A $15 minimum wage for fast food workers would raise the price of a Big Mac by 17 cents

The conservative warning that minimum wages are guaranteed to destroy consumer purchasing power by forcing businesses to raise prices doesn’t hold up under academic scrutiny, according to a new study from Purdue’sSchool of Hospitality and Tourism Management.

Per the study, raising the minimum wage for fast-food workers to $15 would cause a small but incredibly modest uptick in prices — an increase that would be more than offset by the increase in disposable income that workers would have.

From The Washington Post‘s write-up of the study:

[Researcher Richard] Ghiselli used data from both the National Restaurant Association and Deloitte & Touche to estimate how much fast food companies would need to boost sales given varying changes in the minimum wage. Assuming the industry maintained its current profit margin of 6.3 percent — which, to be fair, is fairly slim — hiking the pay floor at fast food restaurants to $15 an hour would mean just a 4.3 percent increase in prices.

If that increase were applied universally across McDonald’s menu, the price of a Big Mac would go up by a whopping…17 cents.

The effects of a $15 minimum wage would, of course, vary by location, as wages are typically higher in major metropolitan areas than they are in smaller towns. The paper estimated the average price increase based on the current median wage in the fast food sector ($10.64 per hour), but obviously a store currently paying its workers an average of $9 per hour would raise prices more than a store that pays $12 per hour to respond to a $15 minimum wage.

Burger and fries via Shutterstock

Burger and fries via Shutterstock

Either way, the data suggest that businesses would be able to handle a significant minimum wage increase without being forced to raise prices to uncompetitive levels. What’s more, the claim that employers would respond to a higher minimum wage not with price increases, but with employment cuts, is tenuous at best. Businesses require a certain number of employees to operate, making it more difficult to adjust employment than it is to adjust prices in response to changes in wage laws.

As I’ve written before, the case for raising the minimum wage for fast food workers instead of everyone is political and economic at the expense of moral. If McDonald’s workers are entitled to a living wage, why aren’t workers at Gap? That said, the fast food sector employes roughly half of our country’s minimum wage workers, suggesting that the biggest area of opportunity for wage growth — short of congressional action that will never happen — is in the fast food sector on the state and local level.

And the economic arguments against doing so are becoming less compelling by the day.


Jon Green graduated from Kenyon College with a B.A. in Political Science and high honors in Political Cognition. He worked as a field organizer for Congressman Tom Perriello in 2010 and a Regional Field Director for President Obama's re-election campaign in 2012. Jon writes on a number of topics, but pays especially close attention to elections, religion and political cognition. Follow him on Twitter at @_Jon_Green, and on Google+. .

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48 Responses to “A $15 minimum wage for fast food workers would raise the price of a Big Mac by 17 cents”

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  2. Buford says:

    Normally, I’d agree with you and happily provide the link to the study… but your dickish attitude makes me instead want to point out that any idiot could find it himself by googling ‘study shows big box stores raise salaries 25000’… it’ll probably show up in the first 5 hits or so. Knock yourself out, Cowboy.

  3. disqus_pVZKOdRReM says:

    Thank you, Obooma

  4. disqus_pVZKOdRReM says:

    Why not talk about the job killing, prohibitory taxes that CHOKE our economy as the villian of the “living wage”

  5. disqus_pVZKOdRReM says:

    Please cite this study. Numbers mean nothing out of their research context. And ANY study or poll that cant be replicated isnt compelling evidence. Its misleading, self serving bull***t. Talk about science deniers. Or wait is it NEW IMPROVED ?

  6. disqus_pVZKOdRReM says:

    What about small businesses? How can they maintain higher wages? First they are driven out of business because they cant compete with corporate big box stores,, including groceries. Hiking wages has ALWAYS meant inflation. Has anyone on this discussion board EVER studied economics?? Or satistics?? Or live in reality??

  7. MoonDragon says:

    I can’t say this would discourage (or encourage me) to eat a McBurger of any sort. Last time I did that was 40 years ago and I was terribly stoned. Freaked the counter person out because I kept staring in rapt fascination at the menu above her head.

  8. Bill_Perdue says:

    At least on in the way lots of Democrat voters think, but as for DLC folks and Dixiecrats that’s another story.

