Comment by bsbechtel | Hacker News Reader

Comment by bsbechtel | Hacker News Reader

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Keep in mind that a wage increase affects not only one business's profit margins and pricing, but also the prices of all of their goods from suppliers too. Consider that fast food needs to pay 30% to labor, mostly at minimum wage. Another 30% or so usually goes to food costs. Those food supplies are the product of farm labor and food processing plant labor, both of which pay close to minimum wage as well. If minimum wage doubles, that means the fast food business now has a labor cost of 60% of his original pricing, plus the increases in food costs he is going to see as well. Those food cost increases could be 30-40%, meaning he will likely need to raise prices significantly to keep the lights on. For a company like McDonald's, who do you think is their target market when they try to keep prices as low as possible? The rich? They're trying to make food affordable for everyone, including minimum wage earners. When McDonald's costs nearly double, what do you think is going to happen to their prices?

If you're curious to see what American McDonalds' would look like where workers have higher spending power and McDonalds has higher costs, take a look at an Australian McDonalds where they already reacted to exactly that.

This is pretty much what the future of fast food restaurants is like when you raise the minimum wage:

http://www.businessinsider.com.au/mcdonalds-australias-upsca...

McDonalds is usually able to adapt better to changing market conditions than other restaurants.

Many restaurants do go out of business when their prices rise, which is why they hate the idea of raising the minimum wage so much. However, those restaurants are quickly replaced by other restaurants, which is why employment is never affected.

Right, so you can now buy a burger off of the dollar menu, which costs approximately 1/7.25 hrs of your labor. When you earn $15/hr, you now have to work 19.5/15 hrs to earn a burger. Yes, it's a higher quality burger, but you can get a higher quality burger for the same amount of labor at minimum wage in the US, and still have the $1 option for those who want it.

>Right, so you can now buy a burger off of the dollar menu, which costs approximately 1/7.25 hrs of your labor.

Yeah, I've tried those they're pretty gross. You can also buy a Big Mac for the same price as in the US.

>When you earn $15/hr, you now have to work 19.5/15 hrs to earn a burger.

A much, much better burger.

And you've got more disposable income too.

You are essentially arguing that there should be no cheap burgers, since there are much, much better expensive burgers. What you seem to be forgetting is that some people won't be able (or not want) to afford much, much better burgers and that's the reason cheap burgers exist.

The article states the price of a couple of cheaper burgers, (a $5.50 Big Mac and a $8.90 floor for the specialty burgers).

5.5/15 doesn't beat 1/7.25, but it's a lot more competitive than 19.5/15, and I imagine the Big Mac isn't the cheapest burger on the menu.

Are you factoring in the exchange rate? Cause the Australian dollar is way out of whack with the US dollar.

I think that's a bit of a moot point. The exchange rate is about $0.75:$1, but what really matters is relative purchasing power in the worker's own country. The OP was pointing out that for McDonald's to survive in Australia, they had to start offering expensive, gourmet burgers. Australia's minimum wage is roughly $17.25/hr in Australian dollars, so the math works out to be roughly the same.

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