How unions won a 30% raise for every fast food worker in California
pluralistic.net
pluralistic.net
What is interesting, however, is that we're not witnessing this with traditional restaurants and/or fast casual spots. I wonder if they will catch up or if this sort of wage inflation or shove McDs out of the fast food category.
That's because the quality is even worse. Chili's (and Applebees) make almost zero profit on their food, it's just a loss leader to get people in the door and keep them drinking. The entire business model is real estate + cheap booze. The food just allows them to operate as a restaraunt instead of a bar, which is much easier to license in most places.
A footlong basic chicken sub at a Subway near me is $13. A "Supreme Meats" is over $18. A "Beast" (whatever that is) is $21! All without a side or drink.
Taco Bell and Wendys are similarly out of my guilty pleasure rotation. The discount was part of the basic contract we had with bottom tier food.
As a business strategy, this makes some minor amount of sense since the app orders are transparently more efficient than drive through orders (say name and get food vs read menu and then "can I get uhhhhhh"). I also suspect online orders probably on average larger than drive up orders because it's easier to order more. On the other hand, there is very very minimal advertising of the app at the store. That sort of makes sense too - App orders probably have lower margin because the price sensitive customers are using it. So you don't want to steer your price insensitive customers to it if you don't have to. Overall, it's actually a nice case of price discrimination.
I don't ever get delivery and prefer to eat on site rather than get takeout so I don't have a need to order ahead anyway.
But I'm happy to order from an in-store kiosk once I get there.
But I can also sit on a bus and order from the restaurant that's at my next stop, 20 minutes away. Google Maps has become great for this, actually. You find a restaurant and you hit the "Order" button, and there's a menu of choices for who to order from. You could GrubHub, DoorDash, Uber Eats, or you could order from the restaurant's website.
Restaurant websites have variable quality, mostly very poor, unless they're a franchise, or signed up with an aggregator, but hey, it's not an app.
So people who have more disposable income wont make a habit of using the steep in-app discounts and just order whatever they feel like eating at MSRP.
Every decade or so they bribe US politicians to have a repatriation tax holiday to bring those dollars back home.
Sounds complicated but another likely reason they want you to use their app.
Growing up their jingle was "$5 foot long" (this lasted til 2011 or so?). I figured there was no way a $5 price held, but I did not expect it to have almost tripled.
The deli sandwich thing, in particular, seems to have really broken the social compact.
Their ingredients aren't better. Their price isn't better. Their service isn't better.
It has become not uncommon for me to say "Yeah, I'll go to the grocery store and hit the deli because it's better and more convenient."
How many more people like me will it take before all the sandwich places collapse?
I think they've buffered against this a little by reducing wait staff and/or coming up with novel justifications to skim their earned tips.
Also restaurants downgrading to fast-casual (a brewery near me now makes customers dispense their own soft drinks, leaving the single bartender to bus food and tend bar).
Traditional restaurants and/or fast casual spots in the USA involve “mandatory” tipping, so even if menu prices are lower, I would assume that the total meal price is higher once one includes the tip, which nowadays is up to at least 20% if not 25%. I remember a Facebook thread that drew some angry wait staff posting things like “You better tip X% or you’re going to get some nastiness in your food next time”, and they were mainly coming from low-end chains.
At least in Florida, if you’re an employee that makes tips, your employer can pay you less than min wage as long as the tips bring you to at least min wage.
I never understood why this was a thing. If you just charge more for the food, you don’t need to put the onus of paying your staff literally directly on the customer
Lower-end fast food is also pretty price sensitive since most the people who buy it don’t have the high salaries you might be thinking of. In general, the people earning those would never eat at McDonald’s.
Are you sure about that?
The immediate counter example that springs to mind is the suspicion that (say) India feeds a lot more people with a lot less energy consumption (per capita but likely also in total).
For comparison here are the costs per kwh in USD for the three places I see with a quick Google:
Switzerland: 33¢
United States: 23¢
India: 11¢I just got back from Japan, however, and I was absolutely spoiled by how affordable eating out was, really good food and no tipping culture. Heck, even the convenience stores in Japan provide better options than most fast food restaurants in the states. But I got a sense that the workers are struggling with the current system.
$90k vs $56k
Of course if you start comparing individual states it would be quite different.
I think a lot of the tables which compare household income etc. are PPP adjusted and CoL is quite a bit higher in Switzerland
It's incredible how inflated prices for fast food are. It's the same crap as always but it costs the same as going to a real restaurant.
McDonalds had $1.9B in profit in 2022. $1.6B in 2021. Starbucks had $3.3B in profit in 2022. $3.6B in 2021. Subway announced they had beaten sales plans by $1.4B in 2021.
It's not the wages that are the issue making the prices go up. These companies aren't hurting for profit.
Out of curiosity, what does that mean? It appears to me the main business of McDonald's is to collect franchising fees. Most McDonald's fast food joints (93%) are owned and operated by independent local business owners, who have to pay McDonald's-the-company the frinchising fees, which are about $45k/year [1].
So, I can see how McDonald's, the company, can be highly profitable, while individual stores could be barely surviving.
