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The Food Institute Blog

What Does the $15 Minimum Wage Mean for the Price of Your Lunch?
Posted on July 29, 2015 by Chris Campbell

"Fight for $15" has become a popular rallying cry for laborers looking to increase their wages across the country. Although some proposals want to raise the minimum wage across the board, a surprising portion of legislation is aimed directly at foodservice outlets. Could this be a side-effect of "The Great Convergence?" As Americans spend more and more of their food dollars outside of the home, it would make sense that they have grown increasingly more interested in the well-being of those serving them their meals.

Regardless of their motives, in general, Americans seem to support the notion, as a study published in January from the National Employment Law Project explained. The survey found that 75% of Americans support an increase in the federal minimum wage to $12.50 by 2020. When the question was rephrased to expand the federal minimum wage to $15.00 in the same time frame, a resounding 63% of Americans supported it. The report also found that 71% of Americans support increasing the minimum wage for tipped workers so that all Americans are subject to roughly the same wage floor.

It would also appear that Americans' views on the subject have started to influence politicians and legislation. In May, the Los Angeles city council voted in favor of raising the minimum wage within the city to $15 an hour by 2020. Last week, New York approved a $15 minimum wage for fast-food employees who work for chains that have 30 or more locations. And as recently as yesterday, Mayor Kevin Johnson of Sacramento formally launched a task force comprised of business, community and labor leaders to study possible wage increases in the city.

Much like Darren Tristano of Technomic, I'm not here to explain the moral, societal or ethical ramifications of increasing the minimum wage. Rather, I'd like to explore the commercial implications. For Technomic's 2014 "Generational Consumer Trend Report," the research group found the top reason Millennial and Generation Z diners choose a restaurant is whether or not they treat their employees well. As these two generations expand their purchasing power, it may make sense for foodservice outlets to tap into the social responsibility that resonates with these consumer groups.

The rising minimum wage does pose one interesting question: what does this mean for food prices? Research from Purdue University could illuminate the subject. According to their research, raising wages to $15 an hour for limited-service restaurant employees would lead to an estimated 4.3% price increase at most restaurants. If the wage was increased to $22 per hour, price increases would spike to about 25%. For those who wanted to keep prices at their current levels, product sizes would have to be scaled back between 12% and 70%.

Economic changes such as these do not happen in a vacuum, and it will likely be years before we understand the full implications of such a move towards a higher minimum wage. But one thing seems to be certain: your favorite value hamburger will be going up in price, down in size, or, in extreme cases, both, in the near future.

Posted in Foodservice   Fight for $15  

 

About the Author

Chris Campbell
Business Writer
The Food Institute

Chris focuses on fresh, canned and frozen fruit and fresh and dried vegetables for the Food Institute Report. In addition, he assists in compiling data for various Food Institute publications throughout the year. He is a proud Rutgers University alumnus with a degree in English, and has a background in web writing for a variety of industries, including legal, foodservice and small-to-medium sized businesses. In his downtime you can find him watching New York Yankees baseball, hiking, enjoying live music and spending time with his dog Kaiden. He invites you to contact him via email at chris.campbell@foodinstitute.com to talk about anything food-related.

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