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NYC wage hikes didn’t hurt restaurants, new study says

While wages climbed over the past five years, openings, job growth and workers’ incomes all soared, according to the research.
Photograph: Shutterstock

A five-year rise in New York City’s minimum wage hasn’t been the devastating blow that opponents of a $15 pay floor there and elsewhere have contended, with the local restaurant industry outpacing the rest of the nation in openings, job growth and incomes, according to a new study.

“The report’s findings of a prospering restaurant industry are in sharp contrast to the ‘sky is falling’ rhetoric of industry lobbyists who warned of massive job losses, $20 Big Macs, and shuttered restaurants,” declares the study, “New York City’s $15 Minimum Wage and Restaurant Employment and Earnings.”

The report, conducted by the liberal-minded New School Center for New York City Affairs and the National Employment Law Project, suggests that restaurant profits were more negatively impacted by the delivery fees charged by third-party services and skyrocketing occupancy costs than they were by the mandated pay increases. “In some cases, restaurants have been hit with steep rent hikes of 20%-50%,” it states. 

It takes direct aim at the contention of wage-hike opponents that increases will result in the elimination of jobs, the argument frequently heard from the restaurant industry. The report concludes that job growth has accelerated since New York City’s minimum wage started climbing in 2013 from $7.25 an hour to $13.50 last year. 

“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,” James Parrott, director of economic and fiscal policies for the New School’s Center for New York City Affairs, said in a statement.  “But our research is clear that the large wage floor rise did not diminish various indicators of restaurant performance, including job growth.”

The findings were slammed  by the Employment Policies Institute (EPI) as heavy-handed politicking in research form. It accused the authors of cherry-picking data to fit their thesis rather than adhering to best research practices. 

"In perhaps the most egregious sleight of hand, the authors pick a benchmark reference point for restaurant growth several years before the state’s radical minimum wage experiment began–taking credit for restaurant growth that evaporated after the minimum wage began rising," the employer-supported researcher and think tank said in an analysis released after the wage study was aired.

It also cited New York state data that seems to refute key assertions of the report. For instance, the EPI said that the job growth cited by Parrott occurred primarily from 2013 through 2015, while the gradual wage increases were still moderate. The 6% rate of increase for that period dropped to 1.2% between 2016 and 2018, when the burden on restaurants was greatest. 

Other sources also raise questions about the findings of today's report. In mid-July, the nonpartisan Congressional Budget Office reported that raising the national minimum wage to $15 an hour would eliminate 1.3 million jobs, and possibly as many as 3.7 million, by 2025. It also found that total family income would drop by as much as $9 billion annually in deflated terms.

In an earlier study, the technology vendor Harri found that 43% of restaurants in areas that had raised the minimum wage had cut positions and 64% had trimmed hours. It also reported that 1 in 10 establishments within those jurisdictions had closed because of the hike in labor costs.

The report released this morning seems intended to be a direct refutation of reports like those. It stresses that New York City’s mandated pay hikes have delivered on the promise of improving the economic situations of hourly workers. 

“Our report shows that workers in both full-service and limited-service restaurants have benefitted tremendously from New York’s rising minimum wage, with real wage increases from 2013 to 2018 averaging 15% to 23% for full-service and 26% to 30% for limited-service restaurant workers,” said Lina Moe, an economics graduate research assistant at The New School and a co-author of the report. “Real wage gains of this magnitude for New York City’s low-wage workers haven’t been seen in the previous half-century.”

It also reports that the city’s graduated wage increases over the past five years have been particularly beneficial for operations in the Bronx, Queens, Staten Island and Brooklyn, generally regarded as less glitzy and more blue-collar than Manhattan. 

The report fuels the continuing war of statistics between opponents and proponents of a wage hike, a battle expected to flare considerably if the Democratic Party should win control of the Senate and White House while retaining its majority in the House of Representatives in the 2020 elections.

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