Study Shows Higher Fast Food Prices Driven by Profits, Not Wages

Fast food prices have greatly increased but the $20 wage increase is not the reason.Photo byPhotos by Joe Raedle/Getty Images

A new study shows that the increase in wages for fast food workers in California did not cost any jobs like some have said it would.

In a state where In-N-Out Burger has paid for high wages, healthcare, and even a retirement fund for their employees for decades, the other fast food companies were getting away with paying as little as they could for workers. All that changed though.

On April 1, 2024, food workers were given a minimum wage of $20 per hour. According to a study done by the University of Berkeley Institute for Research on Labor and Employment, the increase in pay did not cause product prices to increase or jobs to be lost.

When the average hourly wage increased, levels of employment remained the same. The industry itself predicted their demise if they had to pay more money to workers. Instead of worrying about the cost of paying workers though, it showed that fast food companies greatly increased their prices to have consumers pay for the increase in pay and much more. In fact, before the pay raise increased, prices went up 7% in the month leading up to the raises. In May of this year, after the April wage increase, prices soared. The increases were far higher than any inflation driven cost.

New York had the highest fast food prices in the country, increasing their prices by 30% from 2019 prices. The backlash was not what fast food restaurants expected as Americans began to stay away, which ate into their profits.

And while they have not decreased prices much, they are giving out several more deals to hopefully get consumers to come back or using shrinkflation by not dropping their prices but keeping them the same and giving less in a serving. Here are the gross profits for each company.