Jack In The Box Says California's $10 Minimum Wage Will Increase Prices By Just 1%

| by Jonathan Wolfe

One of the most commonly used arguments against raising the minimum wage is that it will cause price increases that offset the difference. This week, fast food company Jack in the Box was the latest of many companies to admit the increase in employee wages would have just a marginal impact on their prices.

In a recent conference call, Jack in the Box executives said California’s looming minimum wage hike would increase their prices in California by 1.4%. If they choose to spread the cost of the wage increase across restaurants nationwide, their prices would rise by less than 1%.

“… in our 2015 numbers, we’ve assumed that we will take some price to offset the California minimum wage, which we estimate to be about 1.4%, this is just for California restaurants, and a little less than 1% if we take it across the entire system,” the executive said.

A 1.4% price increase means a $5.00 meal would cost $5.07 after the new minimum wage takes effect.

Jack in the Box is the latest of many businesses to admit a minimum wage increase would have only a slight affect on the prices of their goods.

The Cheesecake Factory, which operates 20% of their restaurants in California, responded to the wage increase by raising their prices by 2%. A $16.00 meal would now cost $16.32.

The Center for Economic and Policy Research recently conducted a detailed, wide-ranging report on the current and historical impact of minimum wage increases. They concluded that the “minimum wage has little or no discernible effect on the employment prospects of low wage workers.”

“Economists have conducted hundreds of studies of the employment impact of the minimum wage,” the report says. “Summarizing those studies is a daunting task, but two recent meta-studies analyzing the research conducted since the early 1990s concludes that the minimum wage has little or no discernible effect on the employment prospects of low-wage workers."

The report found the most significant impact minimum wage increases have on the job economy is  a reduction in labor turnover, which, they say, “yields significant cost savings to employers.”

Sources: I Acknowledge, CEPR