Reality of $1/Hour

Posted Dec 05, 2013

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So today, unions sponsored another set of protests (and calling them strikes, as if those employees that were involved were already in a union) in an attempt to bully McDonald's, Taco Bell and other fast food chains to increase their minimum wage from ~$7-8/hour to $15/hour. Almost double.

I'll skip the issues of these unions just trying to increase their own membership and destroying entire industries to do it. I'll discuss unions in another post.

Tonight, I just want to show some simple math.

First, some foundational facts. we'll use McDonald's as our test subject.

• According to Micky-Dee's website, they currently have ~1,800,000 employees.
• According to their 2012 K-10 form (financial section), here's some basic financial numbers:
  
  • Total revenues: $27,567,000,000
  • Total operating costs and expenses: $18,962,000,000
  • Net income: $5,465,000,000
  
  

1.8 million employees. $5.4 Billion is net profit. Sounds like they could afford to increase those wages a bit, eh? Look again.

Let's pretend we increase all 1.8 million employees a mere $1/hour
They're mostly part-time so let's say they average 30 hours/week.

1.8 million employees X 30 hours X 52 weeks/year = $2,808,000,000

Yep. $2.8 Billion dollars. Congratulations, you just wiped out almost half their entire corporate profits.

The result? The stock just lost 1/2 their worth. Stock holders, in a frenzy of selling, plummet the price down, wiping out billions of net worth for investors. Investors who would have eventually sold and invested their profits into something else, perhaps the business you work in. But now they can't, because that money's gone.

The New York Stock Exchange index drops like a rock, due to the ripple effect of large increases/drops on the indexes, further removing potential investment money for the things you care deeply about.

Oh, and that 401(k) or other investment plan you have? Wanna bet what this will do to it? I can almost guarantee the stock code MCD and/or NYSE index is floating in their inventory of diversified investments. So yeah, your net worth just dropped too.

@ $2/hour increase across the board, we come to $5.6 Billion, wiping out all profit.

That's right. You just destroyed Mcdonald's. We now have 1.8 million more employees looking for work. Plus those stock investors, including you? screwed.

But it's even worse. remember this part?
Total operating costs and expenses: $18,962,000,000

That line means they spend almost $19 Billion dollars/year on construction, electricity, office supplies, wages, taxes, food, etc. etc. etc.

All those farms, companies, contractors, etc. that does business with them? Lower sales. Lower profits. Workers let go.

And it's even worse than that, because these are corporate numbers, and of the 34,480 MCD locations, 27,882 are franchises. Gone.

Oh yeah, and they want to do this at Wendy's, Taco Bell, Carl's Junior, In-n-Out, Burger King...

Plus, don't forget the other smaller restaurants. They work on even smaller profit margins.

So tell me again how doubling low-level job wages are a good thing?

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