$15 minimum wage kills jobs, burdens economy
The nationwide “Fight For $15” movement hit its first major milestone last month when it managed to push McDonald’s into announcing that it would be rolling out touchscreen self-ordering kiosks into all 14,000 of its national locations. Economists long predicted that this could be the effect of increasing the minimum wage, but finally, the push for a wage high enough that businesses cannot realistically support it has materialized this.
In an article for Forbes, Ed Rensi, the former president and CEO of McDonald’s Corp believes that McDonald’s decision is a direct result of rising wages and the “Fight For $15” movement. To back this, he cites a claim that a quarter of restaurant closures in the Bay Area were attributed to increasing employee wages.
The restaurant business has always been one with a low profit margin, and a look into food franchises shows just how much of a reality this is. According to a report by Franchise Business Review, 51.5 percent of food franchises earn less than $50,000 a year, with the average profit of all restaurants being around $82,033. According to the Carnegie Mellon School of Computer Science, the average salary of one of their graduates comes in at $108,955. That means that right out of college, a student can already make significantly more than someone who has taken the enormous risk and investment of opening a restaurant — and that’s with the current nation-wide minimum wage of $7.25.
If the $15 minimum wage resulted in a number of closures in the Bay Area, one of the most expensive areas in the United States, imagine what it would do to small towns and cities with a significantly lower cost of living. To equate this, let’s compare the standard of living in San Francisco to that in Harlington, Texas. According to CBS News, Harlington is the town with the lowest cost of living in the United States. At $15 an hour, a cashier at McDonald’s would make around $30,000. If this salary was made by a resident in Harlington, Texas, according to PayScale’s cost of living calculator, this would be the equivalent of making $59,415 in San Francisco.
The fact that money literally goes twice as far in Harlington as San Francisco shows just how ridiculous the concept of a national minimum wage is if too high. Countless movements are calling out the $15 minimum wage in San Francisco as their working example, but they fail to show that making $15 an hour in San Francisco is the same as making $7.57 an hour in Harlington. If restaurants have already begun automating restaurants in places like California, imagine what they would do in towns like Harlington if they were forced to pay all of their employees over $15 an hour.
The benefits of automation are clear to businesses — more efficiency, no sick days, no protests, a fixed cost that could be elapsed by the wages of a worker in less than a year, and in many cases, an improved customer experience. That being said, we should be doing all that we can to ensure that Americans continue to have jobs in a sector that accounts for nearly 10 percent of total jobs in the nation according to restaurant.org. Because America is a nation with a vast variation in cost of living from city to city, such policies should be made on the city level, not nationally. The “Fight For $15” movement is one led by some of the cities with the highest cost of living in the nation with little thought into the implications that such a policy may have for areas of less economic wealth.