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by jimmaswell
2609 days ago
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As you must know being a business owner, labor is only one component of expenses, so prices don't go up x% just because labor went up x%. In McDonald's case, a 100+% rise in wages would represent a 4% rise in price. Obviously most minimum wage increases don't double at once so it would be even less. You don't go on a firing spree and shut down the business when property taxes or materials go up so why would you need to do that if labor went up? https://www.marketwatch.com/story/raising-fast-food-hourly-w... There would be no need for a minimum wage if we had UBI but that kind of thing is too far off. |
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Estimates are that labor costs are more like 33% of the costs of a fast food restaurant like McDonalds:
https://s3.amazonaws.com/s3.documentcloud.org/documents/2915...
Increasing pay by close to 50%,one would expect that prices would have to increase by closer to 15%, not 4%. Though, given how price sensitive those customers are, it isn't clear how much you can raise the price.
In terms of margin, it looks like McDonalds is doing much better than other chains:
>...In 2012, for example, when McDonald's had a net profit margin of just under 20 percent; Burger King's net margin was less than a third of that and another big chain; Wendy's, had a scary thin 0.3 percent.
https://smallbusiness.chron.com/average-profit-margin-restau...
But even at McDonalds, I think it is safe to assume that in the longer term, fast food restaurants would look into replacing rising labor costs with machines - that might be replacing cashiers with kiosks or even machines that prepare and cook the food, etc. This would be expected to happen anyway, over time, but mandating huge increases in labor costs will mean it happens quicker and be more disruptive. (One might say "good riddance" as these aren't great jobs, but they are entry level jobs which are disappearing in all industries.)