Sage Journals: Discover world-class research

Abstract

Minimum wages impact restaurant firms more than any other industry, yet no researcher has yet examined how the minimum wage affects restaurant industry output at the city-level. Seattle, Washington’s $15 minimum wage ordinance provides an opportunity to examine the effects of a large minimum wage increase. The author used data collected from the Washington State Department of Revenue and the Employment Security Department to conduct a difference-in-difference analysis. The estimates revealed a 1% increase in the Kaitz index led to a 0.92% decrease in restaurant industry output. Full-service firms suffered greater losses than limited-service firms. The results suggest restaurant leaders experience difficulty adjusting to large minimum wage increases.

Keywords

minimum wage human resources labor relations public policy productivity

Get full access to this article

View all access options for this article.

References

Aaronson

French

(2007). Product market evidence on the employment effects of the minimum wage. Journal of Labor Economics, 25(1), 167–200. https://doi.org/10.1086/508734

Aaronson

French

MacDonald

(2008). The minimum wage, restaurant prices, and labor market structure. The Journal of Human Resources, 43(3), 688–720. https://doi.org/10.2139/ssrn.630515

Aaronson

French

Sorkin

(2018). Industry dynamics and the minimum wage: A putty-clay approach. International Economic Review, 59(1), 51–84. https://doi.org/10.1111/iere.12262

Abadie

(2021). Using synthetic controls: Feasibility, data requirements, and methodological aspects. Journal of Economic Literature, 59(2), 391–425. https://doi.org/10.1257/jel.20191450

Akerlof

G. A.

(1982). Labor contracts as a partial gift exchange. The Quarterly Journal of Economics, 97(4), 543–569. https://doi.org/10.2307/1885099

Allard

S. W.

Romich

Buszkiewicz

J. H.

Althauser

A. K.

Obara

E. E.

(2020). The initial nonprofit exposure and response to Seattle’s minimum wage ordinance. The Social Service Review, 94(2), 185–237. https://doi.org/10.1086/708940

Allegretto

Dube

Reich

(2011). Do minimum wages really reduce teenage employment? Accounting for heterogeneity selectivity in state panel data. Industrial Relations: A Journal of Economy and Society, 50(2), 205–240. https://doi.org/10.1111/j.1468-232X.2011.00634.x

Allegretto

Reich

(2018). Are local minimum wages absorbed by price increases? Estimates from internet-based restaurant menus. ILR Review, 71(1), 35–63. https://doi.org/10.1177/0019793917713735

Allegretto

S. A.

Godoey

Nadler

Reich

(2018). The new wave of local minimum wage policies: Evidence from six cities. Center on Wage and Employment Dynamics (CWED). https://irle.berkeley.edu/files/2018/09/The-New-Wave-of-Local-Minimum-Wage-Policies.pdf

10.

American Community Survey (ACS) . (2022). American community survey accuracy of the data. https://www2.census.gov/programs-surveys/acs/tech_docs/accuracy/ACS_Accuracy_of_Data_2022.pdf

11.

Anderson

P. L.

McLellan

R. D.

Overton

J. P.

Wolfram

G. L.

(1997). Price elasticity of demand. Harvard University. https://scholar.harvard.edu/files/alada/files/price_elasticity_of_demand_handout.pdf

12.

Andreyeva

Long

M. W.

Brownell

K. D.

(2010). The impact of food prices on consumption: A systematic review of research on the price elasticity of demand for food. American Journal of Public Health, 100(2), 216–222. https://doi.org/10.2105/AJPH.2008.151415

13.

Autor

D. H.

Manning

Smith

C. L.

(2016). The contribution of the minimum wage to US wage inequality over three decades: A reassessment. American Economic Journal: Applied Economics, 8(1), 58–99. https://doi.org/10.1257/app.20140073

14.

Bauducco

Janiak

(2018). The macroeconomic consequences of raising the minimum wage: Capital accumulation, employment and the wage distribution. European Economic Review, 101, 57–76. https://doi.org/10.1016/j.euroecorev.2017.09.012

15.

Bell

Machin

(2018). Minimum wages and firm value. SSRN Electronic Journal, 36(1), 159–195. https://doi.org/10.2139/ssrn.2776919

16.

