Minimum Wage Issues

Higher Minimum Wage Increasing Restaurant Failure in Bay Area Cities

The kickoff of 2017 was largely a time to celebrate for advocates of increased minimum wage. They had scored victories to raise state and local minimums across the country and were seeing automatic raises from past legislative accomplishments enacted as well. All told, 21 states were paying minimum wage workers more in 2017 than they had for most of the previous year.

One of the brightest lights of these victories was California's Bay area, where most city councils were enacting the latest step in moving wages up to the $15/hour minimum that was the rallying cry of activists across the country. Indeed, some of the highest minimum wages are payed in California's cities.

However, it's notable that these increases do not come without a price. A recent Harvard study, “Survival of the Fittest: The Impact of the Minimum Wage on Firm Exit,” found that higher minimum wages increase overall exit rates for restaurants. However, lower quality restaurants, which are already closer to the margin of failure, are disproportionately impacted by increases to the minimum wage.

Time will tell whether these trends last and how consumer behavior will adapt to higher prices in the long run. That said, evidence such as recent restaurant closures in the Bay area and this Harvard Business School Study make a persuasive case to exercise caution when raising state minimum wages.

2017 Minimum Wage Changes

The 2017 legislative season is underway and over 130 bills have been introduced to raise or otherwise modify state minimum wages. Note this does not include dozens more local initiatives from cities and towns seeking to modify wages.

As we work our way through the finer points of the U.S. wage debate, it is helpful to look back at the changes that occurred as we moved into the New Year. The 21 states below have or will raise their minimums from 2016 to 2017.

Some of these are part of scheduled raises, others have been raised as a result of increased cost of living or other formulas and others are directly impacted by legislation passed in 2016.

Regardless of the reason, the businesses, employees and general populations of these 21 states are certain to feel both positive and negative effects of these raises. We will continue to track these changes and their impacts throughout the year.

State 2016 2017
Alaska $9.75 $9.80
Arizona $8.05 $10.00
Arkansas $8.00 $8.50
California $10.00 $10.50
Colorado $8.31 $9.30
Connecticut $9.60 $10.10
Florida $8.05 $8.10
Hawaii $8.50 $9.25
Maine $7.50 $9.00
Maryland $8.75 $9.25
Massachusetts $10.00 $11.00
State 2016 2017
Michigan $8.50 $8.90
Missouri $7.65 $7.70
Montana $8.05 $8.15
New Jersey $8.38 $8.44
New York $9.00 $9.70
Ohio $8.10 $8.15
Oregon $9.75 $10.25
South Dakota $8.55 $8.65
Vermont $9.60 $10.00
Washington $9.47 $11.00