Not a quick fix: A raise in fast-food hourly wages to $15 leads to 4% increase of product prices- study

Minimum wage increase has been a lingering issue in most economies. Part of the battle is determining its effects; however, shortly after Seattle began implementing $15 per hour minimum wage, a new study emerged focusing on increased product prices.

A study by Purdue University researchers shows that minimum wage increase in quick service restaurants to $15 per hour will result in a 4.2% increase in product prices. According to Purdue's Richard Ghiselli, the study was lead by the turnover rate in the food service industry and they want to determine the effects of raising minimum wage to $15.

Ghiselli said that people assume added employment benefits and increased pay will minimize turnover.

Although this hypothesis from people is the inspiration behind the study, Ghiselli admitted that its results do answer its main objective.

In a document related to the Purdue minimum wage study, Derived Sales Calculations, published by Market Watch, a price change of 4% is shown as the effect of increased wage however, neither the study nor the document shows growth rate of the industry which may also contribute to increased wages instead of passing the burden directly to consumers.

In another article published by Forbes, its author implies that Seattle's minimum wage which was increased to $15 caused closure of restaurants in the city. The report added that restaurants' profit can't back up the wage increase. However, Seattle Times denies this theory and argues the direct association of wage hike to the closures.

Some observers point out that a more thorough study and review of in the food-service industry could make a better interpretation and predictions on the wage increase.