Some economists say that in general, companies find other ways to respond to increasing wages other than raising costs because they do not want to lose customers.
As fast-food workers across the country walk off their jobs on Thursday to demand higher pay, the question for consumers becomes, what is the impact? Will I have to pay more for my Big Mac or Whopper if there is a wage hike?
Workers from chains such as McDonald's, Wendy's, Taco Bell and Burger King are demanding wages of $15 per hour — more than double the minimum $7.25 some make right now — and the chance to unionize without retaliation by management.
President Barack Obama has suggested raising the federal minimum wage to $9 per hour, and legislation is pending in both the House and the Senate that would raise the minimum to $10.10 per hour.
Reuters: David Ryder
Ryan Parker, a Wendy's employee, demonstrates in front of a Burger King location in Seattle on Thursday.
A McDonald's spokesperson called media reports about possible wage hikes "purely speculative" and said the company was not in a position to comment right now.
Mark Tabakman, a labor and employment lawyer with Fox Rothschild in New Jersey, told MSN News that in situations like this, companies are more likely to lay off workers than raise prices.
"I have not seen, in my experience negotiating labor contracts, a direct correlation between wage increases and cost of product increases passed on to consumers," Tabakman said.
According to Detroit-based labor lawyer Terry Bonnette, labor costs tend to get passed on in different industries in different ways, but the bottom line is that either the price of the product has to go up or the cost of making the product has to go down, which sometimes means cheaper resources.
For example, Bonnette said, manufacturing costs were reduced by moving from hand-made goods to machine-made goods. "What used to be made of wood is now made of plastic — some combination of these things has to happen," he said.
Kate Bronfenbrenner, director of labor education research at Cornell University, said that in general, companies find other ways to respond to increasing wages other than raising costs more than a small percent because they do not want to lose customers.
"Right now people at McDonald's don't make enough money to buy food at McDonald's," she said. "If discount stores and fast food becomes more expensive for those who are making minimum wage — then who is going to shop at those stores?"
Increasing the minimum wage, she says, will boost the economy and enable those businesses to hire more people and raise wages.
Reuters: Lucy Nicholson
Workers and their supporters protest outside Burger King as part of a nationwide strike by fast-food workers to call for wages of $15 an hour in Los Angeles on Thursday.
The most increase any study found in the price of hamburger rounded up to 5 cents if wages increased 10 percent, Bronfenbrenner said.
According to the National Employment Law Project, fast-food jobs — which include cooks, cashiers, delivery workers and other non-managerial positions — rank among the lowest-paying occupations in the U.S.
The group dismisses the fast-food industry's position that low-paying jobs serve as a stepping stone to higher-paying work, arguing that managerial positions account for only a tiny fraction of jobs in the fast-food industry.
But Scott DeFife of the National Restaurant Association said there would be a cost to a significantly higher minimum wage.
Restaurants already operate on very thin profit margins, DeFife said, so "current proposals aimed at doubling the minimum wage would have a significant effect on the private sector’s ability to create jobs, especially those typically filled by first-time workers and teens."
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