by Jon Sanders
Director of the Center for Food, Power, and Life, Research Editor, John Locke Foundation
Background: a recent protest for a $15/hr. minimum wage in North Carolina.
— Elaina Athans (@AthansABC11) November 29, 2016
If the rise of automation, especially in fast food, still isn’t enough to persuade you;
If decades upon decades of widespread agreement among economists also isn’t enough;
If nauseatingly worse aspects of the minimum wage also hasn’t been enough, either;
there’s now this: a new study out of Harvard University entitled “Survival of the Fittest: The Impact of the Minimum Wage on Firm Exit.” Here’s the abstract:
We study the impact of the minimum wage on firm exit in the restaurant industry, exploiting recent changes in the minimum wage at the city level. The evidence suggests that higher minimum wages increase overall exit rates for restaurants. However, lower quality restaurants, which are already closer to the margin of exit, are disproportionately impacted by increases to the minimum wage. Our point estimates suggest that 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 the median rating), but has no discernible impact for a 5-star restaurant (on a 1 to 5 star scale).
Not only does a higher minimum wage cause more restaurants to close, but lower rated restaurants are more likely to be forced to close. The perverse effects of the minimum wage of harming the very ones it’s supposed to help even extends to employers of the very ones it’s supposed to help.
Because lower-rated restaurants would be the ones more likely to employ low-wage workers.
If “moral” activists tricking fast-food workers to walk off their jobs to sit in the streets and demand $15/hr., here’s what the actual wage would become for many of them going forward: