What Would a $15 Per Hour McDonald’s Look Like?


Advocates for what they call a “living wage” staged protests again a week ago for McDonald’s and other fast food restaurants to raise their wages to $15 per hour for starting workers.  In truth, it is likely that those behind these staged protests are really union activists who want to see the minimum wage raised so that their membership will see their wages raised.  Often union contracts are indexed to the minimum wage.  Another possibility that unions, having left Detroit and Dearborn in the ashes, are looking to organize the low wage workers to expand their shrinking membership.

While at UC Berkeley, I saw a lot of protests that were touted as “student protests” in which people were bussed in from all over the state to fill the crowd.  Funny how none of the quotes in the school newspaper the next day seemed to be from Berkeley students despite the impression given that the students spontaneously took to Sproul plaza to support some cause.  The use of paid protestors is also often done by the Left.

Still, one needs to wonder if any of the people who are actually entry-level workers, making at or near the minimum wage to run a cash register or put together orders, have really thought about what would happen if they “got their wish.”  What would a McDonald’s be like if there was a requirement that starting pay be $15 per hour, assuming that the price of everything didn’t just go up instantly until $15 bought what $7 buys now?  Here is some speculation.

1.   Virtually everyone currently cooking at McDonald’s restaurants would lose their jobs.  Wages of $15 per hour would allow restaurants to hire graduates from culinary schools since that is around the starting pay for professional chefs.  Why would a restaurant keep individuals who could only do basic cooking and reheating when they could hire trained chefs?

2.  Menu prices would rise, but food quality would improve.  With labor costs at $15 per hour per employee, why not spend a little more on food?  McDonald’s would need to make a lot more per customer to cover the slow times when there were few customers in the restaurant.  Given that they now had trained chefs, the solution would be to make higher quality food so that they could charge more and increase the amount they made off of each bill.  Right now food costs are probably something like $0.50 for a hamburger.  For about $2.00 per hamburger, they could make much better burgers, worth the $10 each they would be charging.  With wages at $15 per hour per employee, why not spend a little more on food?

3.  Virtually everyone taking orders would be replaced with a kiosk or a smart phone ap.  The technology currently exists for individuals to place orders with a kiosk or with their phones, so there would be no need for someone at the counter to take their order.  This technology costs money, so replacement of workers with technology will be slow so long as wages are sufficiently low.  A sharp increase in wages, however, will make the transition more rapid since it would be less costly to buy and maintain the technology than it would be to pay workers.  For $15 per hour, a technician could be hired to maintain the system, replacing five or six people working at the counter.

4.  It will be almost impossible for a teenager to get a job.  Likewise for a single, divorced mother new to the workforce.  At $15 per hour employers will be expecting people who have proven themselves and whom have experience.  The old saying about “not being able to find a job without experience and not being able to get experience without a job” will become more true.  The entry-level jobs that people rely on today to gain work experience and get their starts will be gone forever.  Note that unemployment among teenagers is already extremely high by historical standards.

5.  Eating out will become something reserved for the middle and upper class.  With higher menu prices and large amounts of joblessness among the poor and under-educated, only those with larger incomes will be able to afford to eat out.

It is easy to just propose that businesses pay their employees more, but the economics cannot be changed.  You cannot expect a business to pay more for an employee than the value he/she is creating through his/her work.  The value that entry-level employees are able to provide, given their lack of experience and the many hours required before they have mastered job demands and no longer need constant help and supervision is not sufficient to justify a high wage.  A business would be losing money with each employee they hired.

Mny advocates for a living wage have their hearts in the right place, but they would be hurting the very people they are trying to help.  Even if a restaurant could pay $15 per hour for a starting worker, it would be disappointing for a starting job to pay a high enough salary to pay for all of the needs that come as one enters one’s thirties and forties.  How sad would it be if people never advanced their skills beyond the first entry-level job they ever had.  People should better themselves and be doing far more significant things when they are 60 than they were when they were 16.  What kind of society would we have if most people peaked at 16?

Contact me at vtsioriginal@yahoo.com, or leave a comment.

Disclaimer: This blog is not meant to give financial planning advice, it gives information on a specific investment strategy and picking stocks. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

2 thoughts on “What Would a $15 Per Hour McDonald’s Look Like?

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  1. I was in a McDonald’s a couple days ago and noticed they had 10 employees working during a fairly steady time of day, but it was nowhere near peak hours. With an average of $9 per hour thats $90 per hour in payroll. Not too bad. With raising the wage to $15, the managers will want to make more than $15 and so lets say the average is $17 per hour, their labor cost would have to almost double to $170 or they would cut employees. The cuts are guaranteed. They would probably end up with 6 workers instead of 10, making worker costs the same, the jobs would have a lot more competition and higher expectations.

    I’ve worked at McDonald’s myself, and I considered it to be a fun job. The expectation was basically show up for work and do the best you could. We had mentally and physically disabled people on staff and that was fine.They did their best. At $15 per hour those people are gone for poor performance, unfortunately. Its not fair but its what would have to be done to make the most of the workers you have.

    I don’t know if you’ve had the privilege of managing welfare employees but I do and I can tell you that they are always hands-down your worst employees. They call out at least a couple times per month for no reason; they only work when they want to work because if they make too much they can’t collect their welfare, and they have no work ethic (ie hungover at work) because it just seems like they dont want or need to be there.

    However, if the wage increase means less taxes and less welfare benefits then it would be a great thing in my opinion. I’m sure, though, that it would only mean an increased standard of living and of course more welfare. If the wage doubles and lets say taxes get reduced by 33% (unlikely I know) then a lot of higher paid employees could take a small paycut, make more than they already make due to less tax burden, and ultimately the system could work. Obama’s idea of punishing the rich and the corps does NOT and WILL NOT work. Just like with obamacare, did he honestly think that insurance companies were just going to accept that they have to offer more coverage and lose money? NO, they immediately passed the costs onto consumers doubling average premiums and tripling deductibles, which raised their profits even more. Same will happen if you just straight up raise minimum wage, the corps CANNOT take a loss, their board wont allow it. They will search for ways to get around taking a loss if it means firing half their staff or lowering employee benefits.

    Therefore, its my belief that the only way this country has a chance of not failing is through tax reform. Right now, working under the table and selling drugs is more rewarded than working a job. Also investment income is more rewarded than hard-earned pay. This needs to change so that the worker and employer are the ones who prosper while the drug dealers are being taxed just like the rest of us (ie FairTax).

    1. It does seem like it would be more effective if the government supplamented wages, for example, paying $3 per hour, gradually reducing it as pay increased but always making sure that people got paid more when they earned more rather than handing out checks for not working and even paying less when people did work.

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