Minimum wage laws are fundamentally a tax on low-margin businesses and the low-wage workers who frequent them. There's a better option available. The Earned Income Tax Credit (EITC). It can ensure that workers take home $15/hour, while also ensuring that the cost is borne by the entire society. Not just a few specific industries and the specific demographics that rely on them.
I haven't qualified for the Earned Income Credit in quite a few years, but I have nonetheless claimed it a number of times. I experienced none of the magical properties you seem to think it has.
You can get a Notice of Withholding to get the credit in your paychecks instead of at the end of the year. I don't know how well it works.
It's clearly possible in theory to get $15,000 on April 15 and $15,000 from McDonald's and live the same lifestyle as someone who makes $30,000 from paychecks. I could manage it easily, it's basic consumption smoothing. Should be able to borrow against the credit if necessary, too, since it's guaranteed.
Depending on the structure of the rest of the tax system and on whether the UBI phases out or not, the effective marginal tax rates can also be quite different, though this part can be massaged to make the two options look identical, I suspect.
But the core of the difference is whether employment is explicitly encouraged (EITC) or not (UBI).
You aren't immune.
Minimum wage laws impact the supply chain that feeds Whole Foods and nice restaurants by increasing the cost of rural labor.
https://www.indeed.com/salaries/farm-worker-Salaries
A quick google will show you that farm workers are well below the $15/hour goal most progressives are touting.
The argument that "society should carry the cost" is based on your opinion that is in error. Society carries the cost of minimum wage increases because we all have to eat. We all have to patronize low margin businesses to some degree (even if it is indirect).
You can argue the EITC is a better "solution" than a minimum wage but if you are trying to ensure $15/hour for people paid $10/hour, you are really talking a negative income tax or UBI. At which point, you are probably better off supporting those proposals instead of pushing the EITC.
Personally, I'm not a fan of subsidizing low margin businesses that from a Capitalist perspective should probably be allowed to die if their workers can't afford to live on what they pay.
I think it’s kind of rich that the same people who are probably working for money losing companies backed by VCs think that small low margin businesses owners don’t deserve to make a living.
> you are really talking a negative income tax or UBI. At which point, you are probably better off supporting those proposals instead of pushing the EITC.
I do support UBI too but it seems like an extreme stretch to say that is easier to sell than EITC. Especially when you consider that EITC already exists today as a federal law, and UBI does not.
https://en.wikipedia.org/wiki/Earned_income_tax_credit
> Personally, I'm not a fan of subsidizing low margin businesses that from a Capitalist perspective should probably be allowed to die if their workers can't afford to live on what they pay.
Allowing McDonalds to hire workers at wages set by supply-and-demand, is the very opposite of a subsidy. Killing off profitable low-margin businesses, will by definition, lower the nation's GDP and tax base. Everyone, especially the workers like the one featured in the article, will be far better off in a world where profitable low-margin businesses aren't killed off by government regulation. It's far more effective to tax McDonalds, as well as every other profitable company, in order to fund the safety net that every citizen deserves.
To do what the person I'm replying to wants, it would be on the scale of UBI/negative income tax. Otherwise, its not the equivalent to $15/hour when they are being paid $10/hour.
Consumers almost certainly have more elastic purchasing preferences for insurance as a group, as they are much more granular. Insurance companies love negotiating with companies, because fewer, larger customers with greater inertia and specially-negotiated deals enable greater price discrimination than a mass-market product compared directly to others. This has further enabled the rise in prices.
I firmly believe that the individual is better-equipped to make his own decisions than any central planner or procurement department. We've messed things up enough with centralization; it's time to shift back to letting consumers make their own choices. Rather than taking even more choice by further centralizing from an oligopoly to a government monopoly, give people a chance to make their own decisions. I picked health insurance as it is a particularly hot topic, but this reasoning applies to many other areas.
[0]: https://fm-static.cnbc.com/awsmedia/chart/2019/8/19/image%20...
[1]: https://www.insurancejournal.com/news/national/2018/10/08/50...
[2]: https://www.insurancejournal.com/app/uploads/2018/10/2018-eh...
You're right, but then we have the employer class generally lobbying against society actually providing these things.
Small businesses outside of the tech sector don’t have the access to capital that tech bro’s have.
Especially since we know that most venture funding goes to people who “pattern match” with Zuckerburg not the people who are running small businesses.
Yeah that’s going to make the poor better off while people in tech shake their finger at them - or in other words let them eat cake!
If low margin companies don’t deserve to be in business then why do money losing companies deserve to be in business? What if we made it against the law for public pensions to invest in VC funds or made it illegal for companies that don’t show that they can be profitable to be listed on the public market?
The mom and pop shop can’t get millions of dollars thrown at them because they “pattern match” what a successful founder “looks like” without a business plan. They actually have to be profitable.
What if capital wasn’t chasing after money losing startups where the VC partners take 20% management fees no matter how badly the fund performs - much of that money coming from public pensions?
This turns the low paid workers into unemployed workers.
I'm fascinated that people honestly think it's better that people make $0/h than $10/h while "exploited".
Most studies that have been done on minimum wage found no correlation to unemployment rate. The economics you learned in high school can rarely be applied perfectly to reality. There are plenty of countries with minimum wages with no significantly different unemployment rates in the service industries.
This makes it very hard to measure the effect with any precision. You have to remember that wages are not 100% of the compensation for employees. So if MW increases from $10 to $10:50, fringe benefits may be cut from $2 to $1:50, and you end up with no measurable effect.
> But the reality is that these shops need the workers regardless.
