Here’s What a $15 Per Hour Wage Means For Fast Food Prices

Fast-food workers and supporters organized by the Service Employees International Union (SEIU) protest in front of a McDonald's Corp. billboard on the street in Los Angeles, California, U.S., on Thursday, Aug. 29, 2013. Fast-food workers in 50 U.S. cities plan to walk off the job today, ratcheting up pressure on the industry to raise wages and demanding the right to wages of $15 an hour, more than double the federal minimum of $7.25. Photographer: Patrick T. Fallon/Bloomberg via Getty Images

A new study shows how it could affect consumer costs

As New York State moved closer to approving a $15 per hour wage for fast food workers last week, there was speculation about what such a hike would mean for consumers. A new study provides this answer: prices will increase ever so slightly.

Researchers at Purdue University’s School of Hospitality and Tourism Management found that raising pay for fast food restaurant workers to $15 an hour—the minimum wage that cities like Seattle and San Francisco have already adopted—would result in an estimated 4.3% increase in prices at those restaurants. That means the price of a $3.99 Big Mac would jump to $4.16. The study also found that offering health care benefits to fast food workers at restaurants with fewer than 25 full-time employees would have a minimal effect on prices because of current tax credits in the Affordable Care Act.

The study also examined the potential price fallout of a $22 per hour wage—the pay rate of the average American in the private sector, according to Bureau of Labor Statistics. That hike would cause a 25% increase in prices, the study says.

The Purdue researchers relied on data from the National Restaurant Association for the study and examined information from Healthcare.gov to determine the price impact of offering health-care insurance.

“There were no surprises. We thought prices would go up. We just wanted to know how much they would go up if you raise pay and offer health insurance,” said Richard Ghiselli, professor and head of the School of Hospitality and Tourism Management in the study release. “The other way to look at this if you don’t want to raise the prices is to examine the impact on product size. As expected, a hamburger would be much smaller.”

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