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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.  |
You are right to some extent. Remember that other salaries and wages will rise commensurate to that higher minimum wage.
The minimum wage we might have made of $1.25 per hour in 1965 is now $7.50. The McDonald's meal of a burger, fries, and shake cost 45 cents back then. Basically, it was 25 minutes to buy that meal. Now that meal from the dollar menu, it costs $3.50 or takes approximately the same length of time to earn that meal at minimum wage.
As salaries rise, other prices follow. Remember, it is not only fast food restaurants to which the higher minimum wage applies.