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Comment by matthewmarkus | Hacker News Reader

Once, when I was in Seattle, I witnessed a volunteer cajoling a McDonald's employee to sign up for her Fight for 15 campaign. I was going to tell the fellow that he was about to commit economic suicide, but I let it go.

Fast forward a year, and that McDonald's is now a hole in the ground and a new fancy high rise is going up in its place.

If the cost of an activity exceeds its value, that activity will cease. Of course, if the cost can be passed on it will be passed on. So, if you raised the minimum wage to $1M per hour, a hamburger would cost $300k (or more).

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The average McDonald's makes $1.75 million per year in profit for the owner and the average payroll and payroll expenses are in the neighborhood of $500k (according to their franchise information).

Let's assume all of them are making minimum wage, so $15 per hour would basically double it (the average wage is almost definitely higher than $7.50 considering minimum wage in some area).

Now the average profit per year for a McDonalds owner is $1.25 million per year. You think the activity is going to cease?

Of course it may make automation about $500k more appealing, but automation was happening one way or another.

To simplify things, let's say the McDonald's owner owns the property. If his profit drops to $1.25 million per year, but he can sell the property and invest the proceeds so that he earns $1.3 million per year, then the activity will cease. Even if a McDonald's is profitable, something else may be even more attractive when costs change.

The average cost to start a McDonald's is around $1 million.

The rate of return is absurd.

Most franchise owners also become experts running at running a restaurant franchise making them even less likely to move into something else. McDonalds isn't going anywhere when minimum wage goes up.

Your point would have been better if you'd been talking about someone working at a small struggling restaurant that was barley able to stay open.

Even then, you're completely ignoring the effect that moving money from the wealthy to low income earners will have on the economy (read up on velocity of money). There are definitely more efficient ways to do this, but you can't just ignore the effect and state that minimum wage = fewer jobs.

I never said that minimum wage = fewer jobs in all contexts. It will definitely destroy certain employment opportunities in certain circumstances. I suppose I would consider it an accelerant for automation.

You implied that a minimum wage of $15 would eliminate fast food jobs. The numbers indicate that it won't.

>It will definitely destroy certain employment opportunities in certain circumstances.

Sure and a 0.1% sales tax will destroy certain employment opportunities in certain circumstances.

The key is to find a balance. I'd prefer a universal basic income or an increase in the EITC. But I think fighting for a $15 minimum wage that won't kick in until 2024 at the earliest, and will probably be negotiated down to $12, is better than what we have now.

$15 in 2024 will be about $12.50 in 2016 dollars based on projected inflation by the way.

The US has raised the minimum wage multiple times.

Want to read a study of seven decades of historical data about what happens when the minimum wage increases?

http://www.nelp.org/publication/raise-wages-kill-jobs-no-cor...

There is no correlation with decreased employment, in fact most times, there are employment increases, and these increases are bigger in industries more effected by minimum wage like retail and hospitality.

McDonalds franchisees do not own the property. That is how corporate keeps them under control.

Yes, I purposely simplified things. In the case of the corporation, it has to look at the rent it can squeeze from the franchisee versus selling or repurposing the land. In that case, it is even more likely the store will be shut down since the corporation has way more opportunity cost than the franchisee.

Having worked at McDonald's (though nearly three decades ago) I question that number. Thats sounds more like sales. 1.75 million in profit is nearly $5,000 per day. Assuming 10% profit that's almost $50,000/day in sales, which stretches credibility for the average restaurant.

Yeah, I found data on the average Mcdonalds franchise costs vs profit. http://www.mymoneyblog.com/mcdonalds-franchise-cost-vs-profi...

While I understand your argument, your anecdote lacks causality. That fancy new high rise was coming now matter how what McDonald's was paying.

Well, the Starbucks next door is still there, so one business was able to pass on its costs, the other was not. Also, the McDonald's mainly served the elderly and those on fixed incomes, so clearly their customer base wasn't going to pay the price of a latte for a cheeseburger.

Admittedly, though, it is just an anecdote.

If you're talking about First Hill, you're comparing a single story standalone McDonalds in a neighborhood of highrises to a Starbucks taking up a single retail storefront in a full-block hospital complex. Not quite equivalent real estate.

Yes, that McDonald's was fighting an uphill battle.

Working at McDonald's is already economic suicide. Unlikely that they're worse off now unless they are unemployed.

The minimum wage slowly boils away jobs. If it boils them away too quickly, problems result.

https://www.epionline.org/minimum-wage/minimum-wage-teen-une...

It's why you might have a house full of teenagers now, but the mother has to shoulder the entire economic burden while they play Xbox or cause trouble. Pricing people out of jobs and thereby denying them mentorship opportunities and people skills does not leave them better off.

If it's the teenager working at McDonalds, they deserve a reasonable wage just the same as if it were the mother working there. Denying people the right to earn a fair wage just because you imagine they are teenagers doesn't leave them better off. Most of these people are over 25 years of age. It is not 1970 anymore.

Any job that would pay less than minimum is worthless.

You're better off taking that time and putting it into learning something, anything, than to work 8 hours a day for less than $40 in wages. You're essentially asking lower class workers to be unpaid interns when you pay them that low, but there is zero benefit to being an unpaid intern in mcdonalds.

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