New Study: A Pricier Burger could mean a Living WageBy: Bennett Rieser - August 1, 2013
The recent striking by fast food workers in many large cities has prompted an undergraduate student to publish a controversial study about McDonald’s food prices.
The question has recently been repeatedly asked (particularly in the wake of a distressing financial advice packet given out to McDonald’s employees) if the company’s food would continue to be affordable if the wages of its workers at all levels of the company were doubled.
With data compiled by Arnobia Morelix, a graduate student with the University of Kansas, the report concluded that, should McDonald’s hypothetically double its worker’s wages, a Big Mac’s price would rise 68 cents while items on the Dollar menu would rise an extra 17 cents.
After the analysis was made public on Monday, readers at Forbes and the Huffington Post pored over the data and discovered an anomaly: Morelix had only accounted for payroll and employee benefits of company-operated stores, excluding franchised locations from his study. When one considers the vast number of McDonald’s restaurants operated under franchise, this data suddenly seems a bit misleading.
The numbers were later resolved to include franchisee data, arriving at the Big Mac price increase of $1.28 based on twice the current pay. Dean Baker, a HuffPost blogger and co-director for the Center of Economic and Policy Research, suggested that such a wage increase would involve some layoffs although other workers would be incentivized to remain in their jobs for longer than they planned.
Regardless of the initial numbers’ correctness, a real discussion on a living wage for fast food worker’s seems to be taking place. Aimee Picchi over at MSN suggests that it may be feasible to raise that Big Mac’s prices, particularly when considering that many minimum wage workers receive food stamp assistance when feeding themselves and their family. The example she gives of this principle at work is a Wal-Mart supercenter, which because of low wages arguably causes taxpayers to hand out $1.7 million per year (or about $6000 per worker) in government benefits.
In spite of her optimism, Picchi’s analysis seems directly discounted by restaurant industry experts. Bonnie Riggs, an analyst from the NPD group, spoke with the Huffington Post about doubled wages for McDonald’s, suggesting that this kind of price hike is nowhere near financially feasible. Riggs said that while restaurants cut prices just to entice consumers to keep coming, profit margins have slimmed to the point that a labor cost increase could be fatal to the industry. The company could not survive if its labor cost that much.