Low-quality restaurants are casualties of minimum wage hikes, study suggests
- Preliminary results from a Harvard Business School study showed that for every $1 the minimum wage increases, average-quality restaurants fail at a corresponding rate of 14%, reports KTVU.
- The study, conducted by Dara Lee Luca of Mathematica Policy and Michael Luca of Harvard, aims to bolster existing research on minimum wage increases and business failures.
- Highly rated restaurants appear to be unaffected by minimum wage increases, the study showed.
Critics of minimum wage increases will likely hail this study as proof that businesses will fail and jobs will be cut, should such laws be enacted. The results are still in the preliminary stage, however, and other studies have not proven decisive in confirming either side of the debate.
One study in California's Fresno County predicted no net impact (positive or negative) on job losses as a result of the planned implementation of a $15/hr minimum wage. Researchers from Trefis, however, have predicted food service workers could be impacted by layoffs in the event of a minimum wage hike.
Supporters of minimum wage increases might argue that average-rated restaurants are likely to fail and that low-skilled workers often have difficulty getting jobs regardless of whether minimum wages are raised. Another factor to consider is the overall rise of part-time and contingent employment in the hospitality industry.
The November 2016 elections ushered in minimum wage increases in states and cities across the country. However, conservative (and even some left-leaning) lawmakers and business groups are challenging such laws. Other states have passed preemptive laws to keep municipalities from overriding state mandates.
While supporters and opponents of the increases remain polarized, employers must keep up with wage changes in their states and municipalities to stay compliant with the law.