Tag Archives: McDonalds

Dire Prediction, Meet Real-World Result…

The growing pressure to increase the minimum wage is frequently met with a prediction that wage increases will hurt both businesses and consumers–if that hamburger costs five cents more, fewer people will buy it, and that will lead to layoffs that hurt the very people higher wages are meant to help. (It’s interesting–and telling– that the prospect of better pay for employees always triggers an expectation of increased prices for consumers rather than a modest decrease in returns to shareholders. But I digress.)

So how’s that prediction holding up in the real world?

After raising the wages to over 90,000 employees and providing more incentives and benefits, Steve Easterbrook, McDonald’s CEO is pleased to announce the company’s turnaround plan is actually working. Profits are up, employee turnover is lower, and customer satisfaction scores are higher.

According to Fortune Magazine,

“U.S. comparable sales rose 5.4 percent, their third straight increase after what had been two years of declines.” This is partly due to their new menu deals and all-day breakfast, but it’s also undeniable customer satisfaction due to happier employees is also a factor in that growth. Which just killed a popular right wing talking point that increasing wages and providing more benefits hurts business, at least for McDonald’s it hasn’t.

So let’s see: McDonald’s CEO says the company measured an overall 6 percent rise in customer satisfaction, and he attributed that improvement to better compensation and incentive packages for employees. (There is no mention in these reports of price increases, nor data suggesting that people have stopped buying Big Macs.)

Not-so-incidentally, it has been estimated that raising wages for McDonald’s employees (and employees of the company’s franchisees, who have not thus far been included in this experiment)  would significantly reduce the burden on American taxpayers. Currently, we are paying 1.2 billion dollars every year to cover public assistance needed just for McDonald’s employees who are not paid a living wage.

In other words, American taxpayers are subsidizing the profits of McDonalds and similar low-wage employers; we are essentially paying that part of employee compensation that represents the difference between what McDonald’s (and Walmart and others) pay their workers and what those employees require in order to live.

McDonalds’ real-world experience suggests that these companies can afford to pay their employees an adequate wage without taxpayer help–and still keep their shareholders fat and happy.

Ideology is Expensive

Here’s another entry for my growing pile of public policies that cost more money than they purport to save. (Of course, the more illuminating question is: who bears the costs and who gets the savings. The answer to that question explains a lot.)

According to the Economic Policy Institute,

“.. if the minimum wage were boosted from its current level of $7.25 per hour to $10.10, as proposed by the Fair Minimum Wage Act of 2014, more than 1.7 million Americans would no longer have to rely on public assistance programs. This would produce $7.6 billion per year or more in savings for the federal government, according to the study.”

The report noted that approximately half of all people earning under $10.10 per hour–or some 11.9 million Americans–receive some form of means-tested benefits from the government. That would include benefits like the Earned Income Tax Credit, food stamps and other forms of welfare.

We the People pay for those benefits. Walmart, McDonalds and other major low-wage employers don’t. The money companies save by paying their employees poverty wages goes directly to their bottom lines. The arguments for continuing to have taxpayers subsidize the (very handsome) profits of such employers is that, if the minimum wage were to be raised, these companies would choose to raise prices rather than (horrors!) see any erosion of those huge profit margins.

Maybe.

I don’t know about the rest of you, but I’d prefer paying an extra nickel for a cheeseburger, and putting that 7.6 billion dollars per year toward something that advanced the common good. I’d rather repair our crumbling infrastructure, educate our children, develop a vaccine for Ebola…there are lots of priorities I’d place ahead of subsidizing the continued wealth of the Walton family and McDonald’s shareholders.

I Know I’m a Broken Record…

It really, really gripes me that taxpayers are subsidizing Walmart’s bottom line. I’ve beaten that drum repeatedly, but when I saw this video, the message was presented in so clear and compelling a way, I just had to share.

In fairness, let me point out that this analysis applies equally to the many other greedy recipients of corporate welfare. (McDonalds, I’m looking at you!)

You either believe in markets or you don’t. Walmart and its ilk may beat the drum for capitalism, but they don’t want to abide by its terms, and compete fair and square in the market–without public subsidy.