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Minimum Wage Increases Make Restaurants More Likely to Fail

The following excerpt is from an article that originally appeared on Hit and Run Reason

Rules that make it more expensive to employ workers will cause fewer workers to be employed. It’s a statement that’s as true in an economics textbook as it is in the real world—as more than a few places are currently discovering—and a new study from Harvard University economists takes a stab at explaining how that relationship can affect not only workers, but businesses and consumers as well.

As the cost of labor increases, driven by higher minimum wages, there is a greater likelihood that restaurants will go out of business, study authors Michael Luca and Dara Lee Luca conclude. As one might expect, Luca and Luca found that lower quality restaurants—those more likely to rely on low-wage workers—are harder hit by higher wage mandates.

“A one dollar increase in the minimum wage leads to a 14 percent increase in the likelihood of exit for a 3.5-star restaurant (which is

Click here to Read this Entire Story on Hit and Run Reason


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