I wrote a few days ago on CD about some of the economic fallout from DC’s minimum wage law (currently $10.50 an hour, rising to $11.50 in less than six months): a) Wal-Mart just announced it is backing out of plans to open two new supercenters on the city’s east side, citing rising labor costs as one reason, and b) restaurant job growth in the District has stalled out over the last few years and turned negative in 2015, at the same time that suburban restaurants are adding thousands of new positions.
In response to: a) some criticism from Richard in the comments below that post (“I think your graph(s) are not completely fair. You are misleading the casual reader I feel.”) and b) a suggestion by Morganovich, I present the new chart above of restaurant employment in DC (dark blue line) and the suburbs of DC (light blue line) from January 2006 to November 2015 with both series displayed on an index scale that is equal to 100 in January 2006. Here are some observations:
1. Like my previous graph, this one shows that DC restaurants were barely affected by the Great Recession, with almost uninterrupted job growth at a time when suburban restaurant employment decreased by nearly 6,000 jobs (and by 3.8%). The relatively minor loss of city food jobs in late 2008 and early 2009 were quickly recovered by late 2009 bringing the District’s restaurant employment to an all-time high by late 2009. In contrast, it wasn’t until early 2011 that suburban restaurants finally recovered all of the recession-related job losses.
2. In the four-year period preceding DC’s first Minimum Wage hike to $10.50 an hour on July 1, 2014, the city’s restaurant jobs grew an annual rate of 6.1% (and by an average of 2,500 jobs annually), which was higher than the 3.6% growth rate for food jobs the DC suburbs. But once the District’s first minimum wage hike went into effect on July 1, 2014, the city’s restaurant hiring stalled and the growth in food jobs fell to less than 0.40% on annual basis, and only 230 new food jobs were added over the last 16 months (or only about 14 per month). Another way to understand the slowdown in DC restaurant hiring is to consider that the city’s restaurant industry used to add more than 200 new jobs every month (and as many as 300 per month in some years like 2012), and it now takes more than a year to add that many jobs.
In contrast, restaurant employment growth in the suburbs continued to increase since DC’s minimum wage law took effect, and in fact actually accelerated to nearly 4% growth on an annual basis since July 2014. In terms of restaurant jobs, nearly 9,000 new jobs have been added over the last 16 months in restaurants located in the suburbs surrounding DC, which struggled to create only 230 new food jobs during that period. As I mentioned in my previous post, the minimum wage either didn’t increase for suburban restaurants (all of the Virginia suburbs, where the minimum wage is $7.25 an hour and most of the Maryland suburbs where the minimum wage is $8.25 an hour) or increased but remained below the District’s minimum wage (it’s $9.55 an hour in two Maryland counties: Prince George’s and Montgomery).
Bottom Line: Using a different graphical method using an index scale to compare restaurant employment in DC to the suburbs, we have the same conclusions: Restaurants in DC were able to withstand the severe economic effects of the Great Recession in 2008-2009 with only a negligible and short-lived adverse effect on restaurant staffing levels. In contrast DC restaurants are having a much harder time dealing with the city’s “Great Minimum Wage Hikes” of 2014-2016, which may be largely responsible for the significant stagnation in restaurant hiring over the last 16 months. Compared to the 2010-2014 period when DC restaurant hiring was booming at an annual growth rate of 6% and compared to the ongoing boom in restaurant hiring in the suburbs surrounding DC at nearly 4% annual growth, hiring at the city’s restaurants has stalled out to a growth rate close to zero. And with DC restaurants facing another $1 an hour wage increase on July 1, the great DC restaurant stagnation might continue for a long time.
Source: New AEI Feed
DC restaurants survived the Great Recession quite well, but are now struggling with the ‘Great Minimum Wage Hikes’