Chipotle: A Case Study In Minimum Wage Hikes

Conservatives and economists have warned for years that hiking the minimum wage would lead to consequences, such as job losses and price increases.

Fast food chain Chipotle is a case study in the consequences of raising the minimum wage, which is intended for entry-level workers to gain valuable work experience. Last week, Chipotle announced that it would be raising menu prices by 4% to offset the costs of the required $15 minimum wage. As Business Insider reported, Chipotle CFO Jack Hartung warned in April that the increased minimum wage would translate to higher costs for consumers.

“We think everybody in the restaurant industry is going to have to pass those costs along to the customer,” Hartung said in April. “We think we’re in a much, much better position to do that, than other companies out there.”

Increased prices for imported goods such as corn and avocados has also risen, though Hartung said that issue wouldn’t lead to further price increases – for now.

“Ingredient costs, there’s talk about it. We’ll see where that leads,” Hartung said last week, according to Business Insider.

Along with the increased menu prices, the outlet also reported that customers are now complaining about receiving much smaller burritos and portions than previously.

“Something strange is happening at Chipotle, at least according to dozens of social media posts,” the outlet reported. “Customers have taken to Twitter to show off tiny serving sizes and small burritos. People used dollar bills, rulers, and beer cans for size references.”

Business Insider reached out to Chipotle to determine whether the smaller sizes were due to supply chain disruptions from the coronavirus pandemic, but the restaurant said it was not experiencing any disruptions or supply shortages.

“Guests of Chipotle have the opportunity to completely customize their meal in restaurants by vocalizing their desired portions, or digitally selecting extra, light, normal or on the side when choosing from the list of real ingredients,” Chief Corporate Affairs Officer Laurie Schalow said in a statement to the outlet. “We are not experiencing any supply-chain shortages, and Chipotle receives an abundance of praise for the incredible value its entrees offer with responsibly sourced ingredients chopped or grilled fresh daily.”

The author of the article, Mary Meisenzahl, ordered a burrito online from Chipotle to test the complaints, and received a burrito just 5 inches long, while her boyfriend’s burrito was larger with multiple additions.

“As with nearly all of the complaints on Twitter, these burritos were ordered through Chipotle’s app, which means customers don’t actually see them being made.,” Meisenzahl reported.

Business Insider also reported that Chipotle isn’t alone in charging customers more for less:

If its portion sizes are getting smaller, Chipotle wouldn’t be the only retailer to do so. Retail brands are increasingly turning to “shrinkflation” to avoid scaring off customers with higher prices, instead keeping prices the same for smaller packages and less product. 

When it comes to raising prices, companies have two options: “Do we raise the price knowing consumers will see it and grumble about it? Or do we give them a little bit less and accomplish the same thing? Often it’s easier to do the latter,” the consumer advocate Edgar Dworsky told The Washington Post.

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