$15 Minimum Wage Led To Fewer Twin Cities Restaurant Jobs: Fed Study

MINNEAPOLIS, MN — Minnesotans love their restaurants, from neighborhood diners and pizza places to breweries, cafes and more.

But many restaurants have spent the past several years fighting to survive a brutal mix of rising food costs, higher rent, worker shortages, changing customer habits, and lingering fallout from the COVID-19 pandemic.

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Research from the Minneapolis Fed says the $15 minimum wage added another major pressure in Minneapolis and St. Paul.

Studies looked at what happened after both cities moved toward higher minimum wages. Researchers found the wage increases helped some workers earn more per hour, but also led to fewer jobs and hours in several low-wage industries, especially restaurants.

The Minneapolis Fed’s working paper, titled "Minimum Wages and Labor Markets in the Twin Cities," found that minimum wage increases in Minneapolis and St. Paul "substantially decreased employment" in restaurants, retail and health care.

Minneapolis began raising its minimum wage in 2018. The city’s minimum wage reached $15 per hour for large businesses in July 2022 and small businesses in July 2024.

St. Paul began implementing its minimum wage ordinance in 2020. The city’s minimum wage is scheduled to reach $15 for all businesses in July 2027, according to the Minneapolis Fed.

For restaurants, the finding is especially important. Restaurants are labor-heavy businesses, and many operate on thin margins. When labor costs rise, owners may respond by cutting hours, leaving jobs unfilled, raising menu prices, reducing service, or closing entirely.

The Minneapolis Fed study found the negative job effects grew over time. Researchers also said businesses may have responded not only to wage increases that had already taken effect, but also to future increases that had already been announced.

The findings come as Minnesota’s hospitality industry continues to track a complicated recovery. Hospitality Minnesota’s 2026 State of Hospitality Report, released April 8, includes data on employment, business establishments, wages, regional restaurant trends, industry sentiment, recovery and taxes.

The Minneapolis Fed study does not say minimum wage laws are the only reason restaurants struggle or close. Restaurants have faced many pressures in recent years, including inflation, high interest rates, labor shortages, changing downtown traffic and the lingering effects of the pandemic.

But the research suggests higher minimum wages became part of the challenge for some Twin Cities businesses, especially in restaurants and other low-wage industries.

The debate over minimum wage laws remains unsettled.

Supporters say higher minimum wages help workers afford basic expenses in expensive cities. Critics say the laws can backfire when businesses respond by cutting jobs, reducing hours, raising prices, or closing locations.