    I don’t think either party can be reformed but I do think that under the impact of the BS TRump campaigns they will experience significant centrifugal forces and that both will split in the foreseeable future. The radicalization that began with the economic chaos caused by Bill Clinton’s NAFTA and his deregulation bills of 2009 and 2010 is now a global phenomenon and it’s not going away.

  9. ComradeRutherford says:

    Indeed. Hillary registered as a Republican when she was young, and later sat on the board of WalMart. Hillary is NOT a Democrat.

  10. Bill_Perdue says:

    I read recently that most of the Democrat candidates were former Republicans.

    And I might add, one of them, HRH HRC is a DLC Dixiecrat to boot.

    Years ago Gore Vidal described them as that same party and by now that’s unquestionable. Their candidates and political programs and interchangeable and their biggest differences are cosmetic and fights over who gets the loot. What they have in common at core is the fact that both are owned by the rich who call the shots.

  11. ComradeRutherford says:

    I describe the choice of voting for Hillary or a Republican as being the lesser of two Republicans.

  12. rodnchance says:

    If the actual cost is .17 then I guarantee that the price raise will be at a minimum .50, up to $1.00 with the increase blamed upon the workers, not the greedy capitalist pig owners.

  13. Bill_Perdue says:

    You’re right but we have some unions left but Democrats and Republicans have been on a 40 year bipartisan campaign to destroy them beginning with Carter and extending down to Obama.

    The problem with most union leaders is that they’re in bed with Democrats and Dixiecrats where they catch and pass on all kinds of political STDs, like voting for the lesser devil. To paraphrase an internet acquaintance,
    voting for Democrat/Dixiecrat politicians is like s is dancing with the devil, or in this case, the lesser devil.

    He says, again paraphrasing, that you can boogie a bit, but step on its toes and your chain will be yanked … Even if it is simply naiveté and not downright complicity with itsits agenda, the idea that you can use it more than it uses you, as far as I can see, is simpleminded folly. Going outside it is the only road one can pursue with any hope of maintaining one’s integrity and opposition to racism, union busting and wars of aggression.

  14. ComradeRutherford says:

    “Why can’t we do that here?”

    Because that would interfere with profits, and the CEO would be sued by shareholders for not maximizing profits by impoverishing the workers.

    Oh, and unions. We don’t have those here anymore, so that our workers get paid shit .

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  16. Doug105 says:

    I give up the major pizza chains years ago over ACA and their whining about 50 cents per pizza it would cost.

  17. Doug105 says:

    Short term a few that aren’t doing well like JcPenny’s maybe hurt, but if they can hold out the working poor will be able to afford clothing again.

  18. Doug105 says:

    Sells the burger or passes laws giving their workers less rights?

  19. Doug105 says:

    Only in america.

  20. Doug105 says:

    More then that.

  21. BeccaM says:

    They’ve all forgotten that a generation ago and especially two generations ago, a college education used to be nearly a golden ticket guarantee to a middle class standard of living.

  22. 2karmanot says:

    Thank you Cleos Yoda! :-)

  23. 2karmanot says:

    I heard of an experiment ( OK I did it). Left a big Mac on the ground behind the barn . Animals ate the bun and licked off the ketchup, but the pattie remained uneaten and still hadn’t decomposed after a long Winter. There was a dead groundhog near by—-must have eaten the pickle. # Irish story. Moral: Eat a big Mac and live for ever.

  24. 2karmanot says:

    Plus they have to figure in a secret clown tax to cover the doings of that bozo, who sells icky burgers.

  25. heimaey says:

    I saw a conversation on the r/nyc subreddit about this and NYers were furious that fast food workers may top out (if they’re lucky and get 40 hours a week) at $32,500 because many of them with higher education degrees weren’t making that much more. No one wants to pay anyone anything anymore and it’s a real problem. I see the young people’s issue but I also think they’re being selfish as they’re fighting the wrong people. Fight greedy corporations or the system that doesn’t want to pay you a decent wage – don’t try and take away a (barely) decent living wage from someone else!

  26. cleos_mom says:

    Busybodies you have with you always.