Brown

Freeman

R. B.

Hamermesh

D. S.

Osterman

Welch

(1995). Myth and measurement: The new economics of the minimum wage: Review symposium. ILR Review, 48(4), 827–849. https://doi.org/10.1177/001979399504800414

17.

Brown

Gilroy

Kohen

(1982). The effect of the minimum wage on employment and unemployment. Journal of Economic Literature, 20(2), 487–528. https://doi.org/10.2307/2724487

18.

Buszkiewicz

House

Aggarwal

Long

Drewnowski

Otten

J. J.

(2019). The impact of a city-level minimum wage policy on supermarket food prices by food quality metrics: A two-year follow up study. International Journal of Environmental Research and Public Health, 16(102), 1–14. https://doi.org/10.3390/ijerph16010102

19.

Campolieti

(2018). Effects of minimum wages on employment dynamics and prices in the restaurant sector: Canada, 1983-2016. Canadian Public Policy, 44(4), 317–341. https://doi.org/10.3138/cpp.2018-016

20.

Card

Krueger

(1994). Minimum wages and employment: A case study of the fast-food industry in New Jersey and Pennsylvania. The American Economic Review, 84(4), 772–793. https://doi.org/10.3386/w4509

21.

Card

Krueger

(2000). Minimum wages and employment: A case study of the fast-food industry in New Jersey and Pennsylvania: Reply. American Economic Review, 90(5), 1397–1420. https://doi.org/10.1257/aer.90.5.1397

22.

Collins

(2017). Surviving minimum-wage hikes at a Seattle restaurant. Journal of Hospitality & Tourism Cases, 6(1), 57–69. https://doi.org/10.4135/9781529716863

23.

Dube

Lester

W. T.

Reich

(2010). Minimum wage effects across state borders: Estimates using contiguous counties. Review of Economics and Statistics, 92(4), 945–964. https://doi.org/10.1162/rest_a_00039

24.

Dube

Lindner

A. S.

(2021). City limits: What do local-area minimum wages do? Journal of Economic Perspectives, 35(1), 27–50. https://doi.org/10.1257/jep.35.1.27

25.

Dube

Naidu

Reich

(2007). The economic effects of a citywide minimum wage. ILR Review, 60(4), 522–543. https://doi.org/10.1177/001979390706000404

26.

Economic Policy Institute . (2021). Minimum wage tracker. https://www.epi.org/minimum-wage-tracker/

27.

Ehrenberg

R. G.

Smith

R. S.

(2018). Modern labor economics: Theory and public policy (13th edition). Routledge.

28.

Fredriksson

de Oliveira

G. M.

(2019). Impact evaluation using difference-in differences. RAUSP Management Journal, 54(4), 519–532. https://doi.org/10.1108/rausp-05-2019-0112

29.

Gagnon

(2022). Preparing for the future of the restaurant labor market. Forbes. https://www.forbes.com/councils/forbesbusinesscouncil/2021/11/05/preparing-for-the-future-of-the-restaurant-labor-market/

30.

Haepp

Lin

(2017). How does the minimum wage affect firm investments in fixed and human capital? Evidence from China. Review of Development Economics, 21(4), 1057–1080. https://doi.org/10.1111/rode.12296

31.

Harasztosi

Linder

(2019). Who pays for the minimum wage? American Economic Review, 109(8), 2693–2727. https://doi.org/10.1257/aer.20171445

32.

Jardim

Long

M. C.

Plotnick

Van Inwegen

Vigdor

Wething

(2017). Minimum wage increases, wages, and low-wage employment: Evidence from Seattle. NBER working paper no. 23532. National Bureau of Economic Research. https://www.nber.org/papers/w23532

33.

Jardim

Long

M. C.

Plotnick

Van Inwegen

Vigdor

Wething

(2018). Minimum wage increases and individual employment trajectories. NBER working paper no. 25182. National Bureau of Economic Research. https://www.nber.org/papers/w25182

34.

Jardim

Van Inwegen

(2019). Payroll, revenue, and labor demand effect of the minimum wage. Working Paper 19-298. Upjohn Institute. https://doi.org/10.17848/wp19-298

35.

Kaitz

H. B.

(1970). Experience of the past: The national minimum. In Youth unemployment and minimum wages, bulletin 1657, United States bureau of labor statistics. United States Government Printing Office. https://fraser.stlouisfed.org/files/docs/publications/bls/bls_1657_1970.pdf

36.

