Testimony on Raising the Minimum Wage for Fast-Food Workers
An increase in the fast food minimum wage to $15 an hour, as the Wage Board is considering, represents an increase of 66 percent. According to the Bureau of Economic Analysis, labor costs account for slightly more than one-third of revenue for food and drinking establishments. Assuming no substitution effects, prices would go up by about 22 percent. If management could substitute away from direct labor, prices could go up by about 15 percent. To assume that prices would not increase with a 66 percent labor price hike is economic naïveté.
An increase in the fast food minimum wage to $15 an hour, as the Wage Board is considering, represents an increase of 66 percent. According to the Bureau of Economic Analysis, labor costs account for slightly more than one-third of revenue for food and drinking establishments. Assuming no substitution effects, prices would go up by about 22 percent. If management could substitute away from direct labor, prices could go up by about 15 percent. To assume that prices would not increase with a 66 percent labor price hike is economic naïveté.
Read the full testimony here.
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