Wages and prices

      Wages for the bottom 20% of American workers have increased in real terms faster than any other segment over the past 4 years.  In large part this is because in many states, the minimum wage has risen to over $15./hr.  This has in turn put pressure on prices which leads to apocryphal stories of $18. Big Mac meals (our local McDonalds is at $12.19 for that deal).

     Fast food prices have always been a source of discontent for consumers who have counted on cheap food to boost their spending power.  Any rise in prices is seen as an affront.  Wages typically make up the biggest single factor in fast food pricing, so, rising wages affect pricing more directly than other inputs such as rent and food pricing.

     Ironically, as lower income workers wages increase, middle income workers resent the gains, feeling they come at their expense.  Overall, reductions in wage inequality are good for the economy.  However, long run gains come at the cost of short term pain.  In other words, a $12. Big Mac may be the price we all pay for worker dignity.