07 January 2017

Even the Fast Food Industry Benefits from a Higher Minimum Wage

The CEO of Wetzel’s Pretzels was rather surprised when California's minimum wage hike boosted his profits:
When California began raising its minimum wage two years ago, Bill Phelps and his investors were worried. Phelps is CEO of a fast food company called Wetzel’s Pretzels, which has almost 100 outlets in California.

“Like most business people I was concerned about it,” he said.

The state increased the minimum wage in mid-2014 and just raised it again on Jan. 1 to $10.50 per hour for companies that employ more than 25 people. Smaller businesses will have a delay in implementation, but will follow suit as California moves along on its schedule to reach $15 per hour by 2022.

Phelps and a lot of other fast food CEOs have been worried that wage increases will cut into profits, and that if they raise prices to compensate, fewer people will come eat. So two years ago, Phelps prepared to take a hit. But something else happened entirely. Sales at his California stores immediately shot up.

“I was shocked,” Phelps says. “I was stunned by the business.”

The same exact pattern took place again in 2016, when the minimum wage rose again, Phelps said. There was a wage increase, and then boom, a bump in same-store sales across the state that held for most of the year.


“My overall sales were something like 15 percent ahead after the first minimum wage bump, and now they’re about 12 percent ahead this year,” Jacobs said. “It isn’t because I’m such a great manager or smart guy, but the buying public has more money in their pocket.”

Jacobs says not only are more people coming to shop, but they’re buying more. Sure enough, as Jacobs and I talk, a mall employee stops in to buy a pretzel. He ends up also paying for a dipping sauce and a drink. Jacobs says sales like this are happening all the time.
(emphasis mine)

It's something that liberal economists have been saying for years.

H/t Crooks and Liars.


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