Raising the Minimum Wage for Working Men and Women in California and the Rest of America

McDonald's Can Afford to Pay More

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The restaurant industry, which employs one in 10 Americans, many of them earning low wages, says it can’t afford an increase in the federal minimum wage. On closer inspection, that argument isn’t as strong as it might seem.

While President Barack Obama’s proposal to raise the federal minimum wage to $10.10 an hour would increase costs for restaurants, it’s not clear how much. Labor makes up about one-third of restaurants’ total costs, but only 5 percent of restaurant workers earn the federal minimum wage, according to the National Restaurant Association. The average wage for non-supervisory restaurant workers is $9, which isn’t much below the president’s proposed level.

Association executives speaking at a Bloomberg Government breakfast yesterday said the real concern with a higher minimum wage is what they call the cascade effect: Workers higher up the wage scale will see their lower-paid colleagues making more, and demand higher pay as a result.

That seems like a flimsy argument; after all, if restaurants raised people’s wages just because workers demand it, then we wouldn’t be having this conversation. But let’s assume it’s true, and that a higher minimum wage would raise labor costs not just for the lowest-paid workers but across the board, pushing up prices. The better question is: What happens next?

• Category: National, Notable • Tags: Christopher Flavelle, Fast-Food