New York City’s $15 Minimum Wage and Restaurant Employment and Earnings

Executive Summary

This is the first assessment of restaurant employment and earnings over the entire period of New York City’s historic minimum wage increases. Contrary to fears of massive job losses, $20 Big Macs, and shuttered restaurants, we found a thriving industry.

During this period, New York City has seen a strong economic expansion of the restaurant industry, outpacing national growth in employment, annual wages, and the number of both limited- and full-service restaurant establishments. The restaurant industry has the highest proportion of workers affected by the minimum wage of any major industry. The New York City restaurant industry has maintained substantially faster job growth than the private sector overall in the years since the State minimum wage rose in phases from $7.25 an hour at the end of 2013 to $15.00 at the end of 2018.

Restaurants in Brooklyn, the Bronx, Queens, and Staten Island have seen particularly strong job and wage growth, despite lacking some of the advantages that Manhattan enjoys—such as high spending by tourists and generally higher-income patrons. For example, the number of full-service restaurants in the boroughs outside Manhattan rose more than three times as fast as the number of Manhattan eateries from 2013 to 2018.

By every measure charted in this report (jobs, number of restaurants, and average wages) the other boroughs have exceeded national performance over the past five years for both full- and limited-service restaurants. For limited-service restaurants, Manhattan well-exceeded national performance in jobs, number of outlets, and wage growth for such establishments, and full-service restaurants in Manhattan fared roughly as well as the national averages for jobs, number of restaurants, and wage growth in this category of establishments over this period.

Compared to 12 large cities around the country that did not have any minimum wage increases from 2013-18, New York City’s restaurants generally have seen stronger job growth. New York City’s experience is consistent with the latest research focusing on the food services industry in large cities where there have been large minimum wage increases—no negative employment effects and sizable average wage gains for restaurant workers.

This report does not suggest that New York City’s sharp minimum wage increase caused restaurant employment to soar—the more rapid restaurant employment gains likely are due to the city’s faster private job growth. But the research presented here clearly shows that the large wage floor rise did not diminish various indicators of restaurant performance, including job growth.

New York’s rising minimum wage has tremendously benefitted low-wage workers, including those in both the full-service and limited-service categories. New York City workers in the lowest-paid three deciles of the wage distribution have seen inflation-adjusted wage gains of 8.5 to 15 percent since 2013 (the largest wage gains for these workers in the last 50 years). Wage gains among restaurant workers have been even stronger, with 2013-18 real wage increases averaging 15-23 percent for full-service and 26-30 percent for limited-service restaurant workers.

Wage gains have been strongest among New York City’s limited-service restaurant workers, since their average wages are lower than for full-service restaurant workers. Average restaurant wages have risen much faster in New York City than in any of the 12 large cities with no minimum wage increases from 2013-18. In the case of limited-service New York City restaurants, workers’ average weekly wages have grown more than twice as fast as for their counterparts in those 12 cities.

The picture painted by the latest available government data shows a vibrant New York City restaurant sector. Restaurant sales rose an average of 6.6 percent yearly starting in 2014 to reach nearly $22 billion in 2018. This is the case even though the sector has faced some challenges in recent years. The rise in restaurant sales may have been tempered to some extent by the 20 percent rise in the value of the U.S. dollar from the end of 2013 to the end of 2018. This has eroded the purchasing power of the many foreign tourists visiting New York City, who account for an estimated 12 percent of all local restaurant spending. The rapid growth of venture capital-fueled third-party delivery services charging restaurants high commission fees is a relatively recent development that, by many reports, has weakened restaurant profitability. The steady rise in real estate prices and rents in Manhattan in recent years has also challenged many restaurants whose long-term leases have expired. In some cases, such restaurants have been hit with steep rent hikes of 20-50 percent.

Even with these headwinds, New York City’s restaurant industry has flourished overall. Some factors, like the rising minimum wage, affect all restaurants, though restaurateurs pursue a number of adaptation strategies. The healthy overall state of the industry as indicated by its impressive growth in recent years shows that most restaurants have found effective ways to adapt to the rise in the minimum wage. In part, this has been accomplished by slight restaurant price increases, averaging less than three percent a year since the minimum wage started to rise. The clear uptick in restaurant prices compared to the five years before 2014 shows that many restaurateurs have been modestly marking up menu prices.

This report shows that the strength of the restaurant industry’s sustained growth provides support for New York to eliminate its subminimum wage for tipped workers. Under current law, restaurant owners are permitted to pay tipped workers a lower cash wage than the overall State minimum wage, provided that tips received by such tipped workers bring the total earnings for each worker to the statutory minimum wage level.

Seven states, among them California, Minnesota, Oregon, and Washington, require restaurants and other employers of tipped workers to pay their workers the State minimum wage. Restaurants in these states have been thriving and there is no evidence that the absence of a lower tipped-credit wage harms the industry overall or lessens tips for affected workers. Moreover, compelling research shows that New York State should end the subminimum wage for tipped workers, who are more vulnerable to sexual harassment and wage theft and suffer higher rates of poverty and hardship than those in states where the subminimum wage has been eliminated.