[todd8]

You continue to cite this study in several comments here. It's true, that under the assumptions of the paper, a 10 percent increase of the minimum wage increases operating costs by about 1 to 2 percent. However, the paper assumes that this increase only affects a small number of workers by a small amount (1/3 of the workers have their wages increased by 5%). A 100 percent increase in wages will affect almost everyone working in the restaurant industry (not just the 1/3 of workers the paper assumes). And it will affect them by a large amount, not 5%. Thus, the results of the paper don't simply scale linearly with the size of the increase in the minimum wage. Under simple assumptions (of the kind made by the paper cited) I calculate that costs to restaurants will rise by over 30%. It could end up more or it could end up less, the paper didn't provide a distribution of wages in the restaurant industry which would more accurately answer this question.

In any case, you should realize that this is a major increase in costs to restaurants, not just 1 or 2 percent.

The numbers I've seen for profit margins in restaurants range from 2 to about 3 percent. Since 1/3 of costs in restaurants come from labor, a 30% increase in labor costs will mean that restaurants will have a negative profit margin of around 7 or 8 percent after the new minimum wage goes into effect.

This means that eventually there will likely be less workers, higher prices for food, and less restaurants.