McDonald's could double wages and it's operating profit would still be $5.5Billion. What's wrong with $5.5billion in profit?
http://www.businessinsider.com/mcdonalds-could-double-wages-...
Headline billion-dollar profits sound impressive, but are meaningless until you see how much capital has been employed. It's all very well to say they should halve their profit, but if that then meant that the returns for the company fell below what is expected from the sector, there will be other flow-on effects, such as a falling company value, difficulty in raising further capital if required, and other problems.
I would turn the question around - what's wrong with a $11b profit? The duty of the McDonalds management is to increase returns for the shareholders, not to run a make-work business.
Nothing, by itself, but in the case of McDonalds, Walmart and others who make massive use of minimum wage workers that profit is heavily subsidized by all of us as taxpayers since by holding on to that money and not sharing it with the employees we (taxpayers) now need to help fill the gap created between the cost of living and what those corporations are paying the majority of their workers.
In the case of McDonald's: absolutely nothing, it's a business, it exists to generate a profit. That is its purpose, to optimize returns. Others may choose a different path, non-profit for example, or low-profit (eg Costco). There is nothing inherently wrong with either path. If McDonald's makes the wrong choice, then they open themselves up to a very large market of competition to hammer them.
The problem the labor of McDonald's has is simple: their customers will not care whether a person or a robot makes the burgers, so long as they taste the same and are inexpensive. This problem will never go away, and the robotics revolution will ensure the obvious outcome.
Low costs are critical to this piece.
Nurses and teachers in Germany and France are happy if they make $30,000 per year. I think $30,000 burger flippers, fry cooks, and order takers, that come with all the complications of human labor, will be mostly easy to replace at a fraction of that cost. The fast food workers have completely lost perspective on what their labor is worth.
A very popular convenience store chain on the east coast, called Sheetz, has been running the order taking of their very successful food business (where they make all of their money), strictly with touch screen order kiosks for nearly 20 years. McDonald's could eliminate, what, four or five order taking employees with a simple change. No way they keep order takers at $30k per year. That's just one simple example of course.
It is more ethical for McDonalds to make a higher profit, and pay lower wages, if they can.
This is because they have an agreement (and I don't care about the precise legal nature of this agreement) with the shareholders to maximize the profit of the company.
The employees on the other hand, they never made any promises to. Employees have a relationship with the company as long as they are willing to take the wages/conditions on offer.
You might think that it is ethical for McDonalds to redistribute money from their shareholders to their workers (and their workers are surely poorer on average). But this is solely the role of the government, and private charity. I can't prove this properly in a single post, but it is closely related to the First and Second Welfare Theorems.
I know, that's why I left it as an open question.
> They have an agreement with the shareholders to maximize the profit of the company.
It's fascinating we let that agreement trump the implicit agreement they have with all humans on earth.
> You might think that it is ethical for McDonalds to redistribute money from their shareholders to their workers (and their workers are surely poorer on average). But this is solely the role of the government, and private charity
This is how the system currently functions, but I strongly believe the system needs to (and must) change. For a business to purely be concerned with profit can only lead to destruction for all of us. They'll bleed workers dry, kill the planet and be happy doing it.
It's also the system that makes the most theoretical sense given the First and Second Welfare Theorems, which state (or more accurately strongly imply) that any desired outcome can be achieved by the free market, and government redistribution.
"killing the planet" is an externality that can be addressed by environmental legislation (e.g. a carbon tax).
One has to wonder what the end-game will be,
There is nothing that I have said that would rule out a highly progressive tax system, and a generous welfare system. In fact that is exactly what I would recommend.
I don't think the US is particularly free economically. It is true that most developed countries have higher minimum wages and, for example, more powerful unions, but this is not, in my opinion, why they have less inequality. They have less inequality because they have more progressive tax systems, and more generous welfare systems.
Also the US has more cultural diversity, and many people (e.g. living in poor rural areas) could earn more money if they were willing to choose a very different lifestyle.
This is a perverse use of the word 'ethical'. It attempts to remove corporations from any responsibility towards their employees.
If it is, as you say, ethical for a corporation to follow their shareholders wishes and maximize profits and the cost to wages,
then I consider it extremely unethical for shareholders to insist upon this, knowing that the result is exploitation of employees.
Let me ask you a question: where does the moral responsibility to pay higher than market wages come from? When I started my work, I had no doubts that my employer would rather pay less than more. However in my case there was competition for my skills that drove up the price of my labor. In the case of people earning minimum wage, there is not enough competition to drive the price above minimum wage. But in both cases the market is setting the price, and I don't see how the term exploitation applies to either.
The fact that some people don't have the ability to earn more than minimum wage is a property of those people, not their employees. And the appropriate response is to transfer money to them via the tax/benefit system.
People are obligated to take employment even if that's at a far lower wage than the value of what they are offering.
I am satisfied to describe this type of employment as exploitation.
If a corporation makes an increased profit only by using the fact that its employees are in a very poor negotiating position and cannot refuse employer demands, I would be satisfied to call that unethical. Normally, people would call sweatshops unethical - on the same basis. I believe that corporations and already-wealthy shareholders both shoulder moral responsibility for that.
Current economic conditions have converged to a point where [minimum wage] employees have almost zero negotiating position.
I agree with you that this needs to be better addressed by politicians - partly, but not only, in the tax/benefit system - but I don't observe that it is being addressed.
Change the laws and you can take their profit down to zero.
Horray!