by Mitch Kokai
Senior Political Analyst, John Locke Foundation
One good aspect of a minimum wage increase: People willing to look at the evidence will get an easy lesson in basic economics. Alex Adrianson offers details in a Heritage Foundation “Insider Online” blog.
How will San Francisco businesses pay the higher wages required by the city’s raising of its minimum wage? From Mark Perry, here is some evidence that “there ain’t no such thing as a free minimum wage hike”:
From an equity research report issued to investors by global investment banking and wealth management firm William Blair on Chipotle Mexican Grill, Inc. (NYSE: CMG) – “Price Increases Have Begun Early in Third Quarter” (received privately):
• In our weekly survey of ten of Chipotle’s markets, we found the company implemented price increases in half of the surveyed markets this week—San Francisco, Denver, Minneapolis, Chicago, and Orlando. In most markets, the price increases have been limited to beef and average about 4% on barbacoa and steak, toward the lower end of management’s expectation for a 4% to 6% price increase on beef.
• San Francisco, however, saw across-the-board price increases averaging over 10%, including 10% increases on chicken, carnitas (pork), sofritas (tofu), and vegetarian entrees along with a 14% increase on steak and barbacoa.We believe the outsized San Francisco price hike was likely because of increased minimum wages (which rose by 14% from $10.74 per hour to $12.25 on May 1) as well as scheduled minimum wage increases in future years (to $13 next year, $14 in 2017, and $15 in 2018).
At higher prices, customers will buy fewer burritos, which means in San Francisco Chipotle will need to employ fewer burrito makers than it previously did.