Do the Math – Minimum Wage Increases And The Service Industry

By Sheri Hernandez, Program Director, Hospitality Management at American Public University

If you are like about 1/3 of adult workers today, you probably worked in a restaurant of some sort as a teenager.  Do you think the job you did was worth being paid $10.10 an hour, or even $15 an hour, which is what some striking fast food workers would like to see as their beginning wage? 

The May 2013 National Occupational Employment and Wage estimates for the U.S. calculated the median hourly wage at $16.87. It is hard to make the argument that all jobs deserve a minimum hourly rate of 90 percent of the median hourly wage.  Some jobs simply are more dangerous or require more skill than others.  The simple fact is that not all businesses can sustain a base wage of $10 or more for entry level positions.

Minimum wage increases have been a hot topic for some time now.  No business owner wants to see their good workers struggling to make ends meet.  However, restaurants typically operate on a very tight profit margin, typically three to five percent, pre-tax. 

If restaurants and other service-oriented companies are forced to increase minimum wages, the end result may be that they forego hiring inexperienced workers and opt for skilled, experienced employees. This would offer more immediate return on labor investments. While higher starting wages may attract more skilled employees to restaurants and fast food companies, this could have a negative impact on unskilled workers that really need the jobs and experience that the restaurant industry offers.

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