McDonald’s And The Minimum Wage

Strikes, walkouts, and protests were staged across the United States last week in support of increasing the American minimum wage. At the moment, the minimum wage is $7.25 per hour; most demonstrators support an increase to $15.00 per hour.

There are many economic rationales, of course, that can be cited in support of each position on this issue. One of the more questionable arguments, though, was expressed by the chief executive of the New York State Restaurant Association to the New York Times this past week.

According to the Times, the executive said, “If the minimum wage were indeed raised to $15, the result (in fast food restaurants) would be more automation, fewer workers hired and increased costs at the counter. McDonald’s dollar meal would be $1.25.”

That sounds like a perfectly objective economic analysis, doesn’t it? But should we accept it at face value? Would McDonald’s necessarily increase the price of a dollar meal to $1.25 in response to an increase in the minimum wage?

First of all, if you are inclined to believe it, you would need to understand what the Association executive means by “more automation” that results in “fewer workers.” Is she referring to contemporary (and reliable) self-service technologies that require customers to place their own orders? Or, alternatively, to futuristic (and untested) robotic janitors that mop the aisles and wipe the tables and seats without human guidance?

Second of all, if you believe that McDonald’s could actually implement these practices, you would need to understand why the company hasn’t already done so. Can you accept the presumption that such technologies are too costly at a time when limited numbers of workers in each restaurant are paid $7.25 per hour, and yet will suddenly become affordable when they are paid $15.00 per hour?

Third of all, if you believe that such technologies would enable McDonald’s to hire significantly fewer workers, you would need to understand why the company would find it necessary to increase the price of dollar meals by 25%. Would consumers be willing to pay that price? And if they would indeed pay it, why isn’t McDonald’s already charging $1.25 for such meals?

Fourth of all, you would need to believe that McDonald’s customers wouldn’t actually welcome the opportunity to pay an extra quarter to increase the compensation of minimum wage employees. Doesn’t the existence of tip jars on food service counters across the nation belie this notion?

So here is the underlying question: do you understand and believe these four assertions? If you do, then you may find yourself opposing the proposals to increase the American minimum wage. But if any one of these four assertions sounds dubious to you, you may wish to consider the opposing position.