WASHINGTON – Today the Employment Policies Institute (EPI) released a new study that surveyed San Jose restaurants to gauge how they were affected by the city’s 25 percent minimum wage increase to $10.00 in 2013. Of those surveyed, two-thirds saw a big increase in business costs that resulted in reducing employee hours, eliminating jobs, and passing the additional cost onto consumers.

EPI also has a full-page ad today in the San Jose Mercury News to highlight the consequences of wage hikes. For more information, visit EPI’s new website BadIdeaCA.com. The new study is available here. The ad is available here.

The ad shows a photo of a destitute person with a sign that reads: “Hey San Jose. I didn’t need a raise. I needed a job.” In bold text, the ad says “You Can’t Be Lifted Out of Poverty if You Don’t Have a Job.” It goes on to explain: “A new survey of San Jose businesses shows that the recently increased $10 minimum wage reduced opportunities for employees in the city and raised prices for customers. Some businesses even closed their doors. San Jose’s poor need real solutions. Not job-killing wage hikes.”

The new survey was conducted in December 2013 and January 2014 and represents the experiences of 163 San Jose restaurants, split roughly evenly between fast-food and table service locations. (The California Restaurant Association provided EPI with a list of all restaurants it had phone records for in San Jose, but did not provide funding for the study and was not involved in the data collection.) Some highlights of the study include:

Approximately 40 percent of those surveyed put the additional cost per location at $10,000-$69,000 per year.
In response to the wage hike, two-thirds of businesses were forced to increase prices, 42 percent reduced their staffing levels, and 45 percent reduced staff hours.
Twelve restaurants reported closing at least one location in response to the higher minimum wage, while 30 percent limited future expansion plans within the city.

“These survey results suggest that proponents were less than truthful when they said a minimum wage hike wouldn’t hurt low-skill and entry-level employees,” said Michael Saltsman, research director at the Employment Policies Institute. “It should serve as an example of unintended consequences for other localities considering wage hikes, such as San Francisco and Seattle. It’s also a cautionary tale for Californians, who may be voting on a $12 minimum wage later this year.”