Study: Raising wages to $15 an hour for limited-service restaurant employees would raise prices 4.3 percent

July 27, 2015
Waitress

Waitress taking orders (Pixabay)

07/27/2015 |

Raising wages to $15 an hour for limited-service restaurant employees would lead to an estimated 4.3 percent increase in prices at those restaurants, according to a recent study.

Researchers from Purdue University’s School of Hospitality and Tourism Management also examined the impact of limited-service restaurants offering health-care benefits and found that, due to current tax credits in the Affordable Care Act, there would be a minimal effect on prices at limited-service restaurants with fewer than 25 full-time employees.

Limited-service restaurants are what many consumers refer to as “fast-food restaurants,” where there usually is no tableside service and no tipping.

The study says increasing wages to $22 an hour, which the Bureau of Labor Statistics says is what the average American private industry employee makes, would cause a 25 percent increase in prices.

The current federal minimum wage is $7.25 an hour, which also is the standard in Indiana. Some states and cities across the United States, including Illinois, Michigan and Ohio, have raised the minimum wage to more than $8 an hour. In the past two years, fast-food workers across the nation have gone on strike or had demonstrations calling for (living) wages to be increased to $15 per hour, the study says.

“We wanted to find out what happens if food-service employees’ wages go up to $15 an hour and what happens if you take it to $22 an hour,” says Richard Ghiselli, professor and head of the School of Hospitality and Tourism Management. “Health-care benefits are a little more complex. We did an analysis based on information at the time we started the study (2013). There were tax credits available then. With those tax credits available, giving full-time employees health insurance shouldn’t affect businesses that much. When those tax credits expire, then it changes.”

– Greg McClure
See original news release at http://bit.ly/22gfPSb