How to hinder the fast food industry and fast food jobs

One of the ideas that economists are most confident about is that when the price of something rises, other than as a result of something that shifts the entire demand curve, the quantity demanded falls. Conversely, if the price of something decreases, the quantity demanded increases. This is not controversial in economics. Moreover, it is so clear that it is part of our mutual understanding, even for non-economists. When you hear that Macy’s is having a sale, you don’t say, “Oh, I better not shop at Macy’s during the sale because the prices are temporarily higher.” No. You understand that Macy’s is having a sale to sell more and the way to sell more is to lower their prices. Or consider what we all know to be true when strawberries are out of season: their price will be higher than when they are in season. In other words, a reduction in supply will, all other things being equal, lead to a higher price; The way to sell the lower amount and satisfy all the buyers is to increase the price.

This is the opening paragraph of my last Hoover article: “High minimum wage laws harm many workers,” Defining ideas, April 25, 2024.

In it, I discuss the effects, some of which have already occurred, of the April 1 increase in the minimum wage for fast food workers in California to $20 per hour. After quoting a news writer named Jack Birle who suggests that the higher minimum wage will make it harder for school cafeterias to compete for labor, I write:

Give Birle some credit. At least he understood that school districts compete with fast food employers. But then he forgot to track what raising the minimum wage does to employment in the fast food industry: it reduces it. So the increase in the minimum wage will save it easier, not harder, for school districts to find employees. Over there shall be a reorganization of employees. Employees with higher productivity will find it more attractive to work in the fast food industry. They will displace some less productive workers who do not produce enough to make it worthwhile for fast food employers to hire them. But the overall net effect will be fewer jobs in the fast food sector, and therefore more workers looking for work in other sectors.

I have reproduced several parts of my article on my Substack. But if you want to read the entire piece, which is only about 1,800 words, then go here.