study found that restaurant prices increased minimally—an average of 3 percent a year since the minimum wage began to rise. Overall, restaurant sales rose an average of 6.6 percent annually, growing to $22 billion last year.
A False Scapegoat
“We are very excited that reliable, independent research has found what we concluded earlier on,” said Anthony Advincula, spokesman for Restaurant Opportunities Centers United. “It’s so easy to use the minimum-wage increase as a scapegoat. But this is a tough business. Rents for commercial spaces are really high. You always see packed restaurants that suddenly close down, and it’s not because their business model failed but because their landlord doubled their rent.”
Service Employees International Union Local 32BJ was one of the major unions in the “Fight for $15” campaign. The union’s president, Kyle Bragg, said that the report “dispelled the scare tactics of the industry,” he said. “They said the sky would fall if the minimum wage is increased, instead the industry and local communities are thriving. This study shows that raising wages is good for everyone.”
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