[1] https://www.investopedia.com/articles/insights/072516/cost-b...
Does this equilibrium-finding method create undo misery and stress for the franchise owners? I would say yes. If franchisees banded together to negotiate in order to extract better fee arrangements from McDs without going through individual bankruptcy, well...
If you think that’s egregious, then we aren’t going to agree on much.
I could imagine marketing and PR alone on the scale of a McDonalds would be hugely costly, easily in the high hundred millions or billions.
Profit is already past expenses.
> That's just the tax they are charging the franchises for the privilege of calling themselves a McDonalds store.
McDonalds does plenty for the franchise restaurants:
1. Brand recognition and marketing which bring in tons of customers, without the franchise owner having to spend a cent.
2. Recipes that will sell. Franchise owners does not have to know anything about cooking, people's tastes etc. It's all covered by McDonald's R&D.
3. Efficient operations. Similar to the above, franchise owner's does not need to know anything about running an efficient restaurant. All equipment design as well as day-to-day operational procedures are standardized, highly efficient, and provided by McDonalds.
4. Employee training.
5. Restaurant interior design. Again, provided by McDonald - no need to think about it, no area to make costly mistakes by inexperienced owner.
6. Supplies. No need to worry about managing supplies and suppliers - it's all provided by McDonalds.
In fact, McDonalds does so much for a franchise owner that he's somewhat closer to a glorified manager with a profit sharing agreement, that to a real business owner.
I would suggest doing at least a little research on this topic before commenting.
For instance, "McDonald's owns about 70% of the buildings and 45% of the land at its locations worldwide. Once all the math is done, calculations show that McDonald’s owns around 47,037 acres of land."
Source: https://www.yahoo.com/video/owns-more-land-bill-gates-132113...
What matters when discussing unit prices is margins.
For example, if a company makes a profit of $10B on a trillion units sold, they likely couldn’t even afford to absorb a marginal cost increase of two cents per unit. In contrast, if they’re making $10B in profit on ten units sold, then a cost increase of a million dollars per unit would have a negligible impact on their bottom line.
Peak hours of course, but given that the McDonalds business model is mostly "sell drinks at pure profit, sell food at cost", price changes at best are just linked to raw materials costing more, and other expenses. Cynicailly: most of that price increase is not landing in workers pockets.
Some other random website states that wages are 20% of a McDonald's franchisee's costs. So I bet a part of the cost is for wages, but most of it is probably about everything else.
I consider wages to be a feedback loop system in the consumer economy that America is.
For the first time in many years, I had Steak N Shake. Had to order from a kiosk, get my own drink, and pick up my own food (it had previously been a full-service restaurant). That by itself wasn’t a big deal, but the kiosk had the nerve to ask for a tip! We didn’t all the work, so no thanks.
So the 30% raise is for fewer workers, and the costs (and work) will be passed on to the customers.
I'm suspicious this article is falsely assuming they were all making minimum wage. That's not the case near me.
It’s partly due to those 20 years during which much poorer generations have started working.
Or were you referring to some other idiom?
The last 50 years of wage growth stagnation comes solely down to a declining rate of productivity growth, which in turn is caused by a marked decrease in market liberalism, most pronouncedly in the housing market:
https://www.aeaweb.org/articles?id=10.1257/mac.20170388
>We quantify the amount of spatial misallocation of labor across US cities and its aggregate costs. Misallocation arises because high productivity cities like New York and the San Francisco Bay Area have adopted stringent restrictions to new housing supply, effectively limiting the number of workers who have access to such high productivity. Using a spatial equilibrium model and data from 220 metropolitan areas we find that these constraints lowered aggregate US growth by 36 percent from 1964 to 2009.
Most people rarely hear alternative narratives like the above to the one presented by unions for the cause of economic stagnation because the news media we depend on to inform us about the world is also fully unionized, e.g. all New York Times journalists are members of the NY Times Guild [1], with its writers and journalists benefiting from the exploitive arrangement of market restrictions granting their union a negotiating monopoly.
How do you mean that there has been a decline in market liberalism? I am pretty sure that the US market especially could need both one and two regulation pushes with regards to reigning in the influence of huge corporations and strengthening labour rights.
I think blaming unions for brain-dead housing policies is disingenuous. What needs to be done is government programmes for increased building, just like last time a lot of houses were built (at least in my home country). Otherwise no new housing will be built that will lower the prices of the current market. I don't even understand how you believe the role of the unions can be so big.
This false claim was popularized by the EPI, which is funded by unions.
The reality is that worker compensation has almost perfectly tracked labor productivity:
https://www.brookings.edu/articles/sources-of-real-wage-stag...
Comparing productivity with one measure of inflation to compensation using another measure of inflation is the way the EPI produced its false claims, as the above article explains.
>>How do you mean that there has been a decline in market liberalism?
Increase in regulatory compliance costs. Increase in the percentage of occupations requiring a license. Increase in the size of the Code of Federal Regulations. Increase in the percentage of GDP constituted by government spending. Increase in the number of regulatory agencies. Increase in regulatory restrictions on housing development, particularly in the highest productivity economic zones.