Kim

H. S.

Jang

(2019). Minimum wage increases and firm productivity: Evidence from the restaurant industry. Tourism Management, 71, 378–388. https://doi.org/10.1016/j.tourman.2018.10.029

37.

Kim

(2019). How does the higher minimum wage impact on restaurants’ tipping policy in Seattle and employers’ and employees’ perspective? (pp. 1–29). University of Washington Bothell. https://digital.lib.washington.edu/researchworks/bitstream/handle/1773/44492/2019_Kim_Manuscript-WyattWansoo.pdf?sequence=1&isAllowed=y

38.

Luca

D. L.

Luca

(2019). Survival of the fittest: The impact of the minimum wage on firm exit. NBER working paper no. 25806. National Bureau of Economic Research. https://www.nber.org/system/files/working_papers/w25806/w25806.pdf

39.

Mayneris

Poncet & Zhang

S. T.

Zhang

(2018). Improving or disappearing: Firm-level adjustments to minimum wages in China. Journal of Development Economics, 135, 20–42. https://doi.org/10.1016/j.jdeveco.2018.06.010

40.

Neumark

Salas

J. M. I.

Wascher

(2014). Revisiting the minimum wage-employment debate: Throwing out the baby with the bathwater? ILR Review, 67(3), 608–648. https://doi.org/10.1177/00197939140670S307

41.

Neumark

Shirley

(2021). Myth or measurement: What does the new minimum wage research say about minimum wages and job loss in the United States? NBER Working Paper No. 28388. National Bureau of Economic Research. https://www.nber.org/system/files/working_papers/w28388/w28388.pdf

42.

Neumark

Wascher

(1994). Employment effects of minimum and subminimum wages: Reply to card, Katz, and Krueger. ILR Review, 47(3), 497–512. https://doi.org/10.1177/001979399404700309

43.

Neumark

Wascher

(2000). Minimum wages and employment: A case study of the fast-food industry in New Jersey and Pennsylvania: Comment. American Economic Review, 90(5), 1362–1396. https://doi.org/10.1257/aer.90.5.1362

44.

Obenauer

M. L.

von der Nienburg

(1915). Effect of minimum wage determinations in Oregon. Bulletin of the United States Bureau of Labor Statistics. https://fraser.stlouisfed.org/files/docs/publications/bls/bls_0176_1915.pdf

45.

Office of the Mayor . (n.d.). $15 minimum wage. Seattle.gov. https://murray.seattle.gov/minimumwage/

46.

Okrent

A. M.

Alston

J. M.

(2012). The demand for disaggregated food-away-from-home and food-at-home products in the United States (pp. 187–212). United States Department of Agriculture. Economic research service report no. 139.

47.

Plunkett

J. W.

Plunkett

M. B.

Snider

(2019). Introduction to the restaurant, hotel & hospitality industry. Restaurant Industry. https://www.plunkettresearchonline.com/

48.

Potter

(2006). Measuring the employment impacts of the living wage ordinance Santa Fe, New Mexico. University of New Mexico, Bureau of Business and Economic Research. https://digitalrepository.unm.edu/bber/111/

49.

Rees

(1963). The effects of unions on resource allocation. The Journal of Law and Economics, 6, 69–78. https://doi.org/10.1086/466592

50.

Reich

Allegretto

Godoey

(2017). Seattle’s minimum wage experience 2015–2016. Center on Wage and Employment Dynamics. https://doi.org/10.2139/ssrn.3043388

51.

Riley

Bondibene

C. R.

(2017). Raising the standard: Minimum wages and firm productivity. Labour Economics, 44, 27–50. https://doi.org/10.1016/j.labeco.2016.11.010

52.

Romeo

(2022). Soaring gas prices cut into restaurant sales and profits, study finds. Restaurant Business. https://www.restaurantbusinessonline.com/financing/soaring-gas-prices-cut-restaurant-sales-profits-studies-find#:∼:text=NearlyhalfofAmericanconsumersarecutting,prices%2Cwiththepainatthepump

53.

Romich

J. L.

Allard

S. W.

Obara

E. E.

Althauser

A. K.

Buszkiewicz

J. H.

(2020). Employer responses to a city-level minimum wage mandate: Early evidence from 149 Seattle. Urban Affairs Review, 56(2), 451–479. https://doi.org/10.1177/1078087418787667

54.

