How Minimum Wage Affects Restaurants

How Minimum Wage Affects Restaurants

The minimum wage has been a hot topic in politics in recent years, with some pushing for doubling the minimum wage against increased costs of living, while others argue that there should be no minimum wage at all. As with any debate, it's important to have some facts about how changes could affect our field. Fortunately, some studies have already been conducted.

Effects on Restaurants

A recent study by Harvard Business School reports that minimum wage increases can, in fact, drive restaurants out of business. "[A] $1 increase in the minimum wage leads to approximately a 4 to 10 percent increase in the likelihood of exit" (that is, a 4-10% higher chance that restaurants close.) Forbes, which also reported on the study, points out that lower rated restaurants carry most of this burden. Five-star rated restaurants were almost unaffected by the increase, regardless of the price level of the business.

Effects for Waitstaff

A survey was recently conducted by Upserve to get some insight on how increases impact the take-home income of servers. 73% of their respondents reported that their real income, (wages plus tips) "has not increased since wage went up." While 24% reported that their average tip has decreased. This points out the major misconception among diners that servers receive the minimum wage, which as many of you know is not necessarily true. The wages of "tipped workers" are often unaffected by changes to the minimum wage. Customers, however, may be likely to tip less if they think you've recently gotten a boost in income. 

WaiterWallet was developed to help servers sell more, improving income for both the restaurant and the waitstaff. Contact us.