The Golden State, which is known for its progressive policies, was one of the first states to implement a $15 minimum wage. While the wage mandate is still a few years out from being fully implemented, its harmful effects are already being felt across the state.
A recent study from the University of California Riverside found that California’s minimum wage increases have contributed to a decline in restaurant growth. For high-income regions such as Los Angeles and the Bay Area, the full-service restaurant industry will have created 30,000 fewer jobs between 2017 to 2022 as a consequence of a rapidly-rising minimum wage without a tip credit. In low-income areas, the relative damage to the restaurant industry is even greater: from 2013-2022, restaurant growth will be half of what it would have been absent California’s aggressive minimum wage experiment.
Economists at Harvard Business School and Mathematica Policy Research also examined restaurant closures in the Bay Area. They found that a one-dollar increase in the minimum wage led to a 10 percent increase in the likelihood of restaurant closures for a median 3.5-star restaurant and a four to six percent reduction in the likelihood of restaurants entering the market to begin with.
If these studies don’t provide enough evidence, consider the fact that restaurants across the state are closing at rapid rates. Just this month, San Francisco’s famed sports pub, The Brick Yard, will be closing after nearly nine years in business. The owner cited the city’s rise in labor costs as a reason for its closure. More business closures can be viewed at Facesof15.com.
As Congress and other states consider increasing the minimum wage, they should take a look at what’s happening in California. It serves as a stark warning of the unintended consequences of minimum wage hikes.