Minimum wage change effects on restaurant pricing and employment

Abstract

Purpose

State and local governments are considering large increases to the minimum wage. As restaurants employ many individuals paid at or below minimum wage, these changes may affect their businesses. The purpose of this study is to evaluate the anticipated effects of minimum wage growth on employment and pricing in US food and beverage operations.

Design/methodology/approach

The study utilizes an experimental design where restaurant owners and managers are presented with scenarios of differing levels of potential minimum wage increases and are asked to anticipate changes to employment and pricing.

Findings

Restaurant owners and managers involved in the study indicate the level of the minimum wage increase will significantly affect changes in pricing and employment levels. Results also show that restaurant demographics such as type of restaurant and average check do not significantly affect the relative change operators anticipate implementing. Specific ways participants plan to make adjustments are also presented.

Originality/value

The anticipated impact of minimum wage increases at the restaurant level is examined, which differs from previous studies that determine the impact at the industry level. This study evaluates large minimum wage increases of up to 100 per cent, which have previously not been studied.

Citation

Repetti, T. and Roe, S. (2018), "Minimum wage change effects on restaurant pricing and employment", International Journal of Contemporary Hospitality Management, Vol. 30 No. 3, pp. 1545-1562. https://doi.org/10.1108/IJCHM-03-2016-0130