The minimum wage should not be raised to $15/hr for fast food workers

1. Labor is now 25% to 35% of fast food costs Con did not contest my specific evidence that labor costs are 25% to 35% of costs in the fast food industry, that a $15 minimum would increase costs by 17% to 20%, Con cites Sen Warren's figure that doubling the minimum at McDonald's would only increase the price of a burger by eight cents. That's unsupported nonsense and probably part of the early mistakes confusing McDonald's Corporation with the franchises. I provided a thoroughly referenced derivation of a minimum of 17% increase in costs. The average McDonald's Big Mac Meal costs $6.74, so a straight increase would be $1.14. In practice, prices would rise less than that with employees being replaced by machines. 2. Increased costs cannot come out of profits Con concedes this point. Prices would rise. 3. A $15 minimum would eliminate about half the jobs Con showed no error in my source. Con referenced the Card and Kreuger (CK) paper (1994) claiming that employment actually increased in fast food restaurants when the minimum wage was raised in New Jersey. A later study by Neumark and Wascher (NW) (1995) [15. http://www.nber.org...] contradicted the result, showing a decrease in employment. NW discovered that CK had relied upon telephone survey data, whereas payroll data showed a different result. The two papers were considered by Roppenen [16. http://onlinelibrary.wiley.com...] Roppenen found that employment decreased in the large fast food chain restaurants, but increased in small independent fast food restaurants. Fast food restaurants outside of large chains have almost disappeared since 1994. I suspect that growth in independent restaurants has something to do with the economic recovery being different in Pennsylvania and New Jersey, the too states compared. NW also pointed out that data variances were very large so the CK results were subject to statistical error. Con referenced the CK paper again with a second link. Con's reference after that is a bogus link. Con then sites a Forbes article that says, “Fifteen dollars an hour is a huge jump from $7.25. It’s outside the range of experience. If you’re an empiricist, you have to say you don’t know what the outcome will be. But it will create some problems with McDonald’s business model.” This is like saying “We have no experience with a large chemical weapons attack on a US city, so we have no empirical data on what would happen.” Nonetheless, we have good reasons to believe it would be bad. There have been many studies of the overall effect of raising the minimum wage. The Congressional Joint Economic Commission surveyed the literature published in the fifty years after World War II. They found only three studies out of 102 cited where a minimum wage increase had no negative effect. In all the others there was a negative effect. The Commission said, “These studies were exhaustively surveyed by the Minimum Wage Study Commission, which concluded that a 10% increase in the minimum wage reduced teenage employment by 1% to 3%.” [17. http://tinyurl.com...] We would expect a few more studies before 2009 to show no significant effect, because the minimum wage has fallen further below the prevailing wage. It's as if we had a minimum wage of $20 per hour for neurosurgeons and raised it to $25. There would be no significant effect because so few neurosurgeons work at such low wage. Before the 2009 recession, only about 2.5% of the population was working at the minimum wage. A study done in those years may show little effect. Most of the state minimum wage hikes were in states with high prevailing wages, making it even less likely for an impact to be observed. Con argued that in general wages are not subject to supply and demand and that any minimum wage increase would therefore have no effect. About a hundred studies contradict that. [Con's falsely generalizes small increases in the minimum to any increase in the minimum. In 1967 the minimum wage was 50% of average wages, now it is 39%. The minimum is now $7.25 and the average wage is $20.08. [18. http://tinyurl.com... ] That is why if raised to $9. countrywide it would have modest effect. At McDonald's workers are generally paid $9, so raising the wage to $15 is a different story. That's an increase from 80% of average to 166% of average. Even though she used the bogus McDonald's numbers, Sen. Warren's hearing was about a small increase, not the $15 proposed for McDonald's, The testimony was that a small raise in the minimum wage would have little effect on the economy as a whole. The studies cited of no impact were from years when only 2.5% worked at the minimum wage. Now 4.7% of workers are at the minimum wage, and most of those part time. [19. http://www.bls.gov...] Even if that group is hurt badly, it is too small a part of the whole economy to have a devastating effect on the nation as whole. Con argues that since full automation did not occur after the 2007 minimum wage increase, none will occur in the future. In fact, automation is incremental. After the comparatively modest 2007 wage increase, McDonald's installed automatic-shutoff drink machines and eliminated one job in twelve. Additional increments of automation are fully-automated drink dispensing, automatic burger flippers, touchscreen order taking, and factory preparation of menu items. Deliberately causing mass inefficiency with artificial increases in labor costs is a net loss of efficiency even there is remediation of part of it with automation. I didn't cite a McDonald's in Tokyo. I cited a competitor that is more easily automated. In Prof. Reich's video he is talking about a raise from $7.25 to $9, not close to what we are debating. He says jobs won't be lost because personal service jobs cannot be automated. In the specific case of fast food I have shown exactly how the jobs can be automated. The only issue is capital costs versus labor costs. If Con argues that supply and demand do not operate on labor. About a hundred studies contradict that. [17] He made the generic argument that the minimum wage has no effect on employment, regardless of the amount. I challenge Con to explain why, under his theory, we should not raise the minimum to $200 per hour. If Con agrees that the amount matters, then he needs to reference the actual numbers for McDonald's. A rise in the minimum cannot be stimulus, because it merely transfers wealth. Con argues that reducing turnover will compensate for increased wages. That depends on the industry, and no one knows more about the McDonald's tradeoffs than McDonald's. Costco is a warehouse store, that's not McDonald's. 4. Welfare should be done by government insofar as it's done at all Con supposes that if the government sets any minimum and if I don't oppose abolishing the minimum entirely, then I've accepted the principle that government is free to set any minimum. If something is bad, it's still valid to discuss an acute case of making it worse. If the minimum is set well below the prevailing wage, it has little effect and isn't worth debating. Con says questioning the role of government is irrelevant. No, the challenge only says that we are weighing advantages versus disadvantages. It is a disadvantage of the $15 per hour minimum that it transfers wealth away from lower and middle income groups to fast food workers, rather than transferring it from the wealthy. The Gini Coefficient is a measure of income equality. Total equality is achieved when all incomes are zero. It is a measure, but not a goal. I showed that fast food is not a monopoly industry. I never said or implied a minimum wage was a free lunch. I said it puts workers out of their jobs. Debate issues Con has the link to the Costco reference used erroneously three times. The CK link is duplicated. I need the real links. Con references Reich's arguments without making the arguments himself. They should be ignored.