Raising fast food wages has been a hot topic across the entire country. Proponents of increasing hourly argue that it will finally give millions of Americans a living wage. Opponents often point out that paying workers more money costs more money so businesses would have to pass along these expenses via price hikes.
But just how much would prices go up? According to a study by Purdue University’s School of Hospitality and Tourism Management, raising workers minimum wage to $15 per hours could be offset by just a 4.3 percent rise in prices. Or to put it in more palatable terms, the price of a Big Mac would only have to go up just 17 cents.
“It would vary a bit, depending on where you live, but that gives you a sense,” lead author Richard Ghiselli was quoted as saying by The Washington Post. “If we were talking about the price of gas, that would probably be headline news, but people have a very different reaction to food,” Ghiselli continued. “A four percent increase in the price of fast food doesn't bother people as much.”
However, Ghiselli stressed that his findings are very dependent on where the minimum wage is currently at. For their study, researchers used the average hourly pay for fast food workers as estimated by the Bureau of Labor Statistics, which is currently around $10.64. Price adjustments would be higher or lower depending on just how far a restaurant’s current wage is from that average.
And as The Washington Post’s Roberto Ferdman points out, economics isn’t just as simple as changing numbers. There are plenty of other possibilities: Restaurants could cut staff, workers could become more productive, price hikes could vary by menu item, etc.
Another intriguing possibility exists, too. Ghiselli also found that restaurants could save money by downsizing their food items by 12 percent. Wait, we can pay workers more and cut portion sizes? Who funded this study? The San Francisco city council??