Two of America’s most popular fast food chains, McDonald’s and Chipotle, are raising their menu prices in California, a direct response to state legislation recently enacted by Gov. Gavin Newsom (D) that will increase the minimum wage for fast food workers to $20 per hour.
This wage hike, while seemingly beneficial for workers, will actually lead to a chain reaction that harms the very people it aims to help. The National Owners Association, a group representing over 1,000 McDonald’s franchisees in the United States, estimates that the new wage law will cost each California-based restaurant an additional $250,000 annually. This added expense leaves franchise owners with little choice but to raise menu prices in order to offset their losses.
Say what? The wage was raised so they could afford things like fast food. Hmm. Who could have seen this coming? 🤔https://t.co/WIzC6yECmJ
— Kat (@katancorUS) November 1, 2023
The economic argument that increasing the minimum wage leads to higher consumer costs for products like fast food hinges on the concept of cost-push inflation. When the minimum wage is raised, businesses that employ many minimum wage workers, such as fast food restaurants, face increased labor costs. In order to maintain their profit margins, these businesses often pass on the increased costs to consumers in the form of higher prices for their products or services. This is particularly true in the fast food industry, which operates on slim profit margins and is highly sensitive to changes in labor costs.
Chipotle’s Chief Financial Officer, Jack Hartung, told analysts that the company expects to increase prices by a “mid-to-high single-digit” percentage. McDonald’s has not yet decided on the exact amount of their price hike.
While raising the minimum wage might seem like a noble cause, it ultimately does more harm than good. Industry experts predict that the wage hike will drive away lower-income Americans who have already cut back significantly on their fast food consumption due to rising prices. This, in turn, creates a vicious cycle of rising consumer prices and reduced consumption that harms both businesses and consumers alike.
California’s Democratic majority in the state Assembly and Senate, along with Newsom, have decided to play favorites with the state’s workforce, elevating the value of fast food workers over other essential workers, such as EMTs. This discriminatory approach to wage legislation is not only unfair but also detrimental to the state’s economy.
California already has the highest cost of living in the nation, with residents paying the highest sales tax and the fourth-highest overall tax rate. This, coupled with the state’s exorbitant housing costs, drives residents out searching for more affordable living. Higher menu prices exacerbate the problem and further harm the state’s struggling economy.
The Democratic party, which prides itself on being the champion of the working class, is hurting its voter base with this legislation. By driving up prices and increasing the cost of living, Democrats are making it even harder for lower-income families to make ends meet.