Minimum-Wage Increase Could Mean Higher Restaurant Prices

minwage2014.jpg
Photo by Andinarvaez
Fast-food workers could soon be making more money.
Last Tuesday during President Obama's State of the Union address, fast-food workers and their fellow minimum-wage workers were an important topic. Obama called for the minimum wage for federal workers to be raised from $7.25 an hour to $10.10 an hour. He also called for an increase in the minimum wage across the country, a move that would help people in the restaurant, construction and retail industries (among others) to make a "living wage."

But while many see a pay increase as a positive step toward reducing income inequality, the restaurant industry worries that operators will have to raise food prices to respond to the higher labor costs. The National Restaurant Association reports that a higher minimum wage could lead to more expensive food, fewer employees, a drop in the quality of food that is served and fewer franchises.

The minimum wage is currently determined at the state level, and many state governments have already raised it or pledged to raise it above $7.25 an hour to adjust to a changing economy and the cost of living. Texas isn't yet one of these states.

Along with pledges to raise the minimum wage come talks of raising tipped minimum wage as well, from $2.13 an hour to as much as $5 an hour. Because of this possibility, it's not just major fast food chain operators who are voicing their displeasure. It's the owners and operators of much smaller restaurants as well.

Currently, if a tipped waiter or waitress doesn't make an average of $7.25 an hour with tips and their $2.13 wage, the restaurant is required to pay the difference. With the non-tipped minimum wage likely to increase in many states, some lawmakers and restaurant-worker advocates are calling for the first increase in tipped minimum wage since 1991.

Tom Harkin, a Democratic senator from Iowa, has proposed to raise the minimum wage nationwide to $10.10, continually adjust the minimum wage to respond to inflation and raise the minimum tipped wage to 70 percent of the minimum non-tipped wage. He pointed to concerns raised by the restaurant industry in 2007 about the minimum wage increase and noted that the previous raise didn't seem to hurt the industry at all, contrary to what the National Restaurant Association might claim.

Still, restaurateurs large and small say that any wage increases will mean they'll have to cut their labor force and raise prices, even though a recent report from Piper Jaffray restaurant analyst Nicole Regan Miller suggested that the status quo could be maintained with little change to restaurant structure or quality.

"On a broad level, we recognize additional labor costs as an added stress to restaurant operators," wrote Regan, "but ultimately believe potential impacts should be manageable through a combination of menu price and/or operational efficiencies."

Even though Texas hasn't made any headway toward changing the minimum or tipped wages, what do you think is the right way to go?

Should the minimum wage be raised? Should the tipped minimum wage be raised?

And would you be willing to pay more for your Big Mac in exchange for the peace of mind that your server is able to pay her bills?

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17 comments
meade1635
meade1635

Considering the fact that America is a country filled to the brim with people that are morbidly obese, I don't see how this could be a bad thing. I know how to cook and there are grocery stores in every city and town across this land. These fast food restaurants and sit down restaurants should only be eaten at occasionally anyway. They are not supposed to be a staple in our diet. If the price goes up, there's a possibility this country will be a bit healthier. If the quality of the food goes down, well ... The food is pretty much sh*t anyway. Therefore, the country could be a little healthier. I'm all for this increase.

Casey Quillen
Casey Quillen

Why should prices have to go up? Corporate profits are at an all time high (not just at McDonalds), the problem is they are not sharing those profits with the employees who actually work in the restaurants. How can a CEO take home a million or billion dollar bonus without increasing the price of the food? Because when they get it, the company doesn't have to pay taxes on it. According to recent research by the Institute for Policy Studies, “the CEOs of the top six publicly held fast-food chains pocketed more than $183m in fully deductible 'performance pay,' lowering their companies’ IRS bills by an estimated $64m” over the past two years.

Jason Love
Jason Love

The pay between the dish washer and waiter at Pappasittos is not almost the same.

Jason McDaniel
Jason McDaniel

Stop eating garbage and you won't have to worry about higher prices

Raulitoway Valdes
Raulitoway Valdes

The work load between a waiter and a fast food worker is different yet the pay is almost the same... I thought the min wage was for city/govt workers anyway.

Jason Love
Jason Love

Guess you will need a way to pay for government mandate insurance.

Sam Samson
Sam Samson

Child Support will go up automatically.

Antonio Martinez
Antonio Martinez

rising prices are a symptom of inflation, the flood of money created by the Fed and private banks is the reason for the decline in our purchasing power. If Mcd's increases the price of food to pay it's employees livable wages, I would gladly pay.

Jason Love
Jason Love

Do you think a publicly held company wants to see profit margins decrease the same percentage as minimum wage increase?

texmex01
texmex01 topcommenter

I would pay 1.99 for 2 JIB Tacos if it meant the person behind the counter could feed their family.....

Corey Mueller
Corey Mueller

No way the 2% isn't getting their record profits, stick it to the middle and lower classes..

JDewitt
JDewitt

Minimum wage has lagged way behind inflation for the past 30 years, and raising it would help over 30 million low wage workers. There is lots of evidence that raising it would not adversely impact jobs, though it might add a bit to your burger. I'm willing to pay 60 cents or a dollar more for this. It's sad we're even having this conversation. 

rkokosz
rkokosz

Those CEOs worked hard to get their million dollar bonuses. I own a successful business in Houston and I can tell you if you raise wages, you're the one who pays, not the company. Companys don't just pay wages, not that simple. I have to pay social security and tax on each employee, for a percentage of their earnings. The American dream is if you work hard you can have great things. Those CEOs worked hard and achieved. If your child grew up and worked hard wouldn't you want him to be rewarded? Making no economical distinction between an achiever and a nonachiever is communism. Bottom line is you raise wages everyone pays the price, but sounds like you'd prefer to help the nonachiever.

kagan34
kagan34

I wish inflation were actually a problem. Deflation is more likely here as in Europe. You and your flood of money theory doesn't wash one bit.

meade1635
meade1635

@rkokosz I don't think it's a question of being rewarded, it's a question of a wage allowing people to survive. I'm glad your business is successful, but wouldn't you agree that without the people you're referring to as "nonachievers" your business would be nothing? You need employees and these people aren't trying to get million dollar bonuses like you get for being such an achiever, they're simply trying to able to afford to get to their menial job for which you hired them. They are trying to put food on they're tables. They are trying to clothe their children. They are trying to survive. You sir, sound like an ass.

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