If you ever want to weep for humanity, spend some time on Twitter. Seriously, I see stupid from all political stripes including some from people I actually like as a general rule.
However, today I saw this tweet in the whole #FightFor15 “debate.”
— Fight For 15 Chicago (@chifightfor15) May 23, 2017
If you no nothing about economics or business, this probably sounds like a solid argument, but there’s so much wrong with this one tweet that it’s going to take an entire blog post to discuss it.
First, let’s address the core claim, that McDonald’s can afford $15 per hour minimum wage because of the CEO’s salary.
I’m going to take their figure for the CEO’s pay at face value for the sake of argument. It may or may not be accurate, but it’ll work for our purposes.
It also seems there is a total of 840,000 people working for McDonald’s at ground level as of a couple years ago. That number may be higher or lower right now, but this still works for illustrative purposes.
Let’s say we took all of the CEO’s pay and gave it to those poor workers. Sound good?
Awesome. Each worker will see their pay rise by a whopping $17.86. Even if you only applied it to the workers directly paid by McDonald’s (more on that in a moment), it still only amounts to $166.67 per year.
Even if you only applied it to the workers directly paid by McDonald’s (more on that in a moment), it still only amounts to $166.67 per year.
WOOT! Rolls Royces for everyone, amiright?
The kicker, however, is that 750,000 of those workers don’t actually work for McDonald’s. They work at McDonald’s.
McDonald’s uses the franchise business model. While they own and run a number of stores, the vast majority of locations are independently owned by much smaller companies who license the name and products as a franchise.
Most of these franchises don’t see any of that $15 million the CEO makes either. Instead, they pay their annual fees so they can keep being McDonald’s–and enjoy the marketing benefits of national advertising and name recognition even among people who have never set foot in town before–and are otherwise a small business by any other way you want to look at it.
Despite the #FightFor15 crowd’s sincere belief that “McDonald’s can afford” such a pay increase, they’re not recognizing that McDonald’s won’t be the most impacted, but the local franchises.
In other words, this isn’t as much a battle against wealthy CEOs as it is a war against struggling small businesses.
Those franchise owners are then forced to make a decision. They’re not raking in CEO money either, so they have to decide how they want to deal with this new wrinkle in the business environment.
Unless we’re talking about an incredibly profitable location–and most don’t fall into this category–that owner is going to find he needs to cut at least some positions.
Many will, if they’re able, shoulder some of the burden because they’re nice people who don’t want to hurt their people. However, they’re going to have to cut some.
Enter the McDonald’s kiosks.
This will allow owners to eliminate positions without really reducing service. In fact, an argument could be made that there will be fewer problems with customers placing their orders this way.
“They can’t do that! That’s not right!”
Yes, they can. And yes, it is right. If a franchise owner can’t make payroll, the store closes and everyone loses their job. Everyone.
Businesses only have so much to spend on payroll, after all. They can’t will more customers to come in, and they can’t force suppliers to charge less for burgers, buns, or condiments, and they can’t just raise prices without customers taking exception and walking out.
This way, at least some employees get to keep working.
Too bad this doesn’t help those who fought so hard for a $15 minimum wage only to find themselves making no wage.
Look, I get the thinking on a higher minimum wage. Even if you’re making more than the federally mandated $7.25 per hour, there’s always a part of you that wants a pay raise, and a $15 per hour wage is a lot of money, all things considered.
I get it.
However, these activists haven’t thought the whole thing through by any stretch of the imagination. At every point, we see ignorance of the greater realities at work with the minimum wage. Whether that ignorance is willful or not, I leave up to you to decide.