As Wage Debate Rages, Some Have Made the Shift

SAN JOSE, Calif.—As lawmakers in the nation’s capital are mired in debate over likely outcomes from raising the federal minimum wage, businesses hit with local wage increases across the U.S. already are grappling with the reality.

A Carl’s Jr. franchisee in San Francisco offset the county’s higher minimum wage—now $10.74—by using less shortening to make french fries. A White Castle in Illinois cut two jobs to match competitors’ costs in nearby Indiana, where the mandated wage is lower. A California pretzel maker pays different wages at mall stores that straddle two cities.

The consequences of a minimum-wage increase cut across everything from the number of hours employees are assigned, to menu prices to how often a drive-through lane is cleaned, according to interviews with more than a dozen businesses. The real-world impacts can vary: Some companies had no difficulties passing along labor-cost increases while other businesses said they might close marginal stores to pare losses.

Such adjustments are rarely captured in the now-sizzling debates over whether a national wage increase would harm the economy or reduce poverty. But as Congress debates lifting the federal minimum wage by nearly 40% in three steps to $10.10 an hour from $7.25, the local mandates are proving there will be no simple way to categorize the range of business impacts.

In part, lawmakers largely have focused on the broadest implications for the U.S. economy. The nonpartisan Congressional Budget Office in February estimated raising the minimum wage to $10.10 an hour would reduce U.S. employment by 500,000 but lift 900,000 Americans out of poverty.

In many cities and states, minimum-wage increases have already complicated the budgeting calculus. Twenty-one states, representing more than half the U.S. population, now mandate pay above the federal rate. Maryland will join them after legislators voted for an increase Monday.