Graph Shows How $15 Minimum Wage Affects Your Big Mac Price

On Friday, The Daily Signal released a graph demonstrating the full impact of what would likely happen if a $15-per-hour minimum wage went into effect across the country.

The graph stems from a report by James Sherk, senior policy analyst in labor economics at The Heritage Foundation, which demonstrates that top fast-food restaurants like McDonalds and Taco Bell would have to boost prices by 38 percent to make up for increased labor costs. Suffice it to say, the before and after price differences are staggering.

In the report, Sherk states that the common assumptions that fast-food restaurants can absorb the extra labor costs by just cutting profits are extremely flawed, because they operate under very small profit margins. Since the fast-food restaurants will only be able to absorb the cost by raising prices, customers will be less inclined to spend their money there, which will then lead to less profit and less jobs. 

"Most Americans eat fast food because they want a quick and inexpensive meal," says Sherk. "If fast-food restaurants raised their prices, many of their customers would either eat at home or go to more expensive restaurants."

Sherk then cited several academic studies illustrating just how price-sensitive consumers are toward fast-food. Not surprisingly, a price increase by as low as 1 percent caused sales to fall by 1 percent as well. A 10 percent increase would cause sales to fall by at least 9 percent.

What are the ultimate effects of these increases? Restaurant owners won't see the benefits of opening new restaurants since the profit margins will be so low and jobs will be combined, which means hiring less people.

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