Economic theory tells us that increases in the minimum wage will be pushed at least partly on consumers, depending on the elasticity of demand for various products produced by minimum wage workers.
Many East Bay restaurants are increasing menu prices as California's new minimum wage, which went into effect Jan. 1, drives up costs.
Assembly Bill 1835, introduced by Assemblywoman Sally Lieber, D-San Jose, and signed into law in September, raised the minimum hourly wage from $6.75 to $7.50. It will climb 50 cents to $8 on Jan. 1, 2008.
...The increase of 75 cents per hour will cost each of the Bay Area's four Tomatina International Inc. Italian restaurants as much as $1,100 per month before taxes, according to President Chilton Dodson. That's around $50,000 annually.
To make up the difference, the company raised food prices by 5 percent Nov. 1, after two years without increases.
Concord-based Digger's Diner expects a monthly cost spike closer to $5,000, or $60,000 per year, said Kathy Sturgill, the original owner of the 13-year-old restaurant now operated by her son and niece. After three years without adjusting menu costs, the diner plans to ratchet up prices by as much as 25 percent.
Walnut Creek-based Dudum Sports and Entertainment, which among other restaurants runs Bing Crosby's, McCovey's and Joe DiMaggio's, expects the change to knock a percentage point off its profitability margin. It hasn't increased menu prices but "of course it will pass along to the consumer at some point," said Mark Wooldridge, the company's chief operating officer.
Employers of minimum wage workers and some low skilled workers,in the short run through job loss and fewer hours worked, will "pay" the rest of the increase.
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