Price of Big Macs Would Only Increase by 68¢ if Minimum Wage Was Doubled

[eridani]

http://readersupportednews.org/news-section2/315-19/25714-price-of-big-macs-would-only-increase-by-68c-if-minimum-wage-was-doubled

As fast-food workers strike and protest in seven cities across the country this week for higher pay, one estimate suggests that raising the minimum wage from $7.25 to $15 an hour could increase the cost of a Big Mac by 68 cents.

Economists have long debated the economic effects of raising the minimum wage, but Arnobio Morelix, an undergraduate student at the University of Kansas School of Business, estimated how increasing pay to $15 an hour would affect prices at the most popular fast-food restaurant in the country, McDonald’s.

Morelix created financial models based on McDonald’s annual reports and investor data. He estimated that paying workers $15 an hour could raise the price of a Big Mac to $4.67 from $3.99, as first reported by the Huffington Post. A Big Mac meal would jump to $6.66 from $5.69, and McDonald’s Dollar Menu would go to $1.17, Forbes reported.

Morelix could not be reached for comment.

Danya Proud, a spokeswoman for McDonald’s, said Morelix’s analysis “is purely speculatory and not something that we are in a position to comment on.”

Another estimate suggests the price of a Big Mac would jump 5 cents, or 1 percent, if the minimum wage was raised to $10.50, according to a letter signed by 100 economists in favor of raising the U.S. minimum wage.

[Deadbeat Republicans]

1. I support their cause 100%.

But I find it very difficult to eat there.

[Journeyman]

2. Bottom line: The price of McDonald's "food" would rise 17% to give the workers a 52% raise . . .

and McDonald's would see a serious increase in business, given that all its own workers would now have enough money to afford an occasional meal out.

[TreasonousBastard]

3. This means nothing unless you have some...

underlying data.

First question is how might productivity be increased. It's pretty high now, but if you could get another 100 burgers per hour out of the place, that would help reduce the marginal cost. How do you get another 100 burgers per hour? Throw a sale, fire a few people, more line efficiencies... Note that this is for total hours for the unit, not per hour per person.

Next question is what else is increased when you give a raise. Workmen's comp and GL premiums are payroll based. SS, UE and other contributions go up... And, of course, all these are tax-deductible, so your net profit at year end is who-knows,what.

The simplest calculation is something like this:

25 total employees at 40 hours each at $7.15= $7,150 per week payroll
--------------------------------------at $15=$15,000 per week payroll

Now, I have no idea how many burgers or meals are are sold, but I found an old number from 2010 that said average sales per unit are $2,400,000

So, try this-- 2,400,000/52=$46,000 per week in sales.

Additional sales per week to pay for the raise-- $7,500

$7,500 is 16% of $46,000, so prices have to be raised by 16% before anything else is taken into account.

A lot of guesswork and missing facts in what I just did, and I rounded a few things to make it easier to read, but if I'm even close we're looking at a 10-20% price increase. They'll bitch and moan about it, but it will be absorbed just like the prices of beef and electricity are absorbed when they go up.

[Erich Bloodaxe BSN]

4. Some of your 'productivity' issues don't strike me as very likely.

Fast food joints like McD's are working full bore during meal rushes, then sitting partially idle at off hours. You can't 'fire people' and still have enough workers to man everything during those rushes, nor can you add extra bodies who just get in each other's way and wait for equipment. So the ways to 'increase productivity' are to A) get people to eat at off hours to increase total sales, or B) to get people to buy higher margin food items.

Off hours is largely structural - based on when people are working at other jobs. So how do you get people to buy upscale? Put more money in their pockets by raising the minimum.

[TreasonousBastard]

5. I'm aware of the shortcomings of my quick analysis...

but I didn't get paid a couple hundred thousand to have a team of 6 crunch the numbers for a few months to come up with the same result.

FWIW, many years a small business I was involved in was introducing a payroll system to one of the largest grossing IHOPs on the planet. The boss took great pride in showing a "feature" that allowed automatic deduction of break time and cutting hours during slow times.

The owner was aghast at the thought-- "I have enough trouble keeping people as it is."