I was at an economic conference in Denver two weeks ago and went to a session on the minimum wage (so you don’t have to!).
Economic theory is clear on the effects of hiking the minimum wage: employers demand less workers and so employment falls. Unfortunately, the empirical observations are not as clear-cut. Some of the trouble lies in isolating the effect of minimum wage laws from other factors that affect employment, such as the general economy or competition from other firms. There are also differences in the data economists use and how they statistically test for the effects of minimum wage increases.
In the session I was at, four different groups of economists investigated the effect of the increase in the minimum wage for fast food restaurants in California from $16 per hour to $20 per hour, a massive 25% increase.
One economist used cell phone data to suggest that staffing fell by 9%, while another used more traditional employment data sources and found that there were negative employment effects across the whole industry, but not for the largest 20 fast food brands. A third group of economists scraped online menu prices to determine that prices increase by 4%. Fast food firms were able to pass on 100% of the higher costs to consumers. Another study using a different model found prices rose by 5-7.5%. There really is no such thing as a free lunch!
What does this mean for Georgia and Augusta? Probably nothing. There is no indication that the minimum wage in Georgia will increase (it is set at the Federal minimum of $7.25). But even a 25% increase would still have little impact when fast food restaurants are paying upwards of $10 per hour and more. Moreover, as the participants identified, the fast-food industry in California is much larger than the rest of the country and is more concentrated in the top 20 brands.