If their expenses become higher than their earnings, the shops will close. Maybe that at least is an economic fact we can agree on?
For what it's worth, here in Australia there's only around 10% less McDonald's stores per capita to the US, despite a $20 minimum wage. All these workers can afford to eat and live in some of the most expensive cities in the world and the country isn't collapsing under unemployment.
If I was emperor, abolishing MW would be my first and most obvious reform to help the poor.
> All these workers can afford to eat and live...
But the problem is the people who can't get work because on MW!
Citation needed. In fact, I did a quick Google search and found out that several US cities/states have increased minimum wage this year and they've seen NO significant job losses. In fact, in some cases these states have seen more growth in low-income jobs than states with lower minimum wages.
Minimum wage takes money out of the pockets of the rich and puts it in the pockets of the poor. Half the time the rich people would have spent this money on luxury goods instead of spending this money on everyday things anyway. As such, in many cases you end up seeing increases (or at least no impact) in the numbers of low wage jobs because of the increase in demand of the products of said workers.
Or they could raise their prices. That’s what normally happens in my experience when a small business faces an unavoidable and significant increase in one of its input costs.
Also, that's a flat out lie. Greece, Spain, and Italy are pulling up the average with their huge unemployment rates, and the vast majority of unemployment rates besides that are almost the same as the US and in some cases lower.
https://www.statista.com/statistics/268830/unemployment-rate...
Germany and the Netherlands have some of the highest minimum wages in the world, and yet they have unemployment rates that are lower than the US.
Moreover, your claim was that most of the countries have twice the unemployment rate of the US. Your very own source shows that only 5 of the 28 nations have double or more, and less than half have an unemployment rate 50% greater than the US. Are you going to admit to your lie or are you going to change the story?
"For the fiscal year 2017, McDonalds reported earnings of US$5.2 billion"
Why are you making this sound like a bad thing? What's with the EITC drum-beating in this thread?
https://www.prnewswire.com/news-releases/mcdonalds-reports-f...
Their net income was less than $700 million and it’s not corporate McDonalds that pays the employees in the stores - it’s the franchise owners.
Franchise owners make less than $70K a year per store.
https://work.chron.com/average-income-fast-food-franchise-ow...
Keep in mind that the owners make that after leasing the building from McDonalds. It’s a turnkey business and there are many, many people who have gotten pretty rich on operating these places.
Most franchise owners aren’t “starting a business” they are “buying a job”.
But a 2013 report from Franchise Business Review dug down into the numbers and came up with a net profit of $66,000 per franchise. McDonald's did much better with an average of around $150,000 per restaurant. But when you consider that a McDonald's franchise costs more than $1 million and can easily run more than $2 million, even McDonald's doesn't generate excellent average returns on investment. The fast-food franchise business is tough, and success doesn't come easy.
With Chick-Fil-A, operators just get one store. They are buying a job. McDonalds franchisees usually own multiple stores and have different business interests.
There’s no regulatory environment that prevents exploitation of the workforce, so doing so is the low risk choice. The company chose a low quality bar and competitive pressure forces them to mercilessly attack cost.
16 hours x 4 people x 7 days x 52 weeks Equals about 2400 hours a year.
How much could they raise the hourly rate of their employees and raise prices before the demand went down and still be profitable if they are only making $150K now? At what point does it not make sense to invest $1 - $3 million a year to make meager returns?
They may need to look at the business and franchise model. They have a fubar business with hundreds of SKUs. 5 Guys is able to make money on a freshly cooked burger, higher standards for quality and higher cost. Make a "McDonald's Classic" concept that cooks real food at higher prices.
Again, McDonald's makes a business decision to have a system that encourages franchisees to utilize labor at the lowest cost possible because it is the lowest risk decision for them. For the larger company, the profitability struggles of the operators aren't a world-ending problem -- they own the real estate assets, and get to be an exclusive supplier and pull their percentage of gross sales first.
From my POV, I don't care a whit about McDonald's -- as a human it's awful that people are treated the way that they are, and as a taxpayer it's awful that society as a whole gets to pick up the pieces when hard working people fail and end up dependent on social services for survival. If McDonald's business can't deliver, that's their problem. The demand for food isn't going anywhere and a competitor will fill the void.
What’s the percentage of people that work at McDonalds are working there as a primary income?
Isn’t kind of hypocritical that you criticize McDonald’s profitable business model but you’re okay with all of the startups - including ones that are backed by YC who are losing millions of dollars but are able to access capital?
Five Guys also costs a lot more. The people who eat at McDonalds every day couldn’t afford Five Guys.
And if the magical competitor becomes available, are they going to be able to sell food as cheaply as McDonalds?
If their business model is not compatible with humane treatment and fair compensation of workers, why should we subsidize it? If the quality of McDonald's food is such that a small marginal cost increase will destroy the business, is it a good business?
Competition in the fast food space is intense, and market forces will drive prices. Perhaps the people who cannot afford a hamburger at Five Guys would be able to do so if paid a decent wage.
Maybe if we didn’t give special treatment to VCs Capital gains, many of the tech bro’s would also be out of a job. If we want to stop subsidizing bad business models let’s start with not allowing public pensions and tax free endowments the ability to invest in VC.
Don't be misled by people unintentionally (we hope) citing revenue numbers to bolster their case.
Criminal.
https://www.cnbc.com/2019/11/15/trump-releases-rule-requirin...
The stick is not big enough.
A massive amount is about to be spent on lawyers, so clearly they see this as a huge threat.
[0] - https://www.insurancejournal.com/news/national/2019/12/04/55...