The takeaway from UC Berkeley’s Institute for Research on Labor and Employment:
The policy increased prices about 3.7 percent, or about 15 cents on a $4 hamburger (on
a one-time basis), contrary to industry claims of larger increases. About 62 percent of the
increased costs were passed on to consumers in higher prices, suggesting that restaurant profit
margins, which were above competitive levels before the policy, absorbed a substantial share
of the cost increase. Since demand for fast food is highly price-inelastic, the price increases
likely raised restaurant revenue. Franchise owners pay a fixed share of their revenue in royalty
fees to their chains’ parent companies. The sectoral wage standard thus benefits the parent
companies.[snip]We find that the sectoral wage standard raised average pay of non-managerial fast food workers
by nearly 18 percent, a remarkably large increase when compared to previous minimum wage
policies. Nonetheless, the policy did not affect employment adversely. It did increase fast food
prices, on a one-time basis only, by about 3.7 percent, or about 15 cents for a $4 item. Consumers
therefore absorbed about 62 percent of the cost increases. These effects are benign. However,
restaurant profit margins likely fell and the royalty fees restaurant operators pay to franchisors
likely increased.
Read the full article here from UC Berkeley
