Purdue University study calculates cost of paying a living wage

THE NEWS

Raising wages to $15 an hour for fast food restaurant employees would cause an estimated 4.3 percent increase in prices, according to research conducted at Purdue University’s School of Hospitality and Tourism Management.

Increasing wages to $22 an hour, which the federal Bureau of Labor Statistics says is the average wage for American private industry employees, would cause a 25 percent increase in prices, the study said.

The cost of providing health care benefits would be minimal at restaurants with fewer than 25 full-time employees because of tax credits available in the Affordable Care Act, the research found.

THE NATIONAL DEBATE

In the past two years, fast food workers across the nation have gone on strike or campaigned for a living wage.

More than 29 states last year responded by enacting minimum wage increases, according to the National Conference of State Legislatures.

The $10.50 per hour minimum wage that took effect July 1 in Washington, D.C., makes it the first jurisdiction to surpass $10.

President Barack Obama last year called on Congress to raise the minimum wage to $10.10 per hour.

He also signed an executive order to raise minimum pay to $10.10 for employees under new federal service contracts.

WHY IT MATTERS

Consumers and employers no longer have to guess at how much an increase in the minimum wage would cost.

The data provide a foundation for future discussions about the impact of increasing fast food wages from the federal minimum of $7.25 per hour.

The study results were not surprising, Purdue professor and department head Richard Ghiselli said.

“We thought prices would go up,” he said. “We just wanted to know how much they would go up if you raise pay and offer health insurance.”

How it adds up

The average cost of some items at Greater Lafayette fast food restaurants under minimum wage increases researched by Purdue University.