Chipotle raised its wages. Can you guess what happened next?

McDonalds Protest
McDonalds Protest

It’s been a long time conservative argument that if the government forces employers to raise wages, they will simply transfer the additional labor costs onto the consumer through price increases. For an opportunity to put economic theory into practice, look no further than Chipotle. San Francisco’s Chipotle Mexican Grill raised its wages by 14 percent, and what happened next? Their product prices increased anywhere from 10 to 14 percent.

The Washington Examiner reports:

Raising the minimum wage doesn’t happen in a vacuum, according to new research on Chipotle.

When Chipotle Mexican Grill Inc. raised its minimum wage in San Francisco, it raised its prices proportionately, according to William Blair, a global investment banking and management firm, which issued a report on Tuesday to its investors.

As part of the company’s weekly survey, it examined 10 Chipotle markets across the country and each location’s relative price changes. In half of the markets — San Francisco, Denver, Minneapolis, Chicago and Orlando, Fla., — food prices increased by about 4 percent and were limited to beef.

In San Francisco, however, where the city has increased the minimum wage by 14 percent, all of the Chipotles in the area saw an “across-the-board” price increase. The hike included the chicken, pork, tofu and vegetarian prices, all of which increased 10 percent. The cost of steak and barbacoa rose 14 percent.

The jump comes after the minimum wage rose from $10.74 an hour to $12.25 on May 1, one wage increase on the path toward San Francisco’s 2018 goal of a $15 minimum wage.

Government actions often have unintended consequences that end up hurting the very people the government wanted to protect in the first place. As it was aptly put by David French, Vice President of the National Retail Federation:

“There simply isn’t any magic pot of money that lets employers pay higher wages just because the government says so, without making adjustments elsewhere like cutting workers’ hours, reducing their non-cash fringe benefits, and/or passing the higher wages along to consumers in the form of higher prices.”

Government is not creating wealth by raising the minimum wage, they are redistributing existing wealth away that could have been used to grow the business and create new jobs for even more people. Unfortunately, San Francisco’s Chipotle chain is a textbook case of exactly what conservatives warned against.