Researchers from the University of Massachusetts Political Economy Research Institute (PERI) have released a working paper verifying the ability of American fast food restaurants to more than double the minimum wage of their lowest paid workers to $15 an hour over a four-year period without causing the widespread employment losses and decline in profits often cited by critics of such increases.
Using data gathered from previous studies and U.S. Economic Census reports, economists Robert Pollin and Jeannette Wicks-Lim have found that at the standard rate of industry sales growth the savings from a decrease in workforce turnover added to revenue generated from moderate annual 3 percent price increases could support a two-stage increase in the minimum wage from its current level of $7.25, first to $10.50 and then to $15 three years later.
Published on the PERI website, the working paper, "A $15 U.S. Minimum Wage: How the Fast-Food Industry Could Adjust Without Shedding Jobs," describes how this increase in wages can be accomplished without generating employment losses within the industry and without these businesses facing a decline in profitability.
"We conclude that the fast-food industry could indeed absorb the increase in its overall wage bill without resorting to cuts in their employment levels at any point over the four-year adjustment period," explain Pollin, Distinguished Professor of Economics at UMass Amherst and Co-director of PERI, and Wicks-Lim, a PERI research assistant professor. "The fast-food industry could fully absorb these wage bill increases through a combination of turnover reductions, trend increases in sales growth and modest annual price increases over the four-year period. We also show that fast-food firms would not need to lower their average profit rate during this adjustment period. Nor would the fast food firms need to reallocate funds generated by revenues away from any other area of their overall operations, such as marketing."
"In terms of policy implications, our results offer a straightforward conclusion," they write. "Achieving a $15 federal minimum wage within the U.S., phased in over four years, should be seen as a realistic prospect. This specifically means that the intended consequence of the $15 minimum wage -- to improve the living standards of low-wage workers in the U.S. and their families -- can certainly prevail over the unintended consequence that low-wage workers and their families would suffer from widespread employment losses."
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