What McDonald's Shows About The Minimum Wage
By: Greg Rosalsky (NPR. org)
The minimum wage was established in the Fair Labor Standards Act of 1938. You'd think that, after 80 years, economists would have figured this out by now. But the public is still force fed a lot of political hype that doesn't seem to be supported by evidence.
It's not rocket science. Consumers pay for everything in our economy. Consumers provide the money for wages, management bonuses, executive compensation packages, and stock dividends. Consumers provide the money to pay corporate taxes, too. Consumers pay for business lobbying, political donations, and political actions committees. Jeff Bezos is rich because consumers provided the money to make Jeff Bezos rich.
Government imposed wage increases, regulatory costs, and business taxes exploit consumers. The government is being charitable with consumer's money. The cost of anything and everything imposed on the supply side of the economy will be born by consumers. There isn't any other source of money in our economy.
The supply side of the economy provides goods and services. The consumer side of the economy provides money. Why is this too complicated to understand?
That's why consumer protections are as important (or more important) as government controls on the supply side of the economy. Consumers need to know what they are paying for to make informed decisions. Consumers are paying for environmental protections, worker safety, public health safety, and a host of other necessary safeguards and precautions. But consumers are also paying for gold plated toilets in executive suites which are a luxury enjoyed by a privileged few. And political government is turning a blind eye to abusive exploitation of consumers because that would bite the hand that feeds politicians.
Without consumer protections, raising the minimum wage will only make the rich richer. Only raising the minimum wage is a political half-measure whose benefit fades quickly. Raising the minimum wage to $100 an hour won't do anything to curtail exploitation of consumers to provide money for luxuries and privileges enjoyed by very few. If anything, raising the minimum wage without addressing abusive exploitation of consumers will only increase disparities and inequalities in our economy.
S E E D E D C O N T E N T
On Nov. 29, 2012, dozens of fast-food workers assembled at a McDonald's in Midtown Manhattan to demand better pay. Their demonstration kicked off a massive wave of protests for a $15 minimum wage. Since then, cities and states around the U.S. have taken action. And now, the federal government, led by President Biden and a Democratic-controlled Congress, has begun to consider making the $15 minimum wage national.
McDonald's is one of the nation's biggest employers of low-wage workers. As such, it was kind of the perfect place to launch what was, in retrospect, the beginning of a historic labor movement. A new study by economists Orley Ashenfelter and Stepan Jurajda suggests McDonald's is also kind of the perfect place to test the effects of the minimum wage increases that workers have been fighting for.
Ashenfelter is an economist at Princeton University, and he has spent a couple of decades studying McDonald's. Back in 2012, when he was president of the American Economic Association, he even dedicated part of his big presidential address to the company. And it wasn't just because, as he told us, his "favorite meal is fries, a chocolate shake and a Big Mac." He views McDonald's as a kind of natural "laboratory" to compare and contrast different labor markets. I mean, think about it: Each McDonald's restaurant is pretty much the same. The workers have almost identical jobs, regardless of which part of the world they're in; the food they make is generally the same; and McDonald's restaurants are basically everywhere.
Meanwhile, over the last decade, a McFlurry of cities and states has been raising their minimum wages. In their new study, Ashenfelter and Jurajda use McDonald's restaurants as kind of like treatment and control groups to assess the impact of these new minimum wage laws. They obtained data on hourly wage rates of McDonald's "Basic Crew" employees, the prices of Big Macs and other information from about 10,000 McDonald's restaurants between 2016 and 2020. And they crunched the numbers to see what happens when a city or state increases its minimum wage.
One big fear of a higher minimum wage is that it could cause businesses to replace their workers with machines. Ashenfelter and Jurajda found that some McDonald's restaurants have already installed touch screens so customers can input their meal orders without interacting with a human being. But they also found that those touch screens weren't installed in response to higher minimum wages. "We couldn't find any relationship between minimum wage increases and the adoption of touch-screen technology," Ashenfelter says.
Not surprisingly, Ashenfelter and Jurajda found that McDonald's restaurants raise their wages after a city or state raises its minimum wage. More surprisingly, they found that a substantial fraction of restaurants preserve their pay premiums for workers who were previously earning more than the minimum wage. That is, if a worker was making a dollar more than the old minimum wage, many McDonald's will make sure those workers continue to make a dollar more than the new minimum wage. Ashenfelter says they don't have hard evidence for why this is, but he believes it's because certain restaurants want to offer wages slightly higher than the legal minimum as a way to reduce turnover. Paying above the minimum wage creates a kind of magnet for workers. Overall, the economists found that if the minimum wage goes up by 10%, the average McDonald's restaurant will increase worker wages by about 7%.
