The Price of Higher Wages

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the street

Protesters seem to be unaware of what the ill effects of large pay increases at fast food restaurants and large retailers could be. Here are a few.

For McDonald’s, a leap to significantly higher wages might mean the popular dollar menu would have to be scaled back to cut costs. Across-the-board price increases, especially during periods of beef, poultry or dairy inflation, would likely have to be implemented. A more drastic action might be McDonald’s franchisees opting to reduce hours at the expense of customer service, sending people to competing fast food chains. In turn, that could hurt sales and trigger an adjustment in the number of employees.

Wal-Mart would also have to change how it approaches its business at a $15-an-hour minimum wage. One of those changes would likely be to jack up prices on fresh and packaged food, which as it stands, sell on razor-thin profit margins. The company could be forced to rely more heavily on its much-criticized computerized employee scheduling system. Doing so might impact the quality of Wal-Mart’s customer service, sending more customers to Amazon (AMZN).


Meanwhile, [Ryan] Williams thinks a $15-an-hour minimum wage would kill jobs and hurt workers who are currently working in the industry. Several other critics of $15-an-hour minimum wage have said as much, the idea being that employers will look for more skilled individuals, eliminating jobs for people with little to no skills.

In the case of fast food, Ryan Williams and other critics warn that employers will replace some positions with robotics and/or self-serve stations for customers to order food and fill drinks. They also contend that businesses that raise prices in an attempt to make the minimum-wage hike work will leave consumers unhappy.