HuffPo Economic

HuffPo put out an article the other day claiming that doubling the wages of McDonalds employees would cause the Big Mac to cost just 68 cents more (the original article seems to have gone down the memory hole; see below).

Of course, being idiots, they ignored several basic economic problems. For one, McDonald’s managers won’t pay the same number of people $15 an hour to flip burgers: they’ll find ways to cut back on staff. For another, if McDonalds were paying $15 an hour, they’d have a much larger pool of employees from which to draw, which could squeeze out the low-skill entry-level workers who desperately need the kind of stepladder jobs offered by … places like McDonalds.

The bigger problem is a fundamental failure to understand Econ 101. If McDonald’s could charge 68 cents more for a burger, they almost certainly would. McDonald’s would charge $45 for a burger if they thought they could. But they have set their prices at a point that maximizes revenue. If you’re a rich economist or politician, paying 68 cents more for a burger doesn’t sound like much. But centuries of economic experience tells us that the market will respond to such a price change with less purchasing, either of burgers or of something else so that they can buy burgers.

And that’s the last part they’re ignoring: that cheap burgers help poor people and middle class people get ahead in life. As Kyle Smith recently pointed out, the McDouble is one of the most cost-effective methods of getting calories out there. It’s a cheap way for working poor people to grab a bite or indulge a vice. Why charge them more for it under the guise of helping them?

Anyway, it turns out that HuffPo — haha — completely garbled the math, counting McDonald’s revenue that included franchise fees but only their direct labor costs. Even HuffPo has to admit that a doubling of salaries would increase the price of a Big Mac by $1.28, more than double what they previously claimed.

Oh, and the story didn’t come from a “researcher” at the University of Kansas but from an undergraduate student. So … it’s bullshit anyway. And the left wing ran with a story that was literally an undergraduate project that would have gotten a D at best.

You know, I didn’t think any left wing meme would beat out the Platinum Coin for stupidest idea of the year but … hmmm … nah. I still think that Platinum Coin idea was even stupider.

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  1. Seattle Outcast

    If the price of the burger went up, so would the cost of everything else. My quick $6 and change meal would now cost $8 or more – so I’d either eat at home or find a cheaper option. It’s one of the reasons I don’t go to the nearby “5 Guys” – they charge too much and the wait is too long. Wendy’s, two blocks away, sells cheaper burgers, has a drive-thru, and reformulated their burger some time back; guess where I get my burgers at lunch?

    Anybody remember how about 30 years ago Taco Bell decided to dial back their prices before they went out of business? They had become too expensive and had lost a LOT of business. As a last ditch effort they chopped prices by half or more on many items and started an aggressive TV ad campaign about their items under a half dollar. It worked, and suddenly the big burger chains started offering large selections of “value” items of a buck or less. They still do, and they make up a large portion of their business.

    If you want an expensive burger, go to Red Robin and pay double. But you also get more menu options, booze, and all the fries & soft drinks you can shove into your face for no extra cost. Red Robin would also never hire most of the fast food workers currently whining about pay, just like Costco would never hire the average WalMart employee. Paying more means cherry picking who you hire because the number of applicants for each position is ten times as large.

    Morons like HuffPo who want to jabber about how raising prices wouldn’t affect these businesses might wan to spend a year or two on a franchise management team first (like I did) and learn what the hell they are talking about.

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  2. AlexInCT

    McDonald’s would charge $45 for a burger if they thought they could.

    PROFITS ARE EVIL!

    Korporashuns should just be make-work factories where the noble laborer gets paid for his valuable work.

    These fucking marxist idiots still think that paying a guy that spends 8 hrs. a day shining a turd the same as an airline pilot, doctor, nuclear engineer, or business owner is the right and noble way to look at this problem. And as long as that’s where they start from, that there is such an idiotic concept as a living-wage, anything and everything they do will result in an abysmal painful failure. Not to mention that they hate the idea of a free and willing exchange of goods, services, or monetary compensation, for everyone but themselves.

    Progressive ideas and economics produce the same results as mixing anti-freeze with club soda and drinking it: they make you seriously ill, and they kill you sooner than later.

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  3. Seattle Outcast

    The discussion on this over at Fark has essentially fallen into name calling at this point. One idiot stated that ALL JOBS must pay a “living wage” by right.

    By this “logic”, if I get a job scooping up dog shit for a landscaper, it HAS to pay enough for me to raise a family of four if I work 40 hours/week. Don’t know where you live, but in the Seattle area that would mean about $20/hour to walk around with a scooper and some plastic bags to do something that is generally farmed out to 8-year old kids for $20/week (and half of that is just allowance).

    And they wonder why the economy is a piece of crap these days….

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