People eating at a Stillwater restaurant Tuesday noticed a new fee added to their bill.
Owners of the Oasis Cafe are charging a 35 cent minimum wage fee. They say it’s to offset the cost of an increased minimum wage for tipped employees.
Customers have mixed reviews about the new fee.
When the price of an input (labor in this case) increases, the supply of the output (food) decreases. Supply decreases cause price increases. The question become who pays for the price increase? As with teh case of a new tax, the end result is that the price increase is partially borne by the producer and partially borne by the consumer. The extent to which each bears the price increase depends on the relative responsiveness (elasticities) of supply and demand.
How that price increase is passed along--whether through menu price changes, or through a fee--is a matter of business judgement. No matter, the end result will be higher prices.