Romich

J. L.

Althauser

A. K.

Allard

S. W.

Long

M. C.

Vigdor

(2018). Linking administrative data to understand effects of Seattle’s $15 minimum wage ordinance (pp. 1–23). University of Washington. https://doi.org/10.31219/osf.io/egvwq

55.

Sabia

J. J.

(2015). Minimum wages and gross domestic product. Contemporary Economic Policy, 33(4), 587–605. https://doi.org/10.1111/coep.12099

56.

Santibanez

(2014). Difference-in-differences, in the encyclopedia of education, economics & finance. Sage Publications.

57.

Schmitt

Rosnick

(2011). The wage and employment impact of minimum-wage laws in three cities. Center for Economic and Policy Research. https://www.cepr.net/documents/publications/min-wage-2011-03.pdf

58.

Seattle City . (2025). City annual stats. https://data-seattlecitygis.opendata.arcgis.com/datasets/SeattleCityGIS::city-annual-stats-2/explore

59.

Seattle Office of Labor Standards . (n.d.). Seattle’s minimum wage. https://www.seattle.gov/documents/Departments/LaborStandards/OLS-MW-multiyearChart2022%28002%29.pdf

60.

Sorkin

(2015). Are there long-run effects of the minimum wage? Review of Economic Dynamics, 18(2), 306–333. https://doi.org/10.1016/j.red.2014.05.003

61.

Stigler

G. J.

(1946). The economics of minimum wage legislation. American Economic Review, 36(3), 358–365. https://www.aeaweb.org/

62.

Taylor

Greenlaw

S. A.

Shapiro

(2017). Elasticity and pricing. In Principles of economics (2nd ed.). Rice University. https://opentextbc.ca/principlesofeconomics/chapter/4-1-demand-and-supply-atwork-in-labor-markets/

63.

The Seattle Minimum Wage Study Team . (2016). Report on baseline employer survey and worker interviews. University of Washington. https://www.seattle.gov/documents/Departments/CityAuditor/auditreports/FinalMinWageReport0416.pdf

64.

The Seattle Minimum Wage Study Team . (2017). The Seattle minimum wage ordinance October 2017 update: Report on employer adjustments, worker experiences, and price changes. University of Washington. https://evans.uw.edu/wpcontent/uploads/files/minwagereport20180119.pdf

65.

Tice

(2015). Behind Seattle’s Franchise battle: Why patrons don’t care if chains die. Forbes. https://www.forbes.com/sites/caroltice/2015/03/24/behind-seattles-franchise-battle-why-patrons-dont-care-if-chains-die/

66.

Uddin

G. S.

Hernandez

J. A.

Dutta

Kang

S. H.

Yoon

S. M.

(2020). Impact of food price volatility on the US restaurant sector. Applied Economics, 52(39), 4250–4262. https://doi.org/10.1080/00036846.2020.1733478

67.

United States Energy Information Administration . (2025). Seattle Washington regular conventional gasoline prices. https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=emm_epmr_pte_y48se_dpg&f=m

68.

University of Berkeley Labor Center . (2022). Inventory of US city and county minimum wage ordinances. https://laborcenter.berkeley.edu/inventory-of-us-city-and-county-minimum-wage-ordinances/

69.

Washington State Department of Revenue . (2022). Statistics & reports. https://dor.wa.gov/about/statistics-reports

70.

Washington State Employment Security Department . (2025). Welcome to the Washington state employment security department. https://esd.wa.gov/

71.

Zhou

Zhang

Song

Wang

(2019). How does emission trading reduce China’s carbon intensity? An exploration using a decomposition and difference-in-differences approach. The Science of the Total Environment, 676, 514–523. https://doi.org/10.1016/j.scitotenv.2019.04.303

72.

Zipperer

Schmitt

(2017). The “high road” Seattle labor market and the effects of the minimum wage increase. Economic Policy Institute. https://www.epi.org/publication/the-high-road-seattle-labor-market-and-theeffects-of-the-minimum-wage-increase-data-limitations-and-methodologicalproblems-bias-new-analysis-of-seattles-minimum-wage-incr

How Seattle’s $15 Minimum Wage Affected Restaurant Output

Abstract

Keywords

Get full access to this article

References