targeting the fast food industry and demanding a $15 an hour base wage via protests outside 100 restaurants nationwide.
While the intent of the action (to improve the lives and living standard of the unskilled, working poor) is praiseworthy, the outcome of such a move would actually backfire and result in all sort of unintended and unwanted consequences.
As my co-host Jeff Macke and I discuss in the attached video, there are at least three key reasons raising the minimum wage for the men and women who take our food orders, cook our burgers and fries, and mop the floors in thousands of different establishments, simply won’t work.
1) Paying $15 an Hour Would Actually REDUCE Fast Food Jobs
It’s estimated that more than four million people work in the fast food industry in the U.S., with a median wage of $8.69 an hour for what are overwhelmingly part-time jobs that have extremely high turnover rates. By calling on one industry, within a spectrum of businesses that employ unskilled workers, to double its compensation would surely lead to an influx of job seekers looking to seize upon this opportunity.
If you stocked shelves in the supermarket, for example, or mopped floors in a hospital, for the current minimum wage rate of $7.25 an hour, and heard that your friends across the street were suddenly getting paid twice as much, suffice it to say you - and countless others like you - would probably be looking to jump ship.
Suddenly, every McDonald’s and Pizza Hut and Popeye’s in the land would be inundated with applications and therefore could be extra-picky as to who they hire, and what they expect from new as well as current workers.
“There is no place on earth with more upward mobility than front line service jobs dealing with the masses,” Macke says. “It’s a very hard, thankless job and if you do it well, you’ll be an assistant manager by lunch time,” he jokes.
The point is, an artificial and mandatory increase in wages would not only syphon workers from other lesser-paying, unskilled jobs but also displace many marginal workers who already have them.
2) It Defies The Low-Cost Business Model
If fast-food restaurants, or any business for that matter, were suddenly hit with a large cost increase, they would have no choice but to offset that expense in some way, the most likely of which would be price increases.
The problem here is that fast food also happens to be cheap food so there is very little wiggle room to begin with. Add in the fact that the restaurant business is highly competitive and there’s really no way to refute the fact that higher prices are a disincentive to consumers and would undoubtedly be a drag on sales, and ultimately profits.
As Macke points out, if there was a competitive advantage to be had by simply paying workers more, than companies would’ve been doing it long ago. We couldn’t think of a single example of a restaurant that sought to capture the high-wage corner of the market, and are certain that’s proof that it isn’t viable.
As it is, food preparation is becoming increasingly automated, which only makes the case even stronger for restaurant owners to buy more machines instead of paying people $15 an hour.
As one observer put it, these well-intentioned wage-hike picketers just may be “protesting themselves right out of a job.”
3) Why Only Fast Food Chains?
Clearly there are a lot of entry-level or low-paying jobs that exist beyond the proverbial burger flipper, and yet, there isn’t a nationwide protest to improve the standing of babysitters, landscapers or grocery baggers.
“It’s up to society to pay these folks more, it’s not up to Wal-Mart” or other corporations, Macke asserts.
The point is, why should fast-food restaurants alone be forcibly disconnected from the free-market forces of labor supply and demand or the wage realities that particular jobs carry?
If the goal is to truly make people’s lives better, then proponents should be upfront about that and set to work on every worker’s behalf and seek an across the board increase in the minimum wage to $15 or $20 an hour.
- Consumer Discretionary
- Personal Finance - Lifestyle
- minimum wage