What to expect as the minimum wage goes up in the Twin Cities
When Chipotle announced that it was raising its minimum wage to $15, it also made the decision to raise its prices by 4 percent.
“It made sense in this scenario to invest in our employees and get these restaurants staffed and make sure that we have the pipeline of people to support our growth,” Chipotle CEO Brian Niccol said at the Baird Global Consumer, Technology & Services Conference. “And then with that, we’ve taken some pricing to cover some of that investment.”
Chipotle is not the first restaurant to raise prices in order to cover the increasing cost of labor, nor will it be the last. Research evidence documents numerous instances when customers bore the majority or even entirety of a wage raise through price hikes. One study, for example, found that minimum wage hikes coincide with price raises for McDonalds’ Big Mac. In some instances, of course, costs are absorbed by workers through job losses or reduced work hours and benefits. But in either case, no minimum wage hike ever came with zero costs.
In 2017, Minneapolis enacted the minimum wage ordinance that gradually raises the minimum wage on July 1 of every year since 2018. Starting tomorrow, big businesses will be required to pay $14.25 per hour, which is up $1 from last year’s $13.25. Small businesses will be required to pay $12.50 up 75¢ from last year’s $11.75. The minimum wage will reach $15 next year for big businesses, and 2024 for small businesses.
Similarly, big businesses –– 101 to 10,000 employees –– as well as small businesses –– 6 to 100 employees –– are facing a $1 minimum wage hike in St. Paul and will be required to pay $12.50 and $11 per hour, respectively. For micro businesses –– zero to five employees –– the minimum wage goes up by 75¢ to $10.
When the Minneapolis minimum ordinance was passed in 2017, Minneapolis council member Lisa Bender hailed it as a victory for workers. But since then even more research evidence has come out showing that minimum wage hikes are rarely a victory for workers –– they lead to job losses or other costs like irregular schedules and short hours, and they close the workforce to young and unskilled workers.
We should not expect anything different as the minimum wage goes up in St. Paul and Minneapolis tomorrow. That minimum wage hike is bad policy has been well demonstrated numerous times.