At least according to this Forbes 'economist.' Is he right or wrong? I am skeptical, but then again in North Dakato the starting wage at McDonald's is $15 and the prices are LESS than they are in Chicago (where wages are a minimum wage)!
The author's argument is that McDonald's would have to stay competitive and thus would reduce staff and move more toward automation.
The author's argument is that McDonald's would have to stay competitive and thus would reduce staff and move more toward automation.
The Real Change In The Cost Of A Big Mac If McDonald's Workers Were Paid $15 An Hour: Nothing - Forbes
The Real Change In The Cost Of A Big Mac If McDonald's Workers Were Paid $15 An Hour: Nothing
A rise in production costs do not affect the cost of goods, aka, a Big Mac? In what universe did you get your economics degree? Supply and demand may deter [...]Tim Worstall, ContributorMy economics degree? The LSE. Where they did indeed teach us that companies price at the maximum whatever their production costs. For thats how to maximis [...]Julie Monroe Would it not matter where the increase in pay came from?Tim Worstall, ContributorIt does indeed matter whether the pay raise is at Maccy D only or across the board. If its only at McDonalds then its as above. They cant raise their p [...]Michael Stein @Tim Worstall: I think its a bit more complex than you make out. Big Macs and Whoppers and Wendys hamburgers are not perfectly substitutable products, be [...]Tim Worstall, ContributorIndeed it is more complex than I make out. You point out one of the subtleties well in your comment.satwood The comments in this section make me lose all faith in mankind. Cmon people!The author never stated that increased production costs have no effect on the [...]55 comments, 7 called-out Comment Now
Follow Comments Following Comments Unfollow Comments Comment Now Follow Comments Following Comments Unfollow Comments I will admit to having been amused at the error strewn Huffington Post piece which insisted that doubling the wages of McDonalds workers to $15 an hour would have only a minimal effect on the price of a Big Mac or the dollar menu. Clare OConnor here at Forbes describes what went on. My amusement isnt at the errors in the calculation, nor in the way that it was subsequently re-reported. We all make errors at times and the important thing is what one then does: just as Mother always said, fess up and try not to do it again. On which point everyone has acted excellently.
My amusement rather is about the fact that a doubling of, or a halving of, or any other change in, the wages of McDonald's MCD -0.43% 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.
Doubling of labor costs will simply increase a fast food restaurants incentives to adopt technology like this. And if fast food wages doubled everywhere it would spur the development of these technologies even faster.
The obviousness of this point is demonstrated by the way in which Apple AAPL -1.42% gets its kit manufactured in China. Theres, as we all know, some 250,000 people working at Foxconn to make all that shiny shiny gadgetry. Theyre paid $400 to $500 a month to do so. If all that manufacturing were done in the US people would be being paid $2,000 to $3,000 a month for the job: but there would be many fewer of them and many more machines.