Thursday, December 3, 2015

Higher wages won't substantially raise prices

Many low-wage employers have been waging a war of fear against raising the minimum wage upwards of $15 an hour. They put out a message, for example, that a fast-food hamburger will now cost $10 and will make products unaffordable.

But a new New York Times piece shows that just isn't the case. Where some jurisdictions have raised their local minimum wage to levels approaching $15 themselves, several restaurant chains are reporting it hasn't caused them to dramatically increase prices. Representatives from Shake Shake, Domino's Pizza, Chipotle and Chili's said prices haven't gone up more than two percent.

As the Times' article states, inflation is not likely to run rampant if salaries are increased:
The last seven years have featured flat wages in inflation-adjusted terms, combined with rising corporate profit margins, two phenomena that aren’t completely unrelated. The behavior we’re seeing out of major restaurant chains may just be a sign that this is reversing, and that worker compensation will gain at the expense of corporate profits. If that’s the case, worker pay has some room to run before consumer price inflation is a real problem.
Workers' salaries should not be held hostage by obscene corporate profit margins. Hardworking Americans have been getting the short end of the stick for far too long. They only want to be able to earn a fair wage so they can support their families. But right now, that's a real struggle for many of them.

Despite what critics of a higher minimum wage might believe, the U.S. businesses will not be devastated by an increase in the salary floor -- even to $15 an hour. Instead, raising wages will improve the economy because it will give people more money in their pockets to spend. And that's good for everyone.