Myths/raising the minimum wage would raise prices

Jump to navigation Jump to search
Myth: Raising the minimum wage will result in higher prices.


There is a widespread belief that raising the minimum wage will just raise prices. It's not clear whether the unspoken assumption is that the prices would go up enough to negate any wage-gains, but we'll examine that implicit claim too.


  • An examination of fast-food prices in other countries, where the minimum wage is often much higher than in the US, shows this to be a bogus claim: "A big mac in Denmark, where McDonald's employees earn $21.00/hr cost $5.08. Here in the US, where they earn less than $8 an hour, a big mac costs $4.79. In Australia, where the minimum wage is over $15/hr, a big mac costs $3.92."[1]
  • The amount by which prices would go up cannot be anywhere near the wage increase, since wages are only a slice of the final retail cost.
  • To the extent that prices are determined by supply and demand:
    • the prices would not go up if demand did not increase.
    • if the price goes up, this indicates an increased demand, which implies greater buying power – a desired goal.
  • Prices going up – aka inflation – is generally the result of an increase in the money supply. Raising minimum wage does not increase the money supply.
    • One thing that does increase the money supply is easy access to credit – so if inflation is a real concern, perhaps consumer credit should be more tightly regulated.
  • And finally, who cares if prices go up a little if this means that more people can make a decent living? If you're getting something at a low price only because someone else has to suffer, then you're essentially stealing their work to save money.


  • See also /rejected for an argument that makes sense on the surface but doesn't pan out when the numbers are checked.
  • Issuepedia: Minimum wage


  1. 2015-07-24 The Bitchy Pundit, comment on this post, citing The Economist for prices