How Much Would Higher Wages Cost Consumers?

There are disagreements about the answers, of course.

A study by the UC Berkeley Labor Center asked in 2005 by Amy Vassalotti about how will a proposed increase from $6.75 to $7.75 in the California minimum wage would impact the California economy?

This study assesses the potential economic implications for the private sector of an increase in the current California minimum wage. It finds that most establishments would face very modest cost increases, which entails only minor adjustments, if any, to the new minimum wage law. The study concludes that the cost increases to businesses are very modest, except in the accommodations and food services industry, which should be able to pass the cost increases on to consumers through price increases. Overall, the minimum wage increase should not affect the California economy negative ly, via loss of employment or business relocation out of the state.

In 2013, Rep. Markwayne Mullin, R-OK, argued publicly a far different outcome as reported in the Huffington Post on Aug. 12.

By David Winograd, Huffington Post

Raising the minimum wage to $10 an hour could increase the price of a hamburger by about 438 percent, Rep. Markwayne Mullin (R-OK) argued at a town hall meeting with constituents on Thursday, Think Progress reports.

“You guys wanna pay $20 for a hamburger at McDonald’s?” Mullin said. “If you wanna increase it, that’s great,” he added, “but what you’re gonna do is punish everybody along the way.”

The math behind Mullin’s argument is a bit hazy and it’s not clear from his remarks how a 38 percent increase in wages would lead to a more than 400 percent increase in prices. We reached out to Mullin’s office Monday afternoon but didn’t receive a response. Other economists predict a much more modest increase in fast food prices as a result of a minimum wage increase.

We do know, as Think Progress points out, that the price of a Big Mac in Australia –- where the minimum wage is $14.50 an hour –- is just 6 cents higher than in the U.S. where the average Big Mac costs $4.56.

While acknowledging that fast-food companies are profitable on the backs of low-paid workers, the New Yorker’s James Surowiecki points out in a piece last week that a $10.10 minimum wage is something that “companies can easily tolerate.”

There are also a number of examples of successful fast-food restaurants that pay their employees above the minimum wage, including In-N-Out Burger, which starts its workers at $10 an hour, according to CBS DFW.

Mullin’s comments come a few weeks after fast food workers went on strike across the country demanding higher pay and as Congress mulls over a bill to increase the minimum wage to $10.10 an hour from $7.25.

The federal minimum wage hasn’t been raised since 2009. A recent study found that if minimum wage had kept pace with inflation since the 1960s, it would be $10.52 cents today.

Blogger David Atkins adds this at

Thursday, April 10, 2014

No, the cost of a living wage won’t significantly affect prices

by David O. Atkins

WalMart has always claimed that paying its workers better wages would hurt the economy by leading to higher prices for consumers. Not so, according to a new report:

Would you be willing to spend one penny more for a box of macaroni and cheese if it meant that Walmart workers would no longer need food stamps to survive? Because that’s all it would cost, according to an analysis by American Public Media’s Marketplace.

While it’s unclear how many of Walmart’s workers are on food stamps, as many as 15 percent of the company’s employees in Ohio are. Applying that same percentage to the rest of Walmart’s workforce, Marketplace estimated the company would need an extra $4.8 billion to lift its average wages across the U.S. enough to get all of its workers off public assistance.

Walmart workers cost the government about $300 million a year in food-stamp costs, according to Marketplace. A single 300-employee Walmart store may cost taxpayers anywhere between $904,542 and nearly $1.75 million per year, a study by Democrats in the U.S. Committee on Education and the Workforce found.

Marketplace gets to its $4.8 billion figure by using an average wage for Walmart sales associates of $8.81 an hour. This figure, which was also cited in the congressional report by House Democrats — comes from market-research firm IBISWorld. Three years ago, an analyst at IBISWorld calculated the average based on job listings in urban areas, and posts submitted to the employer review site Glassdoor showed entry-level Walmart workers earning between $7 and $14, an IBISWorld spokesman told The Huffington Post.

Keep in mind, we’re not talking about the company making any less profit. They don’t pay their employees a decent wage not because it would be bad for business (see Costco for a refutation of that premise). It’s as much about raw Objectivist ideology as anything else.


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