How McDonald’s Responds to Minimum-Wage Hikes

Source: National Review.

The short answer is: the restaurant raises prices. In effect, customers bear the expense directly.

One of the stupidest ideas some people believe is the notion that giving more money to one group of people causes that group to spend more money in ways that grow the economy, eventually benefiting all groups. Here we have the perfect refutation. Giving more money to restaurant workers causes restaurant patrons to endure an exactly equal loss of money. On balance there is no gain anywhere to anyone.

Call it the Happy Meal fallacy, or: There ain’t no such thing as a free lunch.

29 thoughts on “How McDonald’s Responds to Minimum-Wage Hikes

  1. The reality is that when McDonalds or Walmart does not pay “living wages” then the rest of us make up the difference with a dog’s breakfast of subsidy and support programs. Maybe the people who use the services provided should be the one’s who pay the cost? If that means higher prices, so be it.

    But here is a better idea. Get rid of the minimum wage. Get rid of all that dog’s breakfast of support programs. Replace them with Universal Basic Income sufficient to provide food and shelter. Then, let market forces decide on wage rates.

    Liked by 3 people

    1. UBI can never work, because it severs the linkage between production and consumption. There is, in consequence, no way to “pay” for it.

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      1. Uh, we already have de facto UBI. We just administer it very inefficiently.

        As for paying for it? Easy. We already are paying for it but if we need more then raise taxes on those who can pay and stop spending on things that we do not need.

        You seem to be interested in new ideas, even counter-intuitive ideas. I suggest you learn more about UBI and not reject it out of hand.

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      2. RE: “Uh, we already have de facto UBI. We just administer it very inefficiently.”

        That should tell you something. Policy reform won’t change the basic economics of social welfare spending.

        Milton Friedman and Friedrich Hayek both discussed this topic at length. Perhaps you should familiarize yourself with their work.

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        1. “That should tell you something?”
          It does. It tells me that we can afford UBI and that it needs to be administered more efficiently.

          Milton Friedman advocated a negative income tax as far back as 1962 (“Capitalism and Freedom”). He repeated his advocacy in 1980 (“Free to Choose”). While not exactly the same as UBI, a negative income tax is very, very similar.

          Frederick Hayek advocated for a guaranteed minimum income in his 1944 book “The Road to Serfdom” and again in “Law, Legislation and Liberty” Once again, some differences, but in essence the same idea as UBI.

          Liked by 1 person

        2. RE: “It tells me that we can afford UBI and that it needs to be administered more efficiently.”

          It should tell you that efficient administration is unlikely.

          As for your glosses on Friedman and Hayek, neither supported UBI-type schemes based on economics. Both regarded social welfare spending by governments as undesirable, but probably unavoidable in light of uneducated public opinion.

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    2. Please clarify to everyone what a “living wage” is? Does it include the latest cell phone and service? Nights at the omni? Eating out every day and/or delivery? How about a vacation or two? Breast implants? Every person’s idea of it would be vastly different. You socialists just have no clue, do you?

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      1. Of course people have different ideas about what a “living wage” should be. It is not clear cut. And everyone has different needs. Think of it as the level of income such that a family does not need handouts from the government to survive in our economy as it is today. “Survival” is a pretty low threshold. One that we already provide for through a dog’s breakfast of subsidies and handouts.

        By the way, the fact that you label everyone to the left of Attila the Hun as a “socialist” says a lot more about you than it does about them.

        Liked by 2 people

  2. It’s simple, raise the cost of an employee enough to cover amortizing a machine, and bingo, another unemployed Democrat thinking that corporate America is out to get him.

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    1. …” another unemployed Democrat thinking that corporate America is out to get him.”

      Yeah. Like there are no Republicans or Libertarians unemployed that think the same damned thing. You were doing just fine until your last little, anti-safety net line.

      Liked by 1 person

      1. So, you’re saying that the food service workers who lose their job to a machine correctly identify the market interventions by Democrats as the cause?

        If so, why are they Democrats?

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          1. Republicans, and especially Libertarians, recognize the link between an artificially high minimum wage and job losses.

            Only Democrats think you can pass a law against gravity and then be able to fly.

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          2. Republicans and Libertarians have sold their soul to some “private citizen” in Palm Beach County, FL. It is now time to doubt, seriously, their reasoning on anything.

            And your blind hatred for anything progressive continues to dull any sheen of rational thought you may have had. You accuse many here of basing their opinions strictly on hatred of T****. Back atcha, Dr. Tabor.

            Liked by 2 people

    2. In a rational economic system the machine – if its OVERALL cost is less than a person – SHOULD do the work and sooner rather than later, they will. And THAT is exactly why we need UBI. Vast categories of work are going to be disappearing in very short order and we need a solution for the massive economic displacement that is inevitable. And this is not just – or even mainly – a problem at the bottom end. Knowledge workers – typically middle-class – are even more at risk from technological advances.

      Liked by 2 people

      1. RE: “Vast categories of work are going to be disappearing in very short order and we need a solution for the massive economic displacement that is inevitable.”

        Economists call that the “Luddite Fallacy.”

        Vast categories of work are always disappearing.

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          1. RE: “It is a matter of timing/training and really not at the heart of point he’s making…”

            His point is that we need UBI because automation will eliminate jobs. His rationale for UBI is a well-known fallacy.

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          2. Well, in the short run it will eliminate jobs, perhaps many and for a considerable amount of time.
            A reasonable UBI would allow painless transition as retraining/industry realignment occurs.

            Liked by 1 person

        1. It is hardly a fallacy. It is happening now. And the pace of it happening is only going to increase. It is not just that people will be working more efficiently and thus putting other people out of work. It is that people will not be working at all. We are only just now scratching the surface of what robotics and AI can do.

          Luddites oppose technical progress. I do not. I welcome it. But we have to change how we think about things or it will be a disaster.

          Liked by 1 person

          1. Even when first presented the “fallacy” did not mathematically (Econ wonk stuff) account for the slope of the line creasing at an increasing rate. At this point both the pace and depth of change make predictions a crap shoot. IMO.

            Liked by 2 people

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