Over the past few years, there has been a growing movement in the United States to substantially raise the federal minimum wage, which has been fixed at $7.25 per hour since 2009. One widely embraced goal within this movement is to raise the federal minimum to $15 an hour. This would constitute a 107 percent increase over the current $7.25 minimum. The question we address in this paper is whether it is feasible to expect that the federal minimum wage could be raised to $15 per hour without causing major negative unintended consequences, specifically as it would affect the U.S. fast-food industry. The fast-food industry is an appropriate industry on which to focus this discussion. This is because, along with other sectors within the restaurant and food preparation sector, it employs fully 47 percent of all workers who earn at or below the federal minimum.1
The most straightforward possible negative consequence of a minimum wage increase to $15 an hour would be that it would generate large-scale employment losses, within the fast-food industry and more broadly. Through such an outcome, the good intentions that motivate the demand for a $15 federal minimum wage would result instead with low-wage workers and their families being made worse off through the contraction in job opportunities.
In addressing any such proposal along the lines of a $15 federal minimum wage, it is therefore critical to assess the relative likelihood that such a measure would generate its intended consequence—i.e. raising incomes and living standards for low-wage workers and their families—as opposed to its unintended consequence—i.e. reducing job opportunities and thereby worsening the life circumstances for low-wage workers. To preview our findings, we show that the U.S. fast-food industry could absorb the rise in its overall costs generated by an increase in the federal minimum wage to $15 an hour without causing employment losses. More specifically, we present a scenario through which the federal minimum wage rises in two steps over four years—to $10.50 an hour within one year and to $15 an hour three years later. We show that the cost increases resulting from these measures could be absorbed by the fast-food industry not only without causing employment losses, but, crucially, without business firms within the fast- food industry having to reduce their average rate of profitability. This is true, regardless of whether such a redistribution from business owners to low-wage employees is justified as one means of reducing inequality within the U.S.
Chosen excerpts by Job Market Monitor. Read the whole story at A $15 U.S. Minimum Wage: How the Fast-Food Industry Could Adjust Without Shedding Jobs
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