McDonalds.....Don't Eat the Food!

[mikehaugen]

I think this is because the employees usually get their meal for free while working, so naturally most employees are going to eat it the days that they work. This is where the problem is... the people that eat there everyday. I think it is a reasonable warning.

 

[Markcuda]

Ray, with that said, this thread is now closed.LOL

 

[caver]

Recently saw one of those turbo charged, high velocity hand dryers with a label someone took the time to have made up stuck to it that said, "To hear something from the President, hold hands here..."

Too funny......time to make some labels for local hand dryers. :laughing:

 

[dave1949]

Dave,

As you know, there has been a good deal of media chatter regarding the effects on McDonald's pricing if their labor costs increased. A point raised by many economists is that other things aren't going to remain equal.

For the sake of argument, let's say that your calculations are correct and that raising wages would increase all fast food prices by 20% (rounded). What's going to happen to fast food sales? The answer depends on the own-price elasticity of demand for fast foods. My brief search turned up an estimate of -1.9 (rounded) based on data for 1992 (http://ageconsearch.umn.edu/bitstream/31162/1/26010058.pdf).* Using that estimate, increasing prices by 20% would decrease the number of meals sold by 38%. That means a lot fewer people would be required to flip burgers.

Economic theory predicts that when the price of labor (wages) increases relative to the price of capital (the interest rate), firms will substitute capital for labor. Automation of the ordering and preparation process will further decrease the demand for fast food labor (e.g., Momentum Machines | The Next Industrial Revolution).

Steve

* I was in graduate school with one of the authors, so I know he was well trained.

I was hoping you would join the discussion, Steve. I am mindful of the milk pricing exercise. :laughing: I know all of those things work to make "things not equal", and a major one-time jump in the minimum wage would push and pull things all over the place with very complex feedback loops.

My gut feeling is if a meal price increased by 20%, it would not reduce meals sold by 38%. In dollars, a $10 meal becomes a $12 meal, I don't think that would reduce the number of cars waiting in the drive-thru by almost four in ten, or that the average order amount would decrease by 38%. I'm sure there would be some impact, but I'm having trouble seeing it as that high. Of course, I have no data or theory to support my gut feeling.

What does the own-price of elasticity have to say about the effects that occur beyond the Golden Arches? What does the increase of $2 on a $10 meal do for the customer? I believe it would "buy" benefits in other areas such as low income subsidy programs in all their various guises with a result of reducing government overhead and intrusion.

It would leave more money in the public sector compared to passing money through government. Also, some public employees would become unemployed. There are also things like increased revenue into the Social Security and Medicare payroll tax programs.

Even if the net financial impact is not all that great, or the potential savings are swallowed by politics, the social aspects are compelling. Removing welfare from the lives of working families would quiet many of the concerns people have about the hand-out society and its effects on our national character.

I fear that the great majority of human capital is going to continue to be devalued as a market commodity. At some point, societies will have to confront that fact, or vastly alter their core values. Perhaps the recent vote on the "universal income" in Switzerland is an example of such an attempt.

 

[downsizingnow48]

Dave1949 is right. Redistribution is happening all the time. The only question is who loses. For a very long time, the working family has been on the losing end, while the rewards of productivity increase shift elsewhere. Micro-economic theory has nothing to offer in explanation of this.

 

[txdon]

The suggestion of making our own fast food (bacon, eggs) is still not healthy enough for McDonald's. McDonald's suggest and I quote: "It then praises a submarine sandwich and salad – typical fare served by arch-rival Subway – as a healthier choice.""

Subway needs to exploit this advice. Even though it has been shown that Some Subway meals have more bad calories than McDonald's at least at Subway you have a choice and they have enough healthy vegetables to make a healthy meal.

 

[smstonypoint]

My gut feeling is if a meal price increased by 20%, it would not reduce meals sold by 38%. In dollars, a $10 meal becomes a $12 meal, I don't think that would reduce the number of cars waiting in the drive-thru by almost four in ten, or that the average order amount would decrease by 38%. I'm sure there would be some impact, but I'm having trouble seeing it as that high. Of course, I have no data or theory to support my gut feeling.

Dave,

As I mentioned, I did a brief search and cited the one estimate that I found. That estimate applies at the margin and may be higher or lower for individual consumers. Estimation of that elasticity over different time periods, model specifications, etc. will produce different results. But of one thing I am sure -- the elasticity is not zero.

What does the own-price of elasticity have to say about the effects that occur beyond the Golden Arches? What does the increase of $2 on a $10 meal do for the customer? I believe it would "buy" benefits in other areas such as low income subsidy programs in all their various guises with a result of reducing government overhead and intrusion.

It would leave more money in the public sector compared to passing money through government. also, some public employees would become unemployed. There are also things like increased revenue into the Social Security and Medicare payroll tax programs.

Even if the net financial impact is not all that great, or the potential savings are swallowed by politics, the social aspects are compelling. Removing welfare from the lives of working families would quiet many of the concerns people have about the hand-out society and its effects on our national character.

I fear that the great majority of human capital is going to continue to be devalued as a market commodity. At some point, societies will have to confront that fact, or vastly alter their core values. Perhaps the recent vote on the "universal income" in Switzerland is an example of such an attempt.

Economic theory tells us that a minimum wage (that is above the equilibrium wage rate) results in a deadweight loss to society. In my opinion, most economists (but not all, as we are a contentious lot) would agree that the earned-income tax credit program offers the advantage of letting the market work to allocate resources while providing assistance to those who may need it. However, that does bring up the issue of optimal tax policies -- a different (and very large) can of worms.

Steve

 

[wsp617]

JIm Gaffigan - Mr. Universe - "McDonald's" - YouTube

 

[dave1949]

JIm Gaffigan - Mr. Universe - "McDonald's" - YouTube

:thumbsup:

 

[rsallen]

So at what point does a minimum wage below the equilibrium starts resulting in a dead weight loss to society Mr. free marketer Ayn Randian?

We've had 40 plus years of this free market trickle down bs where has it gotten us? Not you, but the us. You know, the ones that actually produce something. You know, the ones that actually make the wondrous fortunes so jealously guarded by your like.

What ever happened to fair value in return?