The latest brilliance claims that McDonald’s could double all wages if they only add about 17 cents to every dollar they charge in price. Thus, a Big Mac would only go up 68 cents.
The report keeps it vague, but the blond girl on the Huffington Post video is helpfully clear. You can only double the wages if you raise the prices and keep everything else constant.
It has already been tried. It doesn’t stay constant.
To her credit she suggests the problem with the idea in response to the Huffington Post’s online poll. But she shouldn’t have needed to see the poll. Any economic knowledge, or just a little acquaintance with McDonald’s struggles, would have told her the “study” was fiction.
All you have to do is used a standard economic supply and demand graph. When you raise the price of fast food, people typically buy fewer burgers and fries. So, by holding everything constant, the “research” is utterly useless. It tells you nothing. If Big Macs go up almost seventy cents, then more people will divert to the value menu, cutting into profit margins. But even more importantly, more people will make do with alternatives like Wendy’s or McDonald’s who are eager to grab more market share away from McDonald’s.
Ask yourself this question: Wouldn’t McDonald’s love to get five cents more on every Big Mac if their sales would remain constant? Then why don’t they raise the price? The answer is obvious: they fear the loss of revenue as fewer people buy their Big Macs So if they already know they can’t raise the price a nickel how can these people claim they can get away with raising it over thirteen nickels?
McDonald’s has already attempted to get rid of the dollar menu and replace it with a slightly higher “value menu.” It didn’t work. They had to give up and go back to their lower price. McDonald’s is actually suffering right now in this economy, reporting lower than expected profits that dragged down the DOW.
McDonald’s is not some infinite fountainhead of money that can simply distribute funds at will. It will look eternal to outsiders until it disappears like Circuit City or Kinko’s or (soon) Blockbuster. These companies don’t last unless they make a profit and make money by keeping prices as low as possible (that’s right, they make money by their low prices). If McDonald’s goes away, it will be paying workers exactly zero dollars and zero cents, a salary that no minimum wage law can fix.
The Huffington Post video gets surreal when they talk about people who need food stamps. Well who do they think will get hurt by raising the price of the dollar menu? These same low wage earners probably have two jobs and don’t always have time to fix lunch or dinner. They need to eat on the go as cheaply as possible. Yet, these economic idiots pretend that higher prices will help them.
Then we are told that something must be wrong because: “Those making minimum wage ($7.25) and just above have less buying power than their peers did in the mid-50s.” But that points to the way forward. Nominally, both prices and wages were much lower then. What we need is for Bernanke to stop inflating and allow the deflationary correction to finally happen—the event he’s been printing money to avoid.
If McDonald’s was under-paying their workers, then they would not be able to staff their stores. People would move to the higher paying jobs. The reason McDonald’s has abundant employees is because they are glad to work there—these ceremonial one-day “strikes,” notwithstanding.
This is the outrage: Barack Obama and Ben Bernanke both get treated like economic heroes by the media. That same media treats McDonald’s, a company that has zero control over the economy, as if they are somehow responsible for it.