I was off by about a week. Unlike last year, businesses are already pricing in the upcoming increase in the Federal Minimum Wage and it's not pretty. It's also a slap in the face for folks on the poorer end of the spectrum. On the one hand, they are getting a 10% increase in their wages, and losing 7.5% of their buying power at the same time.
We know the Federal Minimum Wage rises to $7.25 effective Friday, a 70 cent per hour increase. For those making less, it is an increase in gross wages, minus all the taxes that come out of it. That's an extra $28 dollars a week, of which the worker may see about $18 of it each week.
At the same time, the cost of eating a meal is going up by a factor that is greater than that hourly wage. Based on the Quarter Pound Burger Chart, a dinner of meat, fries and a drink two weeks ago was $4.29 (in the midwest, higher on the coasts of course). For an hourly minimum wage worker, that meal represented 65.4% of their hourly gross wage. As of yesterday, the QPBC was $5.29 for the same meal. For a minimum wage worker, even with the pending increase, the cost of a single meal is now 72.9% of their hourly gross wage. A single mini mum wage parent, feeding two teenagers will need to now work 3.3 hours vs the previous 3 hours, to cover the cost (these are approximate and do not include state tax on the purchase). It also assumes teenagers will only need a single quarter pound burger meal, which we know is an assumption that won't hold soda.
The real losers are those who are making more than the new minimum wage level ($7.25) who will see no increase on Friday because their business is busy covering what they are mandated to cover. They get no additional take home pay and their food costs are rising just the same.
I doubt you'll see this reflected in the inflation figures from the government, which are so adjusted for seasonal factors and the position of planets that you have to take them with a grain of salt. I'm sure that once you factor in the higher quality beef being used in the quarter pound burger, the semi-natural and animal friendly wheat in the bun, the purified water in the soda and the slightly adjusted cooking oil for the fries, the government will be able to claim that the QPBC only increased by a few cents. Of course that's adjusting for the lettuce, tomato, pickles, ketchup and mustard which come at no additional cost.
Two Weeks Ago $4.29+ tax $6.55/hr 65.4% of Gross
Yesterday $5.29+ tax $6.55/hr 80.7% of Gross
Friday $5.29+ tax $7.25/hr 72.9% of Gross
The upshot is that minimum wage workers actually lose ground, businesses lose ground because they have to pay more and pass that along to customers, those making slightly more than minimum really get shafted. As for those who are well off, well, they probably will be affected to a lesser degree, depending on how much more than minimum they average. Some businesses will have to lay off 1 or 2 people and some small businesses may have to close.
And let's not forget the increases that will be coming over the next few months as the higher minimum wage costs are passed along by the folks who make the paper products that cover all that fast food, the food producers, the trucking companies, etc. The increases this week are only the tip of the fiscal iceberg.
