Report: Fast food industry could survive $15 minimum wage

Congress could more than double the federal minimum wage without doing serious harm to the fast-food industry, according to a report from economists at the University of Massachusetts at Amherst. In a hypothetical scenario in which the minimum wage gradually rose from $7.25 per hour to $15, the authors of the report found that fast-food companies would be able to “fully absorb” the increase without limiting its profit margin.

The industry could absorb increased labor costs, the report contends, by reducing turnover and slightly increasing prices. Reducing turnover would theoretically increase the productivity of the employees, therefore reducing the increase in labor costs.

“In terms of policy implications, our results offer a straightforward conclusion,” the report says. “Achieving a $15 federal minimum wage within the U.S., phased in over four years, should be seen as a realistic prospect."

The $15 figure was not selected at random: It is the wage floor that protesting fast-food workers have been demanding for more than two years as part of a nationwide campaign backed by the labor union SEIU. Thanks in part to labor movement pressure, Seattle and San Francisco have approved a $15 minimum wage in the past year, and various other cities and states have raised their wage floors above $7.25 an hour, the current federal minimum.

Industry groups such as the International Franchise Association have denounced the demands for a $15 wage floor as irresponsible.

“Mandating wages would lead to higher prices for consumers, lower foot traffic and sales for franchise owners, and ultimately, lost jobs and opportunities for employees to become managers or franchise owners,” said International Franchise Association President and CEO Steve Caldeira in August. “The franchise industry is a proven job creator and career builder, yet efforts to double the minimum wage to $15 would clearly jeopardize opportunities for existing and prospective employees."

In other parts of the world, the fast-food industry pays its lowest-wage employees considerably more. Burger King and McDonald’s employees in Denmark, for example, tend to earn at least $20 per hour. In Australia the standard minimum wage is AU $16.87, or $13.39 in U.S. dollars.