How much would you pay for a Big Mac?
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Over the past week, McDonaldâs and Chipotle both announced plans to raise their menu prices in California next year in an effort to offset the stateâs new minimum wage increase.
âȘ Some quick background: In September, Californiaâs restaurant industry and state labor groups reached a compromise following months of negotiations over working conditions and wages. Under the new deal, restaurant chains with at least 60 locations nationwide will have to pay their California workers a minimum wage of $20/hour starting April 1, along with annual pay-bumps of at least 3.5% through 2029.
- In response to the upcoming wage hikes, McDonaldâs and Chipotle said they will increase menu prices by a yet-to-be-determined amount to account for some of the higher labor costs.
- The National Owners Association, an independent advocacy group of over 1,000 McDonaldâs franchisees in the US, projects the bill will cost each California restaurant $250,000 annually.
đž Big picture: Businesses across America have been hiking their prices for more than two years in response to a combination of factors including increased labor costs, which rose to a 20-year high in 2021 and have remained at or above that level ever since.
And, moving forward, the recent surge in strike actions and new labor contracts â including union deals at UPS, the Big Three automakers, Hollywood studios, and healthcare giant Kaiser Permanente â is expected to further push up prices across the US economy, since companies often try to pass on increased labor costs to consumers.
đ Flash poll: In general, would you support businesses paying higher wages even if it results in higher prices for goods and services?
See a 360° view of what media pundits are saying â
Sprinkles in favor of more wage increases
- Some commentators argue that companies that offer competitive wages and great job benefits will find themselves with motivated and happy employees who work harder and longer and are more productive than the alternative option.
- Others contend that unions and collective labor are key to improving the economy and the lives of all Americans by increasing wages, improving work environments, and making workers more resistant to economic downturns.
- âGood Jobs Are Good Businessâ âZeynep Ton, Professor of the Practice in the Operations Management group at MIT
- âUnions are key to sustaining a stronger economyâ âThe Shorthorn Editorial Board
- âThe High Cost of Neglecting Low-Wage Workersâ âJoseph Fuller and Manjari Raman, Harvard Business Review
Sprinkles in favor of fewer wage increases
- Some commentators argue that laws requiring higher wages for lower-paying jobs would force employers to cut back on staff and potentially risk going out of business, which would end up hurting both workers and owners.
- Others contend that laws and regulations forcing companies to pay employees higher wages make it more difficult, especially for locally owned mom-and-pop franchises, to properly run businesses by interfering with markets based on supply/demand.
- âHigher minimum wages may increase homelessnessâ âMegan McArdle, WaPo
- âCompromise will boost fast food costsâ âOrange County Register Editorial Board
- âWhen the minimum wage rises, does homelessness rise too?â âJeff Jacoby, Boston Globe
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