I will not set foot in a McDonald’s on April 15…

by Glenn Littrell

On April 15, 2015, in solidarity and support for families struggling to live on minimum wage jobs,please boycott McDonald’s this Wednesday.

Why should you care about the minimum wage? State and federal governments spend more than $150 billion a year on four key antipoverty programs and almost 75% of the families helped by these programs are headed by a worker. “…taxpayers are providing not only support to the poor but also, in effect, a huge subsidy for employers of low-wage workers, from giants like McDonald’s and Wal-Mart…. …four key antipoverty programs used by working families: Medicaid, Temporary Assistance for Needy Families, food stamps and the earned-income tax credit, which is specifically aimed at working families." source

Why McDonalds? McDonalds isn’t the only transgressor, nor is the food service industries. McDonalds is a symbolic choice because they are both a leader in their industry and the one of the most identifiable brands in the world. The food service industries are the biggest advocate for a low minimum wage and the greatest oppressors of their workers with a minimum wage and no to little benefits.

“The low-wage business model practiced by many of the largest and most profitable employers in the country not only leaves many working families unable to afford the basics, but also imposes significant costs on the public as a whole,” Sarah Leberstein, a senior staff lawyer with the National Employment Law Project, testified recently before Connecticut lawmakers.

Why not just find a better paying job? Really? Changing jobs in what is one of the most unstable job markets (low wage workers) in America is a high risk venture. Not all minimum wage jobs are filled by teenagers, and over the last 20 years more and more well paying manufacturing jobs have been replaced by minimum wage and part time jobs. More employees at McDonalds are heads of households, retirees trying to supplement a fixed income to battle increased medical bills, and people having to work a second job. In the minimum wage sector the employer has all the power. Good workers are desperate and training cost are low. The end result is high turnover rates don’t hurt the employer as much as they use to.

Will raising the minimum wage increase the cost of your BigMac? Not necessarily. Outside the U.S., McDonalds labor cost makes up 45% of all expenses while in the U.S. labor cost make-up only 25-33% of all expenses, yet McDonalds in Europe makes more revenue than McDonalds in the U.S.
Businesses have two choices when cost go up: raise the price or reduce the profit margin. They could also do both, but according to Forbes:

“…a doubling of, or a halving of, or any other change in, the wages of McDonald's workers will have absolutely no effect whatsoever on the price of a Big Mac or the dollar menu. For prices are not set by the cost of production of something, but by the supply and demand for that item.”                  source

Won’t a higher minimum wage hurt businesses, the economy, and cause workers to be laid off?

• Business: Wages are a part of the cost of doing business, one of the most fundamental cost. Another is the cost of producing a quality product. Successful business do not skimp on the quality of their product, yes they try to reduce cost as much as possible, but they pay what they must to maintain quality. In the service industry the employee is a significant part of the product. You may not care if the guy in a steel foundry has clean fingernails, but you do if they’re handling your food. Good wages encourages good employees, good workers, and professionalism.
  With siblings Christy & Jim Walton (of Wal-Mart) being the 8th and 9th richest people in the world and worth more than $40 BILLION EACH how much would it hurt them to pay their employees a decent, livable wage?

  “Wal-Mart's (WMT) highly publicized pay hike is a victory of sorts for its 1.3 million employees, but American taxpayers will foot the bill for the large subsidies that will still be needed to compensate for the discount retailer's low wages.”

  “The four primary Walton heirs held a fortune that rose by $20.9 billion from March 2014 to March 2015. For roughly half of that amount, or $10.8 billion, the Waltons could give every one of Wal-Mart's 1.3 million U.S. workers a $5 hour raise and still keep the other $10 billion, the ATF research found.”

  “Wal-Mart benefited from $6.2 billion a year in taxpayer subsidies because many of its employees make so little they need food stamps, Medicaid and six other taxpayer-funded programs to get by.”                   source

• Economy: The effect on the national economy is very controversial, which means that both arguments for and against a raise in the minimum wage are debatable, but a 2013 Center for Economic and Policy Research (CEPR) review of multiple studies since 2000 indicated that there was "little or no employment response to modest increases in the minimum wage." The study indicated 11 reasons for this finding, the most important including: "reductions in labor turnover; improvements in organizational efficiency; reductions in wages of higher earners ('wage compression'); and small price increases." Another CEPR study in 2014 found that job creation within the United States is faster within states that raised their minimum wage. In 2014, the state with the highest minimum wage in the nation, Washington, exceeded the national average for job growth in the United States.
• Layoffs: Possibly, but lets make two distinctions:
  • Corporate America: Corporations work on a model where the least amount of employees are employed at any given time. Layoffs occur for many reasons other than rising labor cost. To maintain productivity an increase in the minimum wage would have little impact on them. The added cost, like all cost increases would be factored in, across the board, with other cost in making workforce decisions.
    In the current business environment worker productivity is at all time highs. As a result we see corporate profits and executive pay skyrocketing, but worker pay remains stagnant. So how is it that in times of high productivity and profits, any mention of raising the wages of everyone, except the minimum pay workers, is applauded and seen as an incentive and reward, but when the minimum pay worker suggest a pay increase it results in a claim that their pay increase would lead to layoffs?
    And let’s not forget, that a wage increase is another tax write-off for the employer.
    
  • Small businesses: At one time it was believed that 95% of new small businesses failed within the first 5 years. Now the figure is pegged at 50% in the top ‘failure’ category. The interesting thing is that after reviewing 10 websites on the subject of why small businesses fail ( Google: small business failure reasons) not one of them mentioned labor cost. The only mention of employees as a reason was about keeping them engaged. The good news for small business owners are that 42% of employees at small companies are happy compared to less than 30% of employees at bigger companies. While wages are still important, job satisfaction always rates high with good employees.
    The problem for small businesses is big businesses. In every business related discussion that comes up, particularly in the political arena, corporate America, their lobbyist, and politicians whip out the ‘small business card’. Corporate America continually uses the small business as the the potential fall guy for anything that might happen to them. It is this co-mingling of interest that on the one hand scares the small business man to death and on the other hand gets him sucked down the drain before any real damage is done to the big floating carcass of big business. While corporate America is in a position to survive 99% of the things that could actually hurt the small businessman they use the small business argument to hurt the small businessman through small business customers. The customers being the employees of the big companies that would benefit from a pay increase. These employees would pass the increase on as consumers to the small businessman.
    In other words, big businesses employees,the general public, small businesses, and eventually big business would benefit from new money being put back into the hands of the consumer.
    What small businesses need to do is separate themselves from the political rule of the big companies. The first step would be to change the definition of a small business. Right now businesses with up to 38 million dollars in receipts or up to a thousands employees, businesses that dwarf what the average person would call a small business, can obtain status as a small business. These so-called small businesses benefit from, and compete with true small businesses for, small business grants, loans and contracts. By redefining a small business the truly small business would find it easier to obtain exemptions to many impediments that now burden them.

Since its inception(1938) the federal minimum wage has been raised 23 times. With its inception and the 23 wage increases, along with state minimum wages and increases, overall negative effects on employment, business and the economy have not been proven. Yet, one thing we all should realize is that the more Americans who have spending money… will spend it, and this is always good for the economy.                           by GlennDL