What Effect will Raising the Minimum Wage Really Have on Fast Food Restaurants?

Jessica SarterSmall Business

The debate over raising the minimum wage is likely to be a hot topic this election cycle.  Congressional Democrats, with the backing of the President are proposing a nationwide increase to $10.10 per hour. This would equal approximately $21,000 for a full-time worker per year.  Even if the minimum wage were raised to $10.50 per hour, it has been estimated that fast food restaurants would only see their costs increase by 2.7%, according to a petition signed by 100 economists.

In the case of McDonald’s, for example, according to these economists, over half of the cost increase could be recouped by raising the price of a Big Mac by five cents, from $4.00 to $4.05.  Industry sources dispute these numbers and argue as well that raising the minimum wage would be a “job killer”. Presently, many fast-food restaurant workers’ salaries already exceed the minimum wage.  Even assuming that the cost of wages equals 30% of restaurant sales and that 2/3 of the workers are paid minimum wage and the balance exceed it, raising the minimum wage by 20% should only increase the cost of wages to 34% of sales, a 4% increase in costs which could be offset by increasing the cost of the Big Mac by sixteen cents.  Would this really be a job killer or lower sales when you consider that these few extra dollars paid to workers are immediately put back into the economy for essential goods and services?