While many Twin Cities residents were preoccupied with a set of historic municipal elections last week, the Federal Reserve Bank of Minneapolis on Nov. 1 quietly released the results of its long-awaited studies on the effects of minimum wage hikes in Minneapolis and St. Paul.

The upshot? The cities’ minimum wage increases appear to have driven a decline in restaurant industry jobs in both cities. But wait: Didn’t the pandemic already do that? Well, yes, but the Fed’s study looked at the impact of minimum wage hikes pre-Covid.

Researchers at the Fed examined the impact of the minimum wage hikes by studying what would have happened if those policies were never enacted — a scenario they refer to as the “counterfactual.” Obviously, economists can’t bend time or reality to conduct a controlled experiment. Instead, they created a hypothetical scenario by looking at the economies of other Minnesota cities that didn’t increase the minimum wage. Anusha Nath, one of the three principal investigators on the report, says that the Fed used a weighted average of economic outcomes in other Minnesota cities.

“We used a synthetic control method,” she said. “Instead of simply taking the average of outcomes [in other cities], we weight the outcomes across different cities so that in the pre-policy period, the other cities look very much like Minneapolis.”

From January 2018 to March 2020 in Minneapolis, the number of jobs at “full-service” restaurants — i.e., sit-down establishments — dropped by 12 percent more than it would have if the minimum wage had not been increased, according to the study. Over that same period, jobs at “limited service restaurants” — counter-order places — fell 18 percent.

During those years, Minneapolis’s minimum wage bumped up from $10 an hour to $12.25 an hour for employers with more than 100 workers. For businesses with fewer than 100 workers, the mandated minimum wage increased to $11 an hour. The long-term goal is to reach $15 an hour by 2022 for large businesses and 2024 for smaller ones with fewer than 100 workers.

“The estimates of job loss in the restaurant industries of both St. Paul and Minneapolis are particularly large compared with other studies of minimum wages, implying that at least some businesses in the Twin Cities were quite sensitive to the actual or imminent increases in labor costs,” Fed staff wrote in a research summary on Tuesday.

Though St. Paul’s minimum wage increase didn’t actually kick in until 2020, the research showed “anticipation effects” in the city. The minimum wage in Minnesota’s capital city bumped up to $11.50 for big companies with more than 100 workers, and to $10 for small businesses with 100 employees or less. The city aims to hit a $15 minimum wage for all businesses by 2028.

But from 2018 through 2019, anticipation of the minimum wage boost appears to have driven declines in jobs, hours, and overall earnings for restaurant workers in St. Paul, according to the Fed’s research.

There are, of course, lots of limitations with the studies. Perhaps what’s just as notable is what the research does not show. Researchers looked at the impact of the minimum wage increase across five broad sectors: health care and social assistance, accommodation and food services, administration and support, retail trade, and a combined set of other miscellaneous service-oriented businesses. Yet, in Minneapolis at least, they could not confidently make any assertions about the impact on the number of jobs or hours in any of those categories, except for restaurants.

“We cannot statistically detect an effect” in those other industries, Nath said.

That may have something to do with the makeup of wages in other industries outside hospitality.

“Workers in restaurants are more exposed to the minimum wage than in some other low-wage sectors,” Nath said. She notes that around 80 percent of workers at limited-service restaurants were earning less than $15 an hour in 2017. But more than half of workers in the health care and social assistance category were making more than that at the time.

The Fed is slated to formally present the findings of its research at a Minneapolis City Council meeting on Nov. 18. Notably, the researchers won’t be making any policy recommendations. “We’re only presenting the results,” Nath said.

Fed researchers will continue producing annual reports on the minimum wage increase in both cities through 2028. Future research will attempt to “disentangle” the impact of Covid-19 and civil unrest on the job markets in both cities, Nath said.