Yes, Big Macs Cost More In High-Minimum-Wage Areas—but Not For The Reason You Think
As the federal minimum wage conversation continues, conservative dads everywhere are taking to Twitter to lament skyrocketing fast food prices. (Just mine? Okay.) And, yes, areas with a higher minimum wage do often see higher food prices—but the phenomenon isn't entirely wage-related. For example: a Restaurant Business analysis of Big Mac prices in all 50 states found that McDonald's franchisees charged customers a "wide variety of prices" for Big Macs and Cheeseburgers, ranging from $3.75 for a Big Mac in Austin, Texas, to $6.39 for one in Seattle. And while this may seem like a convenient argument against raising the federal minimum wage, it's just not that simple.
According to Restaurant Business, customers in cities where the minimum hourly wage is $14 or more pay 26% more for a Big Mac than they do in states at the federal hourly wage level of $7.25. But supply chain prices can also influence food costs, as can real estate. It's no coincidence that cities where the minimum wage is highest—New York City or San Francisco, for example—also have high real-estate costs that influence prices in those markets. High-volume markets can also drive up franchisee real estate costs, as can market conditions including a sparse workforce. "Competition [for workers] is fierce," Juan Martinez of the consulting firm Profitality said. Franchisees attract workers with higher wages; at that point, they may increase prices to cover their bottom line.
In the end, fast food experts don't seem particularly worried about skyrocketing prices. In fact, McDonald's has already stopped lobbying to prevent minimum wage increases. "As long as it's done in a staged way and in a way that is equitable for everybody, McDonald's will do just fine with that," CEO Chris Kempczinski said in January. With almost half of Americans working low-wage jobs, we may just be at a point of national reckoning. Are ultra-low dollar menu prices sustainable if we're going to value the labor of low-wage workers? Definitely not—but that doesn't mean you're going to see an $18 Big Mac anytime soon.