  27. crazymonkeylady says:

    I’d be happy to pay extra knowing that the workers are being paid properly. And we all know the poorer workers are paid, the richer the bosses get.

  28. Bill_Perdue says:

    “Burger King and McDonald’s Pay Fast Food Workers $20 an Hour in Denmark Enough to pay their bills, save some money and even go out with friends. Why can’t we do that here?” http://www.alternet.org/labor/burger-king-and-mcdonalds-pay-fast-food-workers-20-hour-denmark

  29. Hue-Man says:

    Business is lying when they say that they can’t pass along a living wage increase to customers. Has Big Oil refused to raise prices when the price of crude oil increased? Will grocery stores fail to pass along the huge price increases resulting from the current drought conditions?

    Business is suppressing employees’ wages because they can. By wiping out unions, employees are “small suppliers” who have no bargaining power with multi-national corporations. Meanwhile, taxpayers subsidize Walmart and other huge profitable companies so their workers don’t starve to death.

  30. Indigo says:

    Meanwhile and way off topic: now running on Windows 10, glitch-free so far. Download took about an hour and a half.

  31. DGT says:

    As Jon points out, conservatives love to claim that businesses would cut employees because they have a fixed amount to spend on employees. This is completely disingenuous. These businesses spend the absolute minimum they can on labor and not a penny more. If it takes 10 employees to run the business, they will hire 10 employees. Not 9, not 11. If the price of labor goes down, they don’t add employees, and if they price of labor goes up, they don’t fire employees. It’s not a decision made based on price.

  32. Bill_Perdue says:

    Understanding the problems inherent in capitalism is just the beginning of dealing with them.

    What’s needed is a socialist approach that emphasizes the need to end the rule of the rich and their twin parties and replace it with the rule of working people. When that basic step is taken all these problems can be dealt with but that will never happen as long as the Democrats and their brothers and sisters the Republicans run things.

    What’s also needed is a union building approach that fights for unions for all low income workers, including imported and immigrant workers and for a decent minimum wage, which in my opinion is a good deal more than $15.00 an hour. “You know things are fucked up when finding “affordable housing” is a problem for people earning well over the median income.” It far more than that in the most developed states in the union. I think that $25.00 an hour and 40 hours pay even if the number of hours is less than that is a good start. That’s a modern variant of the old socialist slogan ’40 hours work for 30 hours pay”.

    What’s not needed is insulting proposals for a $10.10 an hour minimum wage. After Obama, Pelosi and Reid live on that for a few years and find out the effects of their goal to promote wage slavery on working people.

  33. Bill_Perdue says:

    Which is why socialists work to end the rule of the two capitalist parties and to create a workers government in a workers state.

    When they’re history we’ll pass constitutional amendments to ensure good incomes for working people – active, retired and in training.

    And we’ll take back the money they’ve stolen from workers.

  34. ComradeRutherford says:

    I did some back-of-the envelope math last year, and found that McDs could raise their pay rates for their half-million US workers by $3 and STILL post a profit – just not a huge one.

  35. ComradeRutherford says:

    There’s this meme of the ‘worth’ of labor, and those folks don’t believe that human robot button pushers at McDonalds do not deserve to be paid anything at all because they are not worth paying.

  36. ComradeRutherford says:

    Can’t have that! The shareholders will sue! The prime law of all business is maximize profits by any means necessary. That is why there are the new B-corp class, to exclude that mandate from their corporate entities…

  37. ComradeRutherford says:

    “doesn’t hold up under academic scrutiny”

    Who cares? The GOP makes up lies and threatens people that don’t believe their lies.

  38. Buford says:

    Yep – and another study found the same for big box stores. They could raise every employees’ salary to $25K/yr, and even if they passed 100% of that cost increase on to customers (not likely), that means that the average customer would spend $17 more PER YEAR than they do today.

  39. Bill_Perdue says:

    It wouldn’t increase the price at all if it were deducted from profits.

  40. Skye Winspur says:

    The objections to raising the minimum wage I’ve seen come overwhelmingly from futurists / utopians convinced that this will be the end of all jobs. They really seem to believe that some businesses can operate profitably with zero employees — that robots have gotten intelligent and cheap enough to replace “low-skilled” workers, as if the hardest part of working at McDonalds was pressing buttons on the cash register. It’s extreme intellectual arrogance.

