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How A Minimum Wage Increase Could Impact Restaurants

Legislation that would increase the federal minimum wage to $15 by 2025 has already received approval in U.S. House of Representatives, and November’s general election could significantly impact whether or not that bill advances; however, what such a measure would mean to the economy remains to be seen.

According to a Pew Research Center survey conducted last year, two-thirds of Americans support the legislation. While advocates push for the raise to meet the higher cost of living, others are worried the restaurant industry wouldn’t survive the change.

Some economists warn that restaurants would not be able to absorb the labor costs, and a new study from the nonpartisan Congressional Budget Office found the increase could eliminate about 1.3 million jobs by 2025.

The federal law applies if the state does not have its own minimum wage law, and many states are already raising their minimum wage. States that have already instituted the raise can be viewed as a test of what the federal change would mean.

“The research from Seattle’s increase seems to suggest that the impact on restaurants is two-fold: They either raised their prices or cut back on employee hours, but in neither case were those changes as large or as negative as some predicted,” said Bob Cunningham, chair of the economics department at Alma College. “There was no decrease of employment in the industry.”

John McNamara, vice president of government affairs at the Michigan Restaurant and Lodging Association sees the hike as inevitable.

“The minimum wage in Michigan went up this year and will continue to rise over the next several years,” he said. “Doing anything to interrupt these predictable and consistent changes would be detrimental now and in a post-COVID world.”