Which Restaurants Will Suffer the Most Under a Higher Minimum Wage?

"We don’t want our paper to serve as a mouthpiece for or against raising the minimum wage."

by Alex Swerdloff
May 2 2017, 7:22pm

The debate over the minimum wage is dividing America in unprecedented ways, and how that question continues to be answered throughout the United States will undoubtedly be felt most acutely in the food services and restaurant industry—the segment of our economy with the most minimum-wage workers. As more and more states raise their legal minimum wage, the fight between those who are for the increase and those against it has greatly intensified. The stakes are even higher when you consider the massive labor shortage the industry continues to face—one that Saru Jayaraman, co-founder and co-director of the Restaurant Opportunities Centers United, calls "the worst labor shortage in the history of our industry."

Dara Lee and Michael Luca—a husband and wife team of economic researchers—found out just how politicized and divisive the issue is when they posted their paper regarding the impact of raising the minimum wage on restaurant closures—and Breitbart picked it up. About the study, Breitbart misleadingly wrote that its findings proved raising the minimum "put(s) non-elite restaurants out of business."

Nowhere in the 33-page paper—which is part of an ongoing economic research initiative between the Harvard Business School and Yelp—did the Lucas mention "elite" restaurants or even rely on a rating matrix that could be construed as such, like Michelin stars. Needless to say, their findings were far more nuanced and complicated than the Breitbart summary would suggest. Given the vital importance of this topic to restaurants and diners alike, we spoke to Dara Lee Luca in the hopes of finding out exactly what does happen to restaurants when the minimum wage in their area goes up.

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