  41. Houndentenor says:

    There is a supply and demand aspect to labor like everything else. Wages went up in the late 90s because if you paid too little either you’d get few or no applicants and your best employees would leave to go work for your competitor. Companies hated that. Now there are plenty of applicants for most jobs and since workers are willing to work for the going rate they are not going to pay a penny more. Obviously this is bad for the economy overall since most of the economy is driven by the spending of lower and middle income people. But that would require that the people in charge actually care about anyone but themselves. For evidence of how out of touch with reality CEOs are, watch the “reality” show “Undercover Boss” in which week after week executives find out what shitty lives their employees actually live on the pittance they pay them. They do something nice for one or two of them and then go back to their ivory tower feeling good about themselves. It’s revolting but it’s how things go now.

    So yes, we have to raise the minimum wage OR freeze prices and provide subsidized housing for the lower three quintiles in all cities. Those are the only reasonable options. You know things are fucked up when finding “affordable housing” is a problem for people earning well over the median income.

  42. BeccaM says:

    Corporate capitalism has one overriding motive: Profit. Immediate, short-term profit. There are only first-order concerns involved. How much does it cost me to produce X? All the factors go into this — materials, facilities, advertising and labor.

    Of these, while you want your employees to be competent, most corporations see no point in paying them one penny more than the company can get away with. Why? Short-term profit. The same motive that led to the ‘downsizing’ craze which began in the 1980s, forcing staff to do more work for less pay and zero job security.

    It’s only been around the edges of commerce we’re beginning to see a few businesses realize that a living wage actually results in significantly higher quality output (which increases sales), employee retention and loyalty (which saves money), and better customer satisfaction. However, most corporations are still of a mindset not to give a damn about the picture five years from now; the investor class only cares about this quarter’s profit margins.

    In the short term, cutting wages always increases profits; the long term doesn’t matter, because chances are they or some other junk-bond investor will load up the company with crippling debt, bleed it dry, and discard the bankrupted husk. Moreover, they don’t care about the 3rd or 4th order effect of employees having more money to spend and therefore being stimulative to the overall economy…because that’s not directly tied to immediate profit.

    Or to put all this in other terms: The form of capitalism as practiced in the United States (and in many other countries) is cancerous and parasitic, not symbiotic. If a company can add a few pennies per share in profits this quarter by poisoning a water supply used by thousands — and get away with it — they will. If they pay crap wages — as most fast food franchises, Walmart, and increasing numbers of companies have been doing for the last generation — they don’t care if it’s a drag on the overall economy. Shared sacrifice or even stepping away from those few pennies of additional profit are utterly alien concepts to the parasite. All that matters is whether the current quarter’s numbers are hit.

    The cure for all this? The same model as was used in attempting to design America’s constitution-based democratic republic: A separation and balance of powers. For several generations there were three ‘branches’ of power in the economy: Government, business, and labor. The economy boomed and the middle class grew. Living standards steadily increased, as did wages.

    Then business took over the government and now the two of them are destroying labor.

    The decline of living standards and the deflation of wages in America tracks directly with the decline of organized labor’s ability to bargain collectively. First came the demonization of unions, followed by a stead erosive attack on workers’ ability to organize.

    This will only change if or when ordinary people stop listening to the pro-corporatist, pro-plutocrat propaganda and realize they’re being exploited. At that point, just maybe the ‘consent of the governed’ will come into play.

  43. Naja pallida says:

    The only reason why prices would go up at all is McDonald’s punishing it’s customers. They make more than enough profit to cover wage increases without changing anything else about how they do business. The problem is that the only value Wall Street places on corporations is their quarterly proift numbers. So anything that cuts into those numbers is counted as a loss. Large companies like McDonald’s and Walmart can easily afford these wage increases, they’re just crying to cry.

  44. Indigo says:

    A Big Mac? No thank you.

  45. Mike_in_the_Tundra says:

    You would never catch me eating one of those, but if I did, that would be a reasonable price.

  46. nicho says:

    I wish the price of a Big Mac would go up to $15. Then people would stop eating them and might eat real food.

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