Studies

New Study Says Raising Restaurant Wages Won’t Lead to Job Losses

They'll still be around.
They'll still be around.

Pay inequity and compensation in food service have of course been big topics over the last year, with fast-food workers fighting for higher wages and getting them in New York and a handful of restaurateurs like Danny Meyer eliminating tips to better compensate staff. The National Restaurant Association, meanwhile, has challenged wage increases for fast-food workers, arguing that it will result in price hikes and fewer jobs. Not so fast. A new study from the Center for Hospitality Research at Cornell’s School of Hotel Administration suggests that better pay for restaurants workers won’t result in fewer jobs.

The CHR looked back at federal and state minimum-wage increases over the last two decades, finding that they did not result in fewer restaurants or jobs. Speaking with CBS News, SHA food and beverage management professor Michael Lynn went so far as to say, “We could not find any consistent effect on overall industry employment or on the number of restaurants operating.” However, the CHR isn’t arguing that there’s been no impact — just that it has been positive, leading to less turnover and likely higher productivity. Which, if the research is correct, kind of puts a wedge in the NRA’s argument that raising wages will result in Restaurant Apocolypse Now.

New York restaurateurs aren’t the only ones eliminating tips and increasing menu prices to pay staff better, however. Ignite Restaurant Group’s Joe’s Crab Shack became the first major chain to jump on the no-tipping bandwagon, starting with a trial run at 18 locations, and Ignite’s COO, David Catalano, says it’s going swimmingly. Servers are being paid $14 an hour and prices are up 12 percent, but at one Indianapolis location there is “better guest traffic, sales, better retention,” Catalano told CBS in November. More price hikes are likely on the way, as 20 states will be raising their minimum wages at the start of 2016, with the tipped minimum wage in New York going up 50 percent from $5 to $7.50.

[CBS News]

Study Says Better Wages Fine for Restaurants