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The Effects of the Minimum Wage Increase on the Restaurant Industry

Executive Summary

Policy analysts at the Oregon Center for Public Policy examined economic data to ascertain the impacts of the 1997 and 1998 minimum wage increases on the restaurant industry and retail trade sectors of the economy. Because the restaurant industry comprises 37 percent of the retail trade employment in the state, retail trade data are used to understand the health of the restaurant industry when restaurant industry specific data are not available.

The analysis demonstrates that the Oregon restaurant industry has continued to perform well under the 1997 and 1998 minimum wage increases, and is expected to perform well under the 1999 increase. The data also dispel concerns that the increase in the minimum wage has and will continue to harm those low wage workers intended to receive the benefits of the increases.

State, federal, and the restaurant industry's own data reveal that:

• employment has expanded and is expected to increase in the future, with restaurant employment growth expected to outpace the economy as a whole through 2006;

• retail employers have increased the average hours worked by employees since the 1996 initiative, adding to the increased value of the minimum wage to low wage workers;

• establishment openings outpace closures, and Oregon is one of the national leaders in business openings despite the minimum wage increase;

• the National Restaurant Association expects sales at restaurants in Oregon to increase faster than the Pacific region as a whole and outpace 37 other states in 1999;

• the inflation of restaurant meal prices matches general price increases in the rest of the economy and is less than general food and beverage price inflation;

• employees' real (inflation adjusted) earnings are up, with the minimum wage increase reversing a five year decline in the real value of earnings and raising the spending power of tens of thousands of workers with incomes at or near the minimum.