By Lina Moe, James Parrott, and Yannet Lathrop
This is the first assessment of restaurant employment and earnings over the entire period of New York City’s historic minimum wage increases, 2013-18. Contrary to fears of massive job losses, $20 Big Macs, and shuttered restaurants, we found a thriving industry.
The New York State minimum wage rose in phases from $7.25 an hour at the end of 2013 to $13.50 during 2018. During this period, New York City has seen a strong economic expansion of the restaurant industry, outpacing national growth in employment, annual wages, and the number of both limited- and full-service restaurant establishments. The restaurant industry has the highest proportion of workers affected by the minimum wage of any major industry.
Compared to 12 large cities around the country that did not have any minimum wage increases from 2013-18, New York City’s restaurants generally have seen stronger job growth. New York City’s experience is consistent with the latest research focusing on the food services industry in large cities where there have been large minimum wage increases—no negative employment effects and sizable average wage gains for restaurant workers.
This report does not suggest that New York City’s sharp minimum wage increase caused restaurant employment to soar—the more rapid restaurant employment gains likely are due to the city’s faster private job growth. But the research presented here clearly shows that the large wage floor rise did not diminish various indicators of restaurant performance, including job growth.
New York’s rising minimum wage has tremendously benefitted low-wage workers, including those in both the full-service and limited-service categories. New York City workers in the lowest-paid three deciles of the wage distribution had inflation-adjusted wage gains of 8.5 to 15 percent since 2013 (the largest wage gains for these workers in the last 50 years). Wage gains among restaurant workers have been even stronger, with 2013-18 real wage increases averaging 15-23 percent for full-service and 26-30 percent for limited-service restaurant workers.
The picture painted by the latest available government data shows a vibrant New York City restaurant sector. Restaurant sales rose an average of 6.6 percent yearly starting in 2014 to reach nearly $22 billion in 2018. This is the case even though the sector has faced some challenges in recent years. The rise in restaurant sales may have been tempered by the 20 percent rise in the value of the U.S. dollar from the end of 2013 to the end of 2018. This has eroded the purchasing power of foreign tourists, who account for an estimated 12 percent of all restaurant spending.
The rapid growth of venture capital-fueled third-party delivery services (such as Grubhub) charging high commission fees has weakened restaurant profitability.The steady rise in real estate prices and rents in Manhattan has also challenged many restaurants whose long-term leases have expired. In some cases, restaurants have been hit with steep rent hikes of 20-50 percent.
This report shows that the strength of the restaurant industry’s sustained growth provides support for New York to eliminate its subminimum wage for tipped workers. Seven states, including California, Minnesota, Oregon, and Washington, require restaurants and other employers of tipped workers to pay their workers the State minimum wage. Restaurants in these states have been thriving and there is no evidence that the absence of a lower tipped-credit wage harms the industry or lessens tips for affected workers. Moreover, compelling research shows that New York State should end the subminimum wage for tipped workers, who are more vulnerable to sexual harassment and wage theft and suffer higher rates of poverty and hardship than those in states where the subminimum wage has been eliminated.