Minimum Wage and Restaurant Prices

Gene Bouthiette

Abstract:
In this paper, I investigate the effects of the minimum wage on restaurant prices. Every year, new regulations on employers are set by the Department of Labor to adjust minimum wage. I want to see whether the economic impact of minimum wage level is transferred to the restaurant and ultimately the customer. In order to do this, I compiled state-level data on average restaurant menu prices and minimum wages for the year 2018. I will use a regression method to see the impact of minimum wage increase on restaurant prices, controlling for other state-level socio-economic variables such as state-level cost of living index. I also discuss the effects on tipped employees when the minimum wage is increased. While some states do increase their tipped wages, some also follow the Fair Labor Standards Act as a bare minimum. Preliminary results suggest a significant impact on restaurant prices when there is an increase in minimum wage.