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Many business leaders fear that any increase in the minimum wage will be passed on to consumers through price increases thereby slowing spending and economic growth, but that may not be the case. They also observe that small minimum wage increases do not lead to higher prices and may actually reduce prices.
The Minimum Wage and Prices. The minimum wage acts like a tax on businesses, and they act accordingly. For example, she concluded that a 10 percent increase in the minimum wage would increase food prices by up to 4 percent and overall prices by no more than 0.4 percent.
Wage push inflation is an overall rise in the cost of goods that results from a rise in wages. To maintain corporate profits after an increase in wages, employers must increase the prices they charge for the goods and services they provide.
Raising the federal minimum wage will also stimulate consumer spending, help businesses' bottom lines, and grow the economy. A modest increase would improve worker productivity, and reduce employee turnover and absenteeism. It would also boost the overall economy by generating increased consumer demand.
If the minimum wage were increased to $15 an hour, prices at fast food restaurants would rise by an estimated 4.3 percent, according to a new study. That would mean a McDonald's Big Mac, which currently goes for $3.99, would cost about 17 cents more, or $4.16.
Gradually raising the minimum wage to $15 by 2024 would directly lift the wages of 28.1 million workers. The average directly affected worker who works all year would receive a $3,900 increase in annual wage income equal to a raise of 20.9 percent.
On a national scale, the nonpartisan Congressional Budget Office found that increasing the federal minimum wage from $7.25 to $15 per hour would result in pay raises for 17 million workers making less than $15 per hour and 10 million workers earning slightly above this rate.
The Raise the Wage Act of 2019, passed last year by the U.S. House of Representatives, would boost the federal minimum wage to $15 an hour by 2025, but the bill hasn't yet been taken up by the Senate for debate. In the meantime, states, cities and counties are taking their own steps to boost minimum wage laws.
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