• December 29, 2014

Would a higher minimum wage mean pricier burgers?

Print
Font Size:
Default font size
Larger font size

Posted: Sunday, September 1, 2013 4:30 am

Fast-food workers and their supporters calling for a $15-an-hour minimum wage picketed in nationwide protests Thursday.

That raises the question: If they’re successful, will burger prices soar?

Expert opinion is mixed. The current federal minimum wage is $7.25 an hour. More than doubling that level would be an unprecedented leap.

Sylvia Allegretto, a labor economist and co-chair of the Center on Wage and Employment Dynamics at the University of California-Berkeley, said it’s unclear whether a minimum wage bump would have enough of a ripple effect to affect consumer wallets.

“Many people have assumed that if you increase the minimum wage by X percent, the meal costs will increase by the same percent, and that’s simply not true,” she said. “There are so many other factors at work.”

The price patrons pay for a burger also reflects, for example, the cost of fuel used to deliver the meat from farm to processing center to eatery, Allegretto said. Fluctuations in the price of raw ingredients such as beef and wheat also play a part.

Michael Saltsman, research director of the Employment Policies Institute, added that menu prices aren’t set in a vacuum.

Restaurants are wary of charging more for their food, especially if dealing with the price-sensitive customers who most often frequent quick-service establishments. But if employee costs rise, “they can’t just absorb the hit either,” Saltsman said.

Many fast-food restaurants are franchisees of major brands such as McDonald’s and are on the hook for hefty franchise fees. Such eateries tend to have extremely thin margins.

Increasing the minimum wage could eat up three-quarters of their profit, Saltsman said.

Some operators might try to stay competitive by charging customers slightly more while tamping down labor expenses via self-service options, automated payment kiosks or extra responsibilities for existing workers, he said. Saltsman pointed to a 2006 study that found each 10 percent increase in the minimum wage boosted quick-service menu prices by 1.6 percent and could reduce industry employment by as much as 2.5 percent.

Based on those figures, a $15 minimum wage would cause as much as a 17 percent surge in fast-food prices and nearly a 27 percent slide in employment, Saltsman estimated. But UC-Berkeley’s Allegretto argued that raising the minimum wage could pay long-term dividends that would ease the pressure to raise menu prices.

Labor eats up a huge chunk of a restaurant’s revenue — roughly a third, according to the National Restaurant Association. And the fast-food industry is notorious for its employee turnover — greater than 75 percent annually, according to some estimates. “Constantly having to recruit and retrain new workers is very costly,” she said. “If they had a higher wage and were more apt to want to stay in their jobs, that would lower those costs.”

More about

More about

More about

Rules of Conduct

  • 1 Keep it Clean. Please avoid obscene, vulgar, lewd, racist or sexually-oriented language.
  • 2 Don't Threaten or Abuse. Threats of harming another person will not be tolerated. AND PLEASE TURN OFF CAPS LOCK.
  • 3 Be Truthful. Don't knowingly lie about anyone or anything.
  • 4 Be Nice. No racism, sexism or any sort of -ism that is degrading to another person.
  • 5 Be Proactive. Use the 'Report' link on each comment to let us know of abusive posts.
  • 6 Share with Us. We'd love to hear eyewitness accounts, the history behind an article.

Welcome to the discussion.

4 comments:

  • KarmaGrant posted at 9:26 pm on Mon, Sep 2, 2013.

    KarmaGrant Posts: 20

    Exactly! I swear everyone forgets that the second minimum wage is raised, the cost of everything else is raised as well.

     
  • Bubba posted at 1:26 pm on Sat, Aug 31, 2013.

    Bubba Posts: 771

    that's how economics works.

     
  • Proud Mother of an Army Avi8er posted at 7:46 am on Sat, Aug 31, 2013.

    Proud Mother of an Army Avi8er Posts: 256

    How can a fast food employee expect to get paid $15 an hour.
    I agree there needs to be a salary increase, but to $15.
    Increase like that will lead to an increase in food prices.
    Which will lead to many people not eating fast food.
    When there are more and more customers eating elsewhere, there will be fewer employees.
    Let's just see how much these employees make per hour in the unemployment line.

    If the price of fast food is going to increase anymore, I will be eating at the best restaurant in town...my house.

    The place is clean, the food on most days is healthy, it cooked to my desire and always taste good.

    Eating at home sounds like a win/win situation for my family.

     
  • Mr Dancy posted at 7:44 am on Sat, Aug 31, 2013.

    Mr Dancy Posts: 3

    It shouldn't but it will...Owners, and corporate aren't going to absorb any cost that will reduce the profit margins, any increase in expenses will be transferred to the customer. But if customers refuse to pay increased prices at the counter for fast food and start preparing more meals at home then the dynamic will shift. A lot more has to happen for people to stop buying fast food, I remember when a BigMac was a BigMac and cost a 1.62. A wage increase is certainly needed...manager's earning slightly above minimum wage in a refined business model is an atrocity toward fairness. The boycott's should go beyond the employees, but should also include patrons!