April 7, 2016  

Online calculator measures impact of $15 wage

WEST LAFAYETTE, Ind. — Researchers from Purdue University's School of Hospitality and Tourism Management have created a wage impact calculator.

The free online tool provides limited-service restaurants (LSR) a quick reference to calculate the percentage price change needed to maintain the same amount of profit dollar-wise in relation to increasing the minimum wage.

On Monday (April 4), California Gov. Jerry Brown signed into law a measure that will raise the state's minimum wage to $15 an hour by 2022. New York and Oregon have passed similar measures, and other states are considering increases.

"The calculator provides results under the assumption that the only input cost or operational changes are to the minimum wage. It will provide LSR owners and managers an accurate starting point to evaluate their options," said Richard Ghiselli, professor in the School of Hospitality and Tourism Management.

The calculator is accessible on the School of Hospitality and Tourism Management's website at www.purdue.edu/hhs/htm/. It is intended for use by LSRs also known as "fast-food restaurants" and "quick-service restaurants." These restaurants usually do not provide tableside service, and tipping is not common.

The calculator prompts managers to enter their zip code and some current operational costs.  It then identifies the minimum wage in that area and provides analysis based on increased employee wages. Calculator users can enter wage increases in any increment for operational comparisons.

The current federal minimum wage is $7.25 an hour, which also is the standard in Indiana. Some states, including Illinois, Michigan and Ohio, and U.S. cities have raised the minimum wage to more than $10 an hour. In the past two years, fast-food workers across the nation have gone on strike or had demonstrations calling for wages to be increased to $15 per hour.

Purdue's Ghiselli and Joseph Ismail, associate professor in Hospitality and Tourism Management, developed the calculator to assist the food service industry.

In an earlier Purdue study, researchers found that a $15 an hour minimum wage for fast-food employees would lead to an increase in prices. The amount would vary depending upon the level of wages in an area and the extent to which expenses are similar/dissimilar to the average LSR.  

Writer: John Hughey, 765-494-2432, hugheyj@purdue.edu 

Source: Richard Ghiselli, 765-496-2636, ghiselli@purdue.edu 

Related Web site:

College of Health and Human Sciences: http://www.purdue.edu/hhs/ 

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