Here’s how much menu prices could go up if the Raise the Wage Act is passed

Joanna Fantozzi

A calculator created by operator-run activist group, RAISE: High Road Restaurants, using data from UC Berkeley and Harvard economists released on Tuesday is illustrating approximately how much future wage jumps will require operators to increase their menu prices, based on current subminimum/tipped wages and non-tipped wages.

Although the Raise the Wage Act — which would phase out the subminimum tipped wage and gradually raise the national minimum wage from $7.25 to $15 per hour by 2025 — has only thus far been passed for federal workers, economists think it’s only a matter of time before $15 per hour is a reality. Currently, the subminimum tipped wage (which exists in 43 states) is $2.13.

The concern among restaurant operators, particularly in states where the minimum wage is less than half the proposed hourly wages, is “how will we afford this?”

The calculator was created to answer this question in some part. High Road Restaurants is a subsidiary of nonprofit activist group One Fair Wage, which advocates for the abolishment of the subminimum wage for tipped workers. The data used for the calculator, however, is based on an independent study by the Institute for Research on Labor and Employment at US Berkeley.

One Fair Wage introduced the calculator, along with a report on how “Restaurants Can Provide Livable Wages” on Tuesday, with solutions like modest menu price increases, mandatory service charges, and hospitality fees included in customer bills.

Related:Delaware becomes the 10th state (plus Washington, D.C.) to raise the minimum wage to $15 an hour

“Many employers across the country are voluntarily raising their wages,” Saru Jayaraman, president of One Fair Wage said Tuesday during a virtual press conference. “They are raising their wages because they want to attract workers to come back because workers are saying, ‘we don't want to come back without a livable wage with tips on top.’ […] The point of the guide is to show that it absolutely can be done to raise wages and phase out the subminimum wages in a profitable way with moderate price increase of 20% at most.”

According to the calculator, a restaurant with an average back of house minimum wage of $12.25, a subminimum tipped wage of $2.13, and a burger price of $10 would have to raise their burger price to $11.80, when both tipped wages would be $14.95 per hour and nontipped wages would be $15 per hour.

We inputted some data into the calculator based on current average salaries of workers at major chains and the average price of their most popular menu items. Here is what we found:

Starbucks

Starting hourly wages for barista in Atlanta, Ga.: $9-$10.55 per hour

Related:The $15 minimum wage hike cannot be included in the COVID-19 relief package, Senate Parliamentarian rules

(Sources: Business Insider and Indeed)

Cost of Grande Caramel Frappuccino in Atlanta, Ga. on DoorDash: $4.25

Adjusted menu price with $15 wages: $4.35-$4.41

Chipotle:

Median hourly wages for Chipotle store worker: $10 per hour

(Defined by Chipotle as a part-time worker in Illinois)

Cost of base burrito bowl in Illinois: $9.05

Adjusted menu price with $15 wages: $9.31

McDonald’s

Starting hourly wages for McDonald’s hourly store worker: $8-$10 per hour

(Sources: NRN, Workstream, and Indeed)

Cost of Big Mac in suburbs of Illinois on Uber Eats and DoorDash: $5.29

Adjusted menu price with $15 wages: $5.47

Popeyes

Starting average hourly wages for Popeyes crew member: $10.84

(Source: Indeed)

Cost of chicken sandwich in the suburbs of Illinois: $7.29

Adjusted menu price with $15 wages: $7.45

Since most quick-service restaurants do not have tipped employees, the price adjustment will likely come down to pennies and nickels. But for full-service restaurants that rely on subminimum tipped wages, the difference will be starker:

IHOP

Average hourly wages for IHOP server: $10.79

Average hourly wages for IHOP cook: $12.52

(Source: Indeed)

Cost of stack of buttermilk pancakes in Illinois: $7.49

Adjusted menu price with $15 wages: $7.62, but if the IHOP location pays the subminimum wage they will go up to $8.84