Decades of economic research has documented how minimum wage hikes cause employment loss and business closures. In a year with a record number of wage hikes and historic inflationary increases, 2023 has seen mass business casualties, particularly for the restaurant industry, as a result of the activism for higher wage mandates.
In 2023, 89 states, cities, and counties raised their minimum wages. Eighty-three also raised their tipped wages for servers and bartenders.
A review of economic analyses spanning thirty years shows an “overwhelming majority” of studies find minimum wage hikes cause job loss, in part because affected establishments are forced to close. Another study published by Harvard Business School finds every $1 increase in the minimum wage increases the likelihood of business closure by 14 percent.
Areas debuting new wage hikes in 2023 were not immune. Media recaps of the outgoing year have one thing in common: rising costs are forcing restaurants and other businesses to shutter for good. See how these consequences played out in real time across the country.
California: The Golden State had the highest minimum wage in the country this year, with no tip credit allowance for employers of tipped staff.
- The Los Angeles Times dubbed 2023 “The Year that Killed L.A. Restaurants,” citing businesses were “kneecapped” by inflation, rising labor costs, union strikes, and other factors.
- Eater LA mourns a “tough, complicated year” marked by the loss of some of the city’s “most well-known dining establishments” to the epidemic.
- SF Gate called the state’s restaurant closure epidemic “a mass exodus,” as “operating a restaurant in Southern California is becoming next to impossible.”
- The San Francisco Chronicle maintained that restaurant closures “remained a constant” since 2022.
- The Orange County Register called the Golden State “one of the priciest places to run a restaurant” due to a slew of burdensome real estate prices, permitting regulations, and ever-increasing labor costs.
- CBS Sacramento blames “high cost of food, labor” for restaurant closures that occurred this year, calling the new statewide wage hike up to $16 per hour “a perfect storm” for impacted businesses. Restaurant owners say “operational costs are out of control,” which have actually caused constant turnover due to cost cutting measures to try to adapt to cost increases.
Seattle: Seattle had one of the highest local minimum wages in the country this year, and
- Eater Seattle maintains that though the city has generally recovered from pandemic lockdowns, the restaurant industry “remains on uncertain ground,” primarily citing pressures from rising food and labor costs. One operator said the staffing issues had caused “a tremendous strain”. Eater staff and others note that in looking ahead to 2024, many local restaurants “still struggle” with staffing issues and are “barely surviving” despite increases in menu prices.
- The Seattle Times documents “significant blows” to the city’s dining scene, documenting at least 30 restaurant closures in the city this year.
District of Columbia: This year marked the first two increases in the District’s tipped minimum wage on its way to full tip credit elimination in the next few years. In addition to other consequences, Washington D.C.’s restaurant scene has taken serious hits.
- DCist recounts that the District lost more restaurants in 2023 than in the previous two years, and restaurant openings were down.
- In Eater DC’s tracker for city restaurant closures, restaurant operators called running a restaurant “no longer sustainable” and “impossible to survive” within city limits.
New York: The Empire State has been raising minimum wages and eating away at its tip credit for years. The Governor also carved drastic wage hikes up to $17 per hour into the state budget.
- Crain’s New York Business laments the “spate of blows” felt by restaurants in New York City’s busiest section Times Square, where one developer cited “extraordinary pressures” on the industry including rising labor costs.
- NY Eater dubbed recent closures in New York City “a wave” hitting ahead of the New Year, while staff writers and others expressed wishes for 2024 for “more affordable” dining in New York, while also hoping more restaurants can transition to brick and mortar establishments instead of limited pop-up models, food trucks, or farmer’s market stalls.
Despite these consequences, there are plenty of new proposals to further increase minimum wage requirements or eliminate tip credits in 2024. Lawmakers and voters considering these issues should take note of the destruction sweeping the country.