Will a High Minimum Wage Hinder Cities’ COVID Recovery?

Food service and restaurant-related businesses face a particularly long road to recovery after losses due to the pandemic. However, such businesses faced steep barriers to growth in pre-COVID times, particularly in markets with an unsustainably high minimum wage.

Numerous studies find that rising minimum wage, particularly embracing the Fight for $15 movement’s demands, has severe impacts on employment across the board, and particularly upon the growth of the restaurant industry. Surveys of economists find that many tend to oppose the implementation of a $15 minimum wage, citing its ineffectiveness in targeting poverty.

The following table lists multiple cities with some of the highest minimum wage and tipped wage requirements, as of July 1, 2020.

City Minimum wage Tipped wage
San Francisco, CA $18.24* $18.24
Seattle, WA $16.39* $16.39
New York City, NY $15.00 $10.00
Portland, OR $13.25 $13.25

*Note: San Francisco’s minimum wage represents the compensation rate for for-profit businesses. Seattle represents the minimum compensation rate for large employers. 

View a complete list of minimum wage increases as of July 1, 2020 here.

While hourly employees may be excited at the premise of receiving higher wages, actual wage gains will only be seen by those who are able to lock down jobs in affected industries, including restaurants. As minimum wages have been rising steadily in each of these cities, employment growth in full-service restaurants has slowed over recent years.

Source: Quarterly Census of Employment and Wages, Employees in Private NAICS 722511 (Full-service restaurants), by surrounding county. Portland (Multnomah County) and Seattle (Kings County) capture employment in their respective counties, while New York and San Francisco city limits fall within their own county borders.

Annual rates of full-service restaurant employment growth in and around these high-wage cities have fallen since 2011, particularly in the last five years. From 2011 to 2015, Seattle and surrounding King County full-service restaurant employment was growing by 3-5% annually, Portland and Multnomah County by 2-4% annually, New York by 5-7% annually, and San Francisco by 3-7% annually. These rates often matched or topped the total U.S. growth in year-over-year restaurant jobs during this period.

In the last five years, however, even as U.S. full-service restaurants have continued to add jobs annually, growth in these cities has turned negative, with Portland losing 4%, New York City losing 3%, and San Francisco losing 3% of jobs between 2017 and 2019. The City by the Bay lost over 1,200 jobs during these two years alone.

Now, in the wake of a global pandemic, unemployment across the country, especially in urban areas, has reached historic highs. The restaurant industry took an especially hard hit, as many related businesses have experienced shutdowns, layoffs, and closures. As cities see an exodus of employees now working remotely, these areas can expect to have particularly severe implications for their food service enterprises.

Such hard times can only exacerbate employment losses and slowdowns already set in motion by rapidly rising minimum and tipped wage requirements. The road to recovery for businesses in the restaurant industry will be even more arduous ahead, thanks to the bad policy decisions of cities embracing the Fight for $15 and beyond.