Minimum Wage Increase Raises Consumer Prices at McDonalds : The Indicator from Planet Money When the minimum wage goes up, where does the extra pay for workers come from? Princeton economist Orley Ashenfelter turned to McDonald's to look for some answers.

What McDonald's Tells Us About The Minimum Wage

What McDonald's Tells Us About The Minimum Wage

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Naomi Baker/Getty Images
SOUTHAMPTON, ENGLAND - MAY 30: A sign is seen for McDonald&#039;s in Southampton which also has a Drive Thru on May 30, 2020 in Southampton, England. (Photo by Naomi Baker/Getty Images)
Naomi Baker/Getty Images

Adriana Alvarez started working at a McDonald's in Chicago back in 2010. She has a son named Manny. When she first started, it was hard to get him his necessities. But since 2010, the minimum wage in Chicago — and in lots of other cities and states around the country — has gone up, in part because Adriana Alvarez and workers like her have been advocating for a higher minimum wage. In Chicago, the minimum is now $14 an hour.

There are thousands and thousands of McDonald's workers with similar stories: Their pay has gone up as the minimum wage has gone up. This raises an interesting economic question: Where does the money for the workers' pay increase come from? Does it come out of the owner's profits? Or higher prices? Do the stores use more machines and fewer people? Today on the Indicator, we chat with Princeton economist Orley Ashenfelter about his study on this very question.

One of our cohosts today, Greg Rosalsky, wrote a newsletter about this study as well!

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