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

Summary We know McDonald’s current cost structure. Raising the minimum wage at McDonald's would raise costs by 17% to 20%. That's $1.14 on a typical meal. Customers, mainly the poor and middle class, would pay more and they would tend to eat out less often. The fast food business would shrink, losing jobs. Higher labor costs makes more automation cost effective, so McDonald’s would install more equipment and further reduce the numbers of jobs. We know what McDonald’s can do for automation, like automatic drink machines and touchscreen order entry. They would reduce the number of entry-level jobs. By forcing the prices higher than required, the economy suffers from lowered efficiency. Taxpayers will end up paying unemployment benefits and welfare to the low-skilled workers who lose jobs. Prices will rise 17% to 20% and half the employees will be laid off We agree prices will rise, a strong disadvantage, with the amount in dispute. Con's entire price and unemployment case is built upon a single study (CK) that compared what happened in 1994 when New Jersey raised its minimum wage but Pennsylvania did not. If the study were valid, one case is inadequate to establish that the minimum wage has no effect on employment no matter what the industry, the prevailing wage, and the state of automation technology. 99 of 102 studies on raising the minimum wage showed bad effects, and that's not overcome by one study that shows the contrary. We don't know if there were other differences affecting general economic growth in New Jersey and Pennsylvania. Saying that one example amounts to a law of nature is the fallacy of hasty generalization. However, the CK study was bogus, relying on a telephone survey that produced numbers with a very large spread. The study was contradicted by in 1995 by Neumark, who followed up by checking payroll data. Con says that a 2005 study attempted to resurrect the one case establishing minimum wage having no effect on employment, but he didn't provide a link to that study. However, the most recent study by Roppenen [16] in 2011 showed that CK was in error, and that employment dropped in the large fast food chains. Con explains that Sen Warren's claim of the price of rising eight cents came from the CK study, which claimed an 8% rise in prices. Con says “Both the [CK] study and the increase we're debating about increased wages about 18% found the same numbers.” Actually, we are debating an increase for $7.25 to $15. That is 107%, is 5.93 times 18%. If an 18% rise in wages produces an 8% rise in prices, then a 107% increase should product something closer to 45%. I'm claiming less than half that. To get to an eight cent rise in the price of a hamburger, the Senator must have used the promotional one dollar hamburger, and pretended that was what a McDonald's customer would typically purchase just one of those and nothing else. The Senator's calculation is fraudulent. The current minimum wage rise is much larger, the current economics of McDonald's applies – not 1994, and the average customer does not purchase a single one dollar burger. The analysis showed that costs would rise 17% to 20%. Applying that to the Big Mac Meal, more typical than a single $1 burger, produces a rise of $1.14 for a typical transaction. Con quotes a completely general Wikipedia article that says the classic supply and demand model does not always work because sometimes the assumptions are not met. Con did not make any of the arguments in the article himself, nor did he show how it applies to McDonald's. Wikipedia is not, in any case a valid source for opinions. Con needs to show that people will buy McDonald's hamburgers at the same rate regardless of price, and that McDonald's won't automate to lower costs despite the clear ways they can proceed to do so. I quoted a survey of published papers that showed the trend in job loses with minimum wage increases. Half the fast food jobs will go. I challenged Con to show that McDonald's jobs were so skilled that employee retention would save as much as it was claimed to at Costco. Costco is mainly a logistics company, finding many thousands of products, negotiating prices, arranging supply routes, and stocking warehouse stores. Those are high skill jobs were retaining employees saves training and recruitment. Not so McDonald's, who has no problem finding and training applicants. Con made preposterous unjustified assumptions of replacement costs. Con says, “My opponent drops that MW has been around for years due to it's effectiveness, ...” Debate fans will recognize the ad populum fallacy: that because something has been around for a long time, it must be a good thing. Smoking was around for centuries, and it wasn't a good thing. I did not accept that the minimum wage has been around for years due to its effectiveness. It's around because foolish politicians think they are doing good, and because it gets them votes. I said whether it is a good thing or not, we can debate the effects of doubling it in the fast food industry. I presented a survey showing that in 99 of 102 studies, the minimum wage increases had bad effects. Con did not respond with counter evidence. I challenged Con to explain why the minimum wage should not be raised to $200, given his argument that supply and demand did not apply to labor. He did not respond. Con says, “My opponent drops my monopsonistic argument favouring businesses unfairly.” I did not drop it. I responded that McDonald's had many competitors for labor. A monopsony is when there is one buyer. Not only are there many companies buying labor, but anyone can start their own company. If Con is correct that supply and demand do not operate on burgers, he or anyone can start a hamburger stand, charge $100 a burger and pay employees $200 an hour. The argument is nonsense. Supply and demand are operative, and there is plenty of active competition for both burgers and labor. Con says, “My opponent drops that MW may cause tech improvements, and his contradicting claims in RD2(prices).” I treated this at length. I said that raising the minimum wage causes price increases, and that some of the increase is absorbed by replacing jobs by automation. Con seems to believe that automation necessarily lowers costs and improves efficiency. That's not true, and I said so. If it were more efficient to increase automation at present wage levels, McDonald's would have already done so. Capital costs compete with labor costs. Raising labor costs artificially allows automation to be increased to save some money, but costs will still be higher than if labor costs were not increased. Higher wages won't attract more labor into the market because we already have large surpluses at low skill levels. Gini Coefficient I correctly said that having all wages zero produces a 0 Gini coefficient. The studies Con cites assume that per capita income is equal. That says that if the average income is the same, it's better to have fewer poor people. The Gini coefficient for the United States is 0.38, whereas about the best in Europe is Greece, at 0.33. [20. http://en.wikipedia.org...] So should we strive to be more like Greece? The problem is that achieving a lower coefficient by forced redistribution of wealth also necessary lowers the total wealth, because it allocates capital inefficiently. Con argued that transferring wealth from McDonald’s customers to McDonald’s employees will produce stimulus. Con produced no evidence that McDonald's customers were so wealthy as to be less likely to spend the money more readily than McDonald's employees. It's fundamentally unfair to transfer wealth from customers. -------------- Con had few sources relevant to current McDonald's economics, he declined to fix broken and bogus links, and he relied almost entirely on one doubtful study. Con repeatedly claims that I have dropped arguments when I did not. Thanks to Con for a debate that thoroughly covered the subject.