Monday, July 27, 2015

Is New York Trying To Kill Fast Food Businesses?

It's no secret that many in the U.S. -- especially those in the liberal political class -- blame fast food restaurants for America's obesity problem.

It's no wonder then, that New York State's proposed minimum wage increase to $15 will only be applied to fast food operations throughout the State. The primary argument for doing so won't be about obesity (wink...wink!), but instead, because McDonald's and Burger King underpay their employees. New York must pay out millions of dollars each year in various forms of welfare for these workers.  Of course, the State doesn't mind that other minimum wage workers like busboys, dishwashers, hotel workers, etc. will continue to be supported with welfare payouts. 

So what's the impact on, let's say, McDonald's food prices once the wage hits $15:
  • A $15 minimum wage is a 71% increase from New York's current  $8.75.
  • That $15 wage is higher than every current McDonald's worker's pay except for Shift Manager and Store Manager; both salaried.  Thus, every worker, including the salaried, will also have to see a proportionally-based 71% increase. Therefore, we can assume that whatever a McDonald's store's total cost of labor is today, it will be 71% higher once the $15 kicks in.
  • According to the website, the average cost of labor for every dollar you spend at McDonald's is 32%.  So, if you spend $10 today at a New York McD's, $3.20 will go to cover the cost of labor.  When the 71% increase is finally applied, the cost of labor will be $2.27 higher.  Or, in other words, that formerly $10 meal will then cost you $12.27 or 22.7% more.  That's before any other inflation that may also affect pricing.
So, the question is:  How many people are going to be able to afford a Big Mac, fries, and a Coke when the price goes from the current $7.85 to $9.63?  Probably, well over $10 with inflation. Especially since real wages (those adjusted for inflation) have only been going up three-tenths of a percent per year.

Simply, going to McDonald's or any other fast food store may still be fast but no longer cheap.  For some people, the cost to eat there may just be too steep; especially since traditional sit-down restaurants won't be hit by the minimum wage increase. Thus, expect business declines and business closures as people relegate eating fast food to being a luxury.  Make no mistake, this imposed wage is like any tax on liquor and cigarettes that is used as a means to deter the buying of those products.  To me, that looks like the real intent here.

Lastly, as far as the obesity issue goes, it's not true.  Seven years ago the City of Los Angeles banned any new fast food restaurants in South Los Angeles as a way of curbing the growing obesity problem in that part of the city.  Obesity wasn't abated.  Instead, it got worse; going from 63% to 75%. Also, regarding fast food, poverty, and welfare;  this country has 45.3 million people in poverty and on welfare.  The fact that there are only 3.7 million fast food workers hardly proves that the industry is placing some massive burden on the country and the State of New York; especially, since 61% of all fast food workers are part-timers working before and after school or as a means to earn some extra money.


New York Plans $15-an-Hour Minimum Wage for Fast Food Workers:

McDonald's Menu Pricing for New York:

McDonalds Salaries in New York, City:|+Glassdoor&ie=utf-8&oe=utf-8 

Real Earnings:

Cost of McDonald's Labor:

Ban on fast-food eateries in South L.A. hasn't cut obesity:

In 2013, the official poverty rate was 14.5 percent, down from 15.0 percent in 2012. This was the first decrease in the poverty rate since 2006. In 2013, there were 45.3 million people in poverty: in the U.S. fast food restaurant industry:

Characteristics of Minimum Wage Workers, 2014:


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