Restaurants in the nation’s capital experienced their worst hiring period in 15 years, fueling speculation that wage hikes are reducing employment opportunities.
Employment in the food service industry fell in Washington, D.C. even as it continued to increase in the region.
Restaurants shed 1,400 jobs in the first six months of 2016, a three percent decrease and the largest loss of jobs since the 2001 recession, according to an analysis from American Enterprise Institute scholar Mark Perry.
The steep drop was isolated to D.C. Neighboring suburbs in Virginia and Maryland added nearly 3,000 jobs over the same period, a 1.6 percent increase in hiring.
Perry said the hiring slowdown can be tied to recent minimum wage hikes in the city. Washington, D.C. began the year with a higher-than-average wage for tipped employees in the restaurant industry. Tipped employees in the nation’s capital earn a base wage of $2.77, almost 30 percent above the federal minimum of $2.13 that is used by Virginia. The city also mandated a $10.50 minimum hourly wage for non-tipped employees in January—higher than Virginia’s $7.25 and Maryland’s $8.75 rate.
Perry said it may take several years to fully understand the link between wage rates and hiring practices in the region, but early evidence shows a potential link. Washington, D.C. and its suburbs are among the nation’s wealthiest regions and the health of the service industry will provide “a natural experiment to test for the employment effects” of minimum wage policies, according to Perry.
“The preliminary evidence so far suggests that DC’s minimum wage law is having a negative effect on staffing levels at the city’s restaurants,” Perry said on AEI’s website. “If the DC restaurant industry can’t easily absorb an $11.50 an hour minimum wage without experiencing the greatest job losses over the last six-months than in any comparable period in 15 years, just imagine the troubles adjusting to further labor cost increases of more than 30% (and $3.50 an hour) for minimum wage workers in the coming years to the full $15 an hour.”
The gap between D.C. labor costs and its neighbors is about to increase even further. In June, Washington D.C. joined a handful of major cities to adopt the $15 minimum wage, more than double the federal minimum of $7.25 an hour. That bill will nearly double wages for waiters and other tipped employees, hiking wages from $2.77 to $5 an hour. Similar laws have been adopted in New York and California.
The Service Employees International Union has spent tens of millions of dollars to carry the Fight for $15 campaign nationwide. They have found an ally in the Democratic Party, which endorsed the $15 minimum wage in its 2016 platform over the objections of nominee Hillary Clinton. Clinton backed a $12 minimum wage during the Democratic primary over concerns that a hike to $15 would lead to “job loss and dislocation.” She has since said she would support a $15 minimum wage law.
A study from the Heritage Foundation found that Clinton’s initial fears were well-founded. Labor expert James Sherk estimated that the massive hike would eliminate 7 million jobs, with most of those losses concentrated among younger and less-skilled workers. The losses would disproportionately impact poorer regions because of differences in cost of living, according to Perry.
“If the restaurant industry in the nation’s capital, with one of the highest costs of living in the country, is stumbling on the road to a full $15 an hour minimum wage in 2022, just imagine the troubles lower-cost cities like Minneapolis and Cleveland would have adjusting to a $15 an hour wage,” Perry said.
Labor critics said the news coming out of Washington D.C. should serve as a warning to lawmakers in other cities and states. Jeremy Adler, a communications director at AR Squared, said that there is a “clear correlation” between job losses and government mandated wage hikes.
“It’s a reminder that there are serious consequences to these misguided labor policies, and that following D.C.’s example puts workers’ economic future at risk,” Adler said in a release. MORE