McDonald’s Response To Minimum Wage Hikes Totally Undercuts The ‘Fight For $15,’ New Study Shows

Almost all the higher labor costs from minimum wage hikes resulted in an equivalent increase in menu prices.

The push for a $15 federal minimum wage continues across the country. But new research shows that if the “Fight for $15” wins, the biggest loser may just be your wallet next time you want to chow down on a Big Mac or Egg McMuffin.

A recently-released study reveals that past minimum wage hikes resulted in much higher menu prices for consumers. 

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Princeton economist Orley C. Ashenfelter and Czech economist Štěpán Jurajda studied price and wage data from almost every McDonald’s (MCD) restaurant in the US. They found a “full or near-full price pass-through of minimum-wage-induced higher costs of labor.” In English, this means that by vastly increasing production costs,  minimum wage hikes resulted in an equivalent increase in menu prices. 

A Nominal Minimum Wage Increase Doesn’t Actually Mean Workers Are Better Off

What does this mean? 

Well, minimum wage hikes are intended to help workers. Proponents say that everyone deserves a “living wage” and argue that a government-mandated wage increase will mean higher wages for workers. In contrast, the most common counterpoint against minimum wage increases is that they lead to unemployment. This is indeed true, and the nonpartisan Congressional Budget Office estimates that a $15 federal minimum wage would eliminate at least 1.4 million jobs. 

However, the McDonald’s example reminds us that there’s another angle to this debate as well. Even if minimum wage hikes didn’t shed jobs, they would still cause harm in other ways.

Supporters of hiking the minimum wage point to workers’ nominal wages and argue, correctly, that some workers would see higher numbers on their checks every week. However, nominal figures aren’t actually what matter. A worker’s real income and standard of living is best measured by the purchasing power of their wages.

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