Finally and perhaps most thought provokingly, the economists looked at the effects of minimum wage hikes on the prices of Big Macs. They found that when the minimum wage goes up, the price of a Big Mac goes up too. Ashenfelter says the evidence from increased food prices suggests that basically all of the "increase of labor costs gets passed right on to the customers." But because low-wage workers are also usually customers at low-wage establishments, this suggests that any pay raise resulting from a minimum wage increase might not be as great in reality as it looks on paper. In econospeak, the increase in their "real wage" — that is, their wage after accounting for the price of the stuff they buy — is not as high, because the cost of some of the stuff they buy, such as fast food, goes up too.
However, Ashenfelter says, the fast-food workers they studied were still, on the net, much better off. "They still get a raise. They just don't get as big a raise as it may seem," he says. In effect, a minimum wage increase appears to be a redistribution of wealth from customers to low-wage workers. Ashenfelter says he thinks of it like a kind of sales tax. And for whatever reason, unlike with many other types of taxes, the minimum wage tax seems to be more popular with voters — even in many red states, like Florida, where they're voting to increase the minimum wage.
The one big disappointment from Ashenfelter and Jurajda's study is they're unable to tell us much about the effects of minimum wages on employment, which is at the center of the debate about the policy. They couldn't obtain data on hiring and firing from McDonald's restaurants around the nation.
It's worth remembering that McDonald's was also at the center of the famous study by David Card and Alan Krueger that revolutionized economic thinking about the minimum wage. Card and Krueger found no evidence that New Jersey's hike of the minimum wage from $4.25 to $5.05 an hour reduced employment at fast-food restaurants there. Would the same happen in the entire nation if the federal government raised it from $7.25 to $15? Last week, the Congressional Budget Office, while saying a $15 minimum wage would reduce poverty, cast doubt on the idea that there would be no substantial job losses.
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The supply side of the economy provides goods and services. The consumer side of the economy provides money. Why is this too complicated to understand?
What? Say it isn't so! s/
This, I'm not completely sure of really; I could see unemployment numbers rise because of the increase, but I could see them not moving much too; there's other dependencies. If a good / service provider cannot make up the difference of minimum wage increases by charging the consumer more [in essence, the consumer would never pay the amount of said product / service the provider would need to increase to], they will make up that difference by reduction in staff. There's a magic number of what consumers are willing to pay for certain goods and services and it's different depending on a lot of factors; location, type of good / service, competition, reputation, etc.
They are going to do whatever they can to save a buck whether or not there is a minimum wage increase. They already have order kiosks around here.
Yep, the customers are now unpaid McDonald's workers.
Agreed. However, companies WILL use that minimum wage increase as an excuse to raise prices to the maximum point in which people are willing [and able] to pay.
That would be generally consistent with what we've seen in the past. So, why aren't we demanding consumer protections?
How do we do that? I honestly don't know.
They can only raise so much without losing customers.
I for one would in no way visit the establishment if I had to pay the same amount as I would at a quality restaurant.
Agreed and same goes for me. That's the consumer's limit.
It's been argued here by some [in another article] that the cost of McDonald's would NEVER meet or exceed the cost of a quality restaurant / sit-down restaurant. Do you agree with that premise?
Nope. When I have to spend ten bucks for a meal there, I would rather go to where one could get an actual patty.
I guess it comes down to what people are willing to pay.
There is a Chinese restaurant here that I could spend ten bucks, and they give me so much food I could eat on it for days.
I agree.
What I was asking you is if YOU believe that McDs would ever cost as much as a quality / sit-down restaurant?
Could get close. Though like we said, if they start charging ten bucks a burger, they will lose a substantial customer base.
I think it's pretty darn close now.
When I ordered delivery from a Chinese place, for a family of 5, it cost me $55 including tip, delivery fee, and food. I ordered McDs delivery [Doordash is free for first 30 days] for the same 5 people was $48 including tip. For Jimmy John's in November, it cost me $72 for the 5 of us [including tip and delivery fee]... granted, I ordered us the large sandwiches, drinks, cookies, and chips, but still! The local Mexican restaurant delivers too... that was $68 for the 5 of us including tip and delivery fee.
Holy crap that is a lot.
