You don't half talk some pish, I'm very much pro business, unfortunately an awful lot of economists,CEO's,MD's,MP's etc only take notice of the parts of Adam Smith's Wealth of Nations that suit their ends and totally ignore the sections that would involve increasing costs, in no way did Adam Smith promote imbalance such as we see in the UK today.
In your Gregg's example a 5% price increase would undoubtedly result in a drop in demand, how big, nobody knows, the extra income delivered to staff members would see staff members spending increase thus helping to protect the jobs of others and the economy while saving the taxpayer a wee bit on benefits.
Giving 20,000 staff an average wage increase of £1,000,a 5% price increase and a 2.25% dip in turnover would more or less leave Gregg's standing still with a happy more loyal workforce.