Founded in 1991, the Employment Policies Institute is a non-profit research organization dedicated to studying public policy issues surrounding employment growth. In particular, EPI focuses on issues that affect entry-level employment.

Last week, the Employment Policies Institute (EPI) released a new survey of nearly 200 restaurant owners who collectively employ tens of thousands of California employees at hundreds of locations. The first-of-its-kind survey asked about the impacts of a $20 minimum wage. Most have already resorted to price hikes, reducing employees’ hours, or laying off staff entirely. Responses show these consequences will continue to play out in the next year.

A majority say they will limit future expansion within California, instead looking outside the state. Key findings on Impact of $20 Minimum Wage:

– – A majority of restaurants say they have already raised menu prices (98%), reduced employee hours (89%), have limited employee shift pick-up or overtime opportunities (73%) and reduced staff or consolidated positions (70%) as a result of the minimum wage law.
– – A majority of restaurants say in the next year they will have to raise menu prices (93%), reduce employee hours (87%), reduce staff or consolidate positions (74%), and limit employee shift pick-up or overtime opportunities (71%).
– – Eighty-nine percent of owners say they are less likely to expand inside California (somewhat less likely, 16%; significantly less likely, 73%). A majority (74%) say there is an increase in the likelihood of shutting their restaurants down (somewhat increase, 38%; significantly increase, 36%).
– – A majority of respondents (67%) say the minimum wage law will cost their restaurant at least $100,000 per location every year. One in four say it will cost more than $200,000 per location every year.

The full survey conducted by CorCom, Inc. asked California limited-service restaurant operators for feedback on the impacts of the $20 minimum fast food industry wage on their business, and sentiments on future profitability of their businesses in the state.

The problem is emerging in states other than California.

In the fall of 2023, Chicago’s City Council passed a full tip credit elimination bill that will go into effect on July 1, 2024. The law will raise the city’s minimum wage for tipped restaurant employees from $9.48 per hour to $11.02 per hour on that date, and continue to increase annually until restaurant employers will be required to pay the full minimum wage (currently $15.80 per hour) – a 66% increase in a few years. Even before this policy went into effect, restaurants started bracing for effect.

A survey of Chicago restaurants found tip credit elimination would force them to raise menu prices potentially sacrificing customer foot traffic, introduce service fees, or lay off staff. Already, Chicagoans are reporting restaurants have begun adding automatic service charges ahead of the new increases beginning July 1. The latest federal employment data released June 25, 2024 finds:

– – Chicago full-service restaurant employment has lost 358 jobs in the last two months while Chicago’s total employment has been rising;
– – Since City Council passed a full tip credit elimination ordinance last fall, Chicago has experienced a net loss of hundreds of full-service restaurant jobs representing a -0.23% decline; and
– – Chicago’s full-service restaurant employment growth rates have stagnated.

And in Washington DC, Initiative 82, a ballot measure to eliminate the District’s tip credit by 2027, was passed by voters in November 2022, restaurants in D.C. began bracing for impact. An Employment Policies Institute survey of roughly 100 restaurants in the city found most were planning to raise prices, lay off employees, or reduce employees’ scheduled hours sometime before the full implementation of the law in 2027.

Roughly one year under the law, the job loss consequences operators warned about are already a reality. D.C. restaurants have experienced two wage hikes in the past year: up to $6 per hour on May 1, 2023 and up to $8 per hour on July 1, 2023. Restaurants are facing a third increase up to $10 per hour on July 1 – an 87% total increase under Initiative 82.

This May marked a full year under Initiative 82 in D.C. The best federal data available shows D.C.’s full- service restaurant employment has declined as a direct response to the implementation of Initiative 82, even after accounting for normal seasonal variation. Prior to Initiative 82, D.C.’s full-service restaurant industry was booming with added jobs. Initiative 82 has killed that momentum and is now seeing net job losses since the policy went into effect. The latest federal employment data released June 25, 2024 finds:

– – District of Columbia full-service restaurant employment has a net loss of 925 jobs since the beginning of Initiative 82 in May 2023. This is while District of Columbia’s total employment has been rising – D.C. total employment increased by nearly 1% over the same period since May 2023;
– – This represents a 3.1% percent net employment loss for the full-service restaurant industry since May 2023, when Initiative 82 was first implemented; and
– – Prior to Initiative 82, the last year-over-year loss this large in the full-service restaurant industry was in April 2002 (barring COVID effects in 2020).

California and Other States Restaurant Wage Mandates Cause Job Losses