If I am going to pay 75 bucks, might as well be at a sit down restaurant and they bring me the food.
That's why we don't order out very often. 3 teenagers are difficult to feed.
We can't sit down in a restaurant to eat right now... but then again, we like to sit together, as a family, in our pajamas, eating dinner without any interruptions.
If it ever gets to twenty bucks for a pizza, I'm out.
Depends on the pizza place I suppose.
Little Caesars is $5 + 6% in tax = $5.30 for a large pepperoni or cheese only pizza
Hungry Howies for a single topping large pizza is roughly $10
and the prices increase from there for local mom n pop places or Papa Romanos.
Buying pizza for this household of animals is about $65 including tip and delivery fee from Hungry Howies. Little Caesars on the other hand... it's about $20, but I have to go get it. I sure wish one of these damn teenagers WANTED to drive!!!
I don't get that. I always wanted to drive somewhere when I was a teenager. Haha
Me too! These kids walk, ride bikes, skateboard, but I've had them out driving... they don't really WANT to drive! WTF? These kids NEVER go anywhere!!!!!
Yes, unemployment depends upon what consumers are willing (or able) to pay. That's why government stimulus tries to put money into the hands of consumers.
You want $15 an hour? How about getting my order right? For $15 an hour, I shouldn't have to open my bag later only to see that my burger isn't in there. Honestly, how frickin hard is that? And oh yeah, how about dispensing with the shitty attitude, too?
I think it's common sense that if you raise wages, then at some point, it's going to cut into employment. It has to.
Going from $4.25 to $5.05 is an increase of a little less than 19%. So maybe that's not enough to be a problem. But going from $7.25 to $15 is an increase of almost 107%! That's just a little bit different.
When I worked at McD's, I worked at the first drive-thru window, which is right next to the grilling area. I used to make sure that the customers were getting their food and that it was RIGHT before it left that window... making $5.25 / hour and I actually had to COUNT CHANGE BACK! There's no pride left. Even when I was in a foul mood, I still smiled and told the customers, "Have a fantastic day!"
Times have changed. $15 a hour .....LOL
IMO: At least some of the management doesn't even earn that wage.
There is a newer Burger King just up the street here, even their manager can't get anything right.
I got such crappy service Again ! the other morning about 10 am and I asked to see the manager, just to find I was already talking to him.
There were 2 cars ahead of me, I waited 10 minutes to have them take my order of one sausage biscuit, they said "Sorry we don't have any of those, would you like something else ?"
I said "NO"
Then It took 10 more minutes to just get up to the window so I could exit the drive thru so I stopped to complain to their management.
When I asked the kid at the window to see his manager he said "I'm the manager."
He started with his excuses, I left.
$15.00 per hour .... LOL .... Kiss my ass !
I worked the drive through at a Wendy's. I remember one time our manager came out and congratulated a coworker on her having a perfect drawer.
All I could think was, I guess mine was never right.
You wanna know where I get the best fast food service?
"Shadier" areas. Outskirts of Detroit, where most white people panic and lock their doors. BEST McDs service I ever received was at Joy Rd. and M39. Second best, was on McNichol's just west of I75... that's the area that a customer at a gas station told me to go in the store part... keep in mind, this was 8 am and it was a sunny, July morning. He told me to go in the store part and get behind the bullet proof glass with the store manager while he finished filling up my truck for me. I wasn't worried, but apparently that other patron was for me.
My drawer was always perfect. I was proud of that... but that's also why I was ALWAYS at that first drive thru window.
There is one McDonalds here that is always out of something. One time it was straws...
Bad management.
Showoff...
That doesn't surprise me. I think that a large part of why customer service has gone totally to hell in some businesses and companies is because they do not have to care, the next customer is right behind you with their money in hand.
Fast food drive-ins are a great example.
Doesn't sound to me that you were in an area that people were lining up to do shopping much.
..................
I walked around everyone in a really long checkout line at Frys Electronics one day, put my purchase on the counter looked at the cashier and said "Here is your stuff, I am not waiting for a half hour to give you my money for it"
turned and walked out. I heard a couple of people behind me clapping as I left.. lol
Evidently they didn't like Frys "cattle pathway" to get to the few cashiers working either.
WE vote with our feet as well as our money and our political vote.
No. Not too many people lining up.
Lucky you, getting screwed twice in the same night.
I usually have to make separate trips.
Dude, when talking about McDonalds those groups are the same.