Calculator adds cost of $15 wages to fast-food prices

calculator and pencil

A free, online wage impact calculator will allow fast-food restaurants to calculate the price change necessary to maintain profits given an increase in the minimum wage.

On April 4, California Gov. Jerry Brown signed into law a measure that will raise the state’s minimum wage to $15 an hour by 2022. New York and Oregon have passed similar measures, and other states are considering increases.

“The calculator provides results under the assumption that the only input cost or operational changes are to the minimum wage. It will provide LSR [limited service restaurant] owners and managers an accurate starting point to evaluate their options,” says Richard Ghiselli, professor in the Purdue University School of Hospitality and Tourism Management.

[Low wages cost taxpayers $153 billion a year]

The calculator prompts managers to enter their zip code and some current operational costs. It then identifies the minimum wage in that area and provides analysis based on increased employee wages. Calculator users can enter wage increases in any increment for operational comparisons.

The current federal minimum wage is $7.25 an hour. Some states, including Illinois, Michigan, and Ohio, and US cities have raised the minimum wage to more than $10 an hour. In the past two years, fast-food workers across the nation have gone on strike or had demonstrations calling for wages to be increased to $15 per hour.

In an earlier study, researchers found that a $15 an hour minimum wage for fast-food employees would lead to an increase in prices. The amount would vary depending upon the level of wages in an area and the extent to which expenses are similar/dissimilar to the average LSR.

Source: Purdue University

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