Gerald (Jerry) Zezas

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Hamburgers and Minimum Wages

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The premise that raising the minimum wage will force employers to cut jobs is as imbecilic, shop worn and oft disproven as the one that claimed employers will stop hiring if we raise their taxes-remember that bit of tripe?

Employers don’t base their hiring on dollar cost-they base their hiring on the amount of personnel required to do a specific job. In an efficiently run company, the amount of employees doing a particular job is exactly the amount needed to get it done well and on-time-no more and no less. The larger the company, the more efficient they presumably are, since they have the resources to measure these things quite accurately. The cost of those employees is reflected in the price they charge for their product-not in the quantity of employees, for the above reasons. If an industry needs lots of people, it hires accordingly and the cost of labor is reflected in its pricing.

An example is McDonalds. Statistically, the typical McDonalds counter worker can handle a certain amount of customers per hour. For the sake of this argument, let’s say it takes 3 minutes to help the average customer, which would mean that counter worker helps 20 customers per hour, on average. If there are 5 counter workers standing side-by-side all day, that’s 100 customers per hour and 800 customers per eight-hour shift (5 workers x 20 customers x 8 hours). Now let’s say that the average check per customer is $9.00 (this includes when people buy food for others at their table or to take back to the office). At 800 customers per shift and $9.00 per customer, that shift in that McDonalds should earn $7200.00 in revenue ($9.00 per customer x 800 customers). If every one of those workers should get, let’s say, an increase of $1.00 per hour in wages, that’s $1.00 x 5 workers x 8 hours = $40.00. If they get a $2.00 per hour increase it means that means an increase in wages for that 8-hour shift of $80.00. Now, if we simply divide that $80.00 increase in the cost of that shift by the amount of customers served during the shift ($80.00 / 800 customers = it works out to $.10 (ten cents) per customer per meal. Not $.10 per bag of fries or $.10 per Big Mac-$.10 for the entire meal! McDonalds can give their counter workers a $2.00 per hour increase and only raise the price of the average meal by ten-cents!

Now, before you go ape-shit on me, I realize that there are anywhere from 10-20 people or more in the kitchen who have to cook that food as well, and their incomes are just as important as the counter workers, so let’s include them, shall we? Using the numbers above:

To put this to the most stringent test, we’ll exaggerate how many people are needed. We’ll use 30 workers for this McDonalds. 30 workers x 8 hours x $2.00 per hour raise = $480.00 per 8 hour shift for the entire McDonalds store to get a $2.00 per hour raise. Once again, divide that by the 800 customers served during that shift and you get $.60 (sixty cents). So, friends and neighbors, McDonalds can give everyone in that store a $2.00 per hour raise and only have to increase the cost of an ENTIRE MEAL by sixty cents!

The argument made by these companies is that customers won’t spend more for their food (bullshit, especially if it’s only an average of $.60 on the entire meal) and so they’d have to lay off workers. Well, if they have so many excess workers that they can lay them off and say, have only 4 employees at the counter handling those 800 customers per shift, it means that they have been operating inefficiently to begin with. My suspicion is that they can’t.

But, let’s say that our friendly neighborhood Mickey D does, in fact, lay off just one worker to cover their additional expense of a $2.00 an hour increase for the counter workers. Now they have only 4 people working the 8 hour shift at the counter. The numbers go south quickly:

4 counter workers x 20 customers per hour = 80 customers per hour. 80 customers x $9.00 for the average check times 8 hours in the shift equals $5760.00 in revenue for that shift, A NET LOSS OF $1440.00 IN REVENUE from the $7200.00 per shift they were making with 5 counter workers. But, that should be covered by their savings from having fired the counter worker, right? Well, no.

That counter worker is getting paid, as you’ll remember, minimum wage of $7.25 per hour, so by firing him or her, you’ve saved A TOTAL OF FIFTY-EIGHT SEMOLIANS! (8 hours x $7.25 per hour = $58.00). So, all those MBAs at the Golden Arches are threatening that, rather than raise the price of a $9.00 meal by $.60 and potentially lose one or two customers because of it (since everyone would be doing it, where would those customers go?), they would rather fire employees, which saves them $58.00 in wages per day, yet costs them $1440.00 in lost revenue!

C’mon folks. Labor, although not exactly cheap, is not the largest expense in food service. This is grade school arithmetic, yet these fast food megaliths are hoping that you and I (and their workers) forgot where we put our calculators.

These are the same tactics used in the last election. Those of a certain “protect business at all cost” political persuasion (OK, Repubs) have persuaded workers that it is in their best interest to let the bosses keep the money, because then those extremely wealthy bosses will allow it to trickle down and rain upon us.

They hope that their expertise in getting us to vote against our own interest will continue unabated. Will it?

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2 Comments

  1. Frank says:

    The figures uses an example that assumes there is a never ending line of people coming at a constant rate of 20 people per hour per cashier, which is not realistic. Restaurants have more non peak hours than most businesses.
    All that aside, the domino effect of increasing the minimum wage is what concerns me. If minimum wage goes up by 2$ an hour, then the person making $10 per hour now will demand, abd rightly so,$12 an hour and so on. That is the reality of the situation. Teenagers, part time housewives or househusbands dont require premium wages. And by proposing $15 an hour( not you, but the organizers of these protests) are not being taken seriously. The plan that you have put forth is reasonable and workable.

  2. JZ says:

    Numerous problems with your response:

    The figures I use are statistical averages. It does not assume a steady stream of customers. It is the average amount of customers a cashier handles in an hour when the entire 8 hour shift is taken into consideration. It may only take 1 minute or so to handle one customer. The three minutes I used includes downtime in the average.

    The “domino effect” is the same argument used to get us into Vietnam. How’d that work out for you?
    It isn’t a matter of what this or that group will demand. That’s irrelevant. You can’t say to minimum wage workers that they have to continue to be paid so low that they need food stamps, just because we’re worried what a $10/hour worker might ask for. Raises in minimum wage have never proven to raise everyone elses wages, because the pressure to do so diminishes as you go up the economic ladder and people can at least live off of the money they’re making. You comment has no basis in fact and reminds me of the argument used by Repubs when they resisted tax increases. They claimed it would cost jobs, yet could never point to a single statistic to prove it. Economics, (much like law) is not based on what most people thinks make sense. It is based on facts and empirical data. There are no facts or empirical data to validate the premise that raising the minimum wage will result in other wages climbing. Because you think it will does not make it true.

    The $15 demand is a negotiating tactic, nothing more. No one expects a worker in McDonalds to make $15.00 per hour nationwide (although in some cities that truly is the minimum amount it takes to live). It is an attempt to start negotiations high because they know that they will be negotiated down.

    The point of all of this is the fact that you have people who work, full time, receiving food stamps. That makes no sense. You and I are subsidizing these people so that their bosses can pay them unrealistically low wages. We are supporting McDonalds and Walmart low wages through our taxes.

    Republicans have to make a choice between lowering their taxes (which is an issue of biblical importance to them), or supporting big business (which for some reason, is of equal importance to them). In this case, supporting big business has a direct and negative effect on your taxes.

    You can’t have it both ways.

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