The latest news regarding the minimum wage debate in Saint Louis makes me feel like Michael Corleone in The Godfather Part III. Just when I thought this thing was on ice, the Board of Aldermen decides it wants to hold a day-long debate on raising the minimum wage and mortgage city buildings in order to fund a new site for the National Geospatial-Intelligence Agency (NGA).
My colleague Joe Miller had a great run-down on what’s going on with the NGA, and I encourage you give it a read. I want to focus on the minimum wage. I’ve already laid out how increasing the minimum wage can cost jobs, hurt economic opportunity, and fail to alleviate poverty. However, it also can raise prices.
This is what is happening in San Francisco, which has raised its minimum wage (H/T Moe Lane). According to one report, Chipotle is seeing prices rise 10-14 percent in San Francisco versus 4 percent in other markets. The report says that the size of this increase is directly attributable to the increase in the city’s minimum wage.
When you artificially raise prices, businesses have to respond. Some (though not all) businesses can absorb the costs. Some will just shed workers or substitute workers with automation. However, others will just pass that cost on to consumers. It seems this is what Chipotle is doing.
As the Board of Aldermen once again debates whether to raise the city’s minimum wage, it should really consider whether the benefits outweigh the costs, not only to businesses and workers but to consumers as well.