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Originally Posted by B767drvr
Both of your points are excellent.
Speaking to this one… the "price inelasticity of demand"… is going to be an eye opener for some. Fast-food restaurants typically run on tight margins and high labor costs. Doubling your labor costs (even if phased in) will result in sharply higher food prices. At $12-15 for a "Happy Meal", you can bet demand will fall. This is Econ 101 stuff. Artificially higher wages without a commensurate productivity increase will result in higher costs and higher prices (suppressing demand).
Finally… higher costs and reduced demand (sales) will ultimately lead to reduced demand for labor (job cuts/reduced hours). If that mechanism is insufficient, then the business fails.  |
According to the article I linked from the Seattle Times, the cost of restaurant food rose 2-3% in cities where the minimum wage was raised. Even at 5% the cost of a Happy Meal may go from $4.00 to $4.20. This is Econ 101 stuff.