A modern look at the effects of minimum wage increases on restaurant labor

Several states recently increased their minimum wage.  Illinois, California, New York, Massachusetts, and New Jersey passed legislation raising minimum wages toward or to $15 over the next four years.  Seattle made headlines with its minimum wage experiment.  Some data on that seemed to indicate slightly less total earnings.  It is a much different experience when one earns a higher hourly rate, even if the total annual earnings stay the same or decline slightly.  Higher hourly rates enable saving and that significantly changes quality of life.

Minnesota offers an interesting opportunity for analyzing the effects of minimum wage increases on food-service industries.  Minnesota raised minimum wages to $9.75 an hour, a $2.50 cent increase over a four year span of time.  The Center for Research on the Wisconsin Economy studied the results as an information gathering activity related to efforts in Wisconsin to raise the minimum wage.

The authors conclude that the increased minimum wage results in fewer teenagers working, while significantly increasing earnings for other workers in that industry.  Noah Williams concluded that such results should persuade lawmakers to reconsider minimum wage increases, while also noting a very important truth.

“…the minimum wage hikes may potentially lead to wage gains for a broader class of workers.” (p. 8)

Annual incomes had increased by an average of 20% by 2017.  Restaurant prices grew lower than inflation annually, at 1.5%.  This study reveals that very important reality of a benefit to the overall labor market rather than benefits isolated only to minimum wage workers at the time the rate increase begins.

Williams, N. (2018). Evidence on the Effects of Minnesota’s Minimum Wage Increases.

The Badger Herald, February 19, 2019,UW economist discusses Evers push for minimum wage increase

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