New Research Finds Hiking Minimum Wage Leads to Higher Prices of Consumer Goods. Thank God for New Research to Tell us These Things!

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The article is being misleading, because while a higher minimum wage obviously results in higher prices, they conveniently leave out how much higher they actually get, which according to the study: is not much.

The study states that:

We estimate an elasticity of hourly wage rates with respect to minimum wages of 0.7...Our data imply that McDonald's restaurants pass through the higher costs of minimum wage increases in the form of higher prices of the Big Mac sandwich. We find a 0.2 price elasticity with respect to wage increases, which implies an elasticity of prices with respect to minimum wages of about 0.14.

Keep in mind that anything under 1 is considered inelastic; if you don't understand economics jargon, according to Investopedia:

Elasticity is a measure of a variable's sensitivity to a change in another variable

So the report is basically saying that an increase in the minimum wage doesn't really change wages by that much, and that prices only barely change — seeing how 0.14 is about as elastic as a block of wood.

In the survey, we collect prices of the Big Mac sandwich (including sales tax and excluding temporary promotions)

I worry that changes in sales tax might have impacted the results. I'm not sure why they included it, because if taxes went up: the price would appear to be more elastic, or if they went down: it would appear to be less elastic.

and wage rates of the Basic Crew (for day shift entry-level crew members aged 18 or older who finished initial training), which we will refer to as McWages.

I actually laughed out loud when I read this, it's great.

Sources:

Amy Drury. "Elasticity". Investopedia, 25 Feb. 2021, https://www.investopedia.com/terms/e/elasticity.asp.

Orley C. Ashenfelter and Štěpán Jurajda. "WAGES, MINIMUM WAGES, AND PRICE PASS-THROUGH: THE CASE OF MCDONALD’S RESTAURANTS". NATIONAL BUREAU OF ECONOMIC RESEARCH, Feb. 2021, https://www.nber.org/system/files/working_papers/w28506/w28506.pdf?utm_campaign=PANTHEON_STRIPPED&%3Butm_medium=PANTHEON_STRIPPED&%3Butm_source=PANTHEON_STRIPPED.