Comment by pydry | Hacker News Reader

Comment by pydry | Hacker News Reader

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>Those burger flippers are compensated poorly because you need a lot of them to run a restaurant that serves cheap food. If you had a way of increasing their productivity 2 fold you can afford to pay them twice as much. I said afford.

McDonalds made $11 billion in 2019. They employed 210,000 people. They therefore made ~$52,400 per worker in profit.

A $10 / hour burger flipper makes ~$19,500 per year.

Those burger flippers are compensated poorly because of labor market competition. The value they provide only puts a ceiling on what it is possible for them to earn for their job to exist.

The actual prevailing wage is determined by, frankly, how desperate the low skilled pool of labor is. If unemployment goes up, that means greater desperation. If public sector compensation goes down, that means greater desperation. If social services are cut that means greater desperation. If overseas workers in a country that practices chattel slavery starts taking orders, that means greater desperation. If prison workers start getting in on your industry, that means greater desperation.

All of these things mean wages go down.

This all has absolutely fuck all to do with automation. It is largely about power.

The Roman empire also had mind-bendingly high levels of income and wealth inequality and they weren't exactly automating everybody out of their jobs. They were a society built on the selective application of extreme violence.

Automation does provide the perfect excuse for paltry, declining wages though, largely because it's nobody's fault. If I were an industrialist I'd for sure be gently guiding the pointy pitchforks in the direction of the robots while I outsource, use prison labor, lobby for reining in public sector wages/pensions, cutting social services and gorging myself on gargantuan profit margins. I'm squishy and they are not.

The other useful aspect of the automation narrative is that it plays well with outsourcing. Americans don't see the labor intensive factories that leave its shores in search of more impoverished, cheaper, possibly even slave labor.

What they do see are the factories that didn't bother offshoring - the ones that required a small amount of highly skilled labor to maintain automated production lines, where the headache of offshoring wasn't worth the hassle.

Net income listed on https://mcdonaldscorporation.gcs-web.com/news-releases/news-... is $6 billion. Which makes a pretty big difference when you look at the per worker number.

There's lots of money that goes to franchise owners though.

An operation like McDonald's will end up paying higher wages due to automation, but to fewer employees. As the revenue per employee goes up things like training and churn become more expensive than increasing wages.

Minor nitpick:

> McDonalds made $11 billion in 2019. They employed 210,000 people. They therefore made ~$52,400 per worker in profit.

Don’t forget that McDonalds is mostly a franchise business. They could have 0 people flipping burgers and still make 10 billion profit

That's a fair point, but also remember the franchisees also make a profit (an average of $1.8 million per restaurant apparently), which is not counted in the above figures either. McDonalds also have a lot of non franchised restaurants, which complicates the calculations because it's hard to see who is taking profits and where.

I'll try recalculating for Starbucks, since not having franchisees makes the calculations easier:

Starbucks in 2019:

* Made $26.5 billion dollars

* Employed 346,000

* Average barista wage ~$12 / hour = ~$25,000 per year

* Average profit per employee = $76,589

> Starbucks in 2019: Made $26.5 billion dollars

Hold on a minute, that's Starbucks' revenue, not profit. You haven't accounted for any non-labour expense.

From its financial data (https://finance.yahoo.com/quote/SBUX/financials?p=SBUX) (Yahoo link for convenience), that $26.5b revenue is directly offset by $19b in cost-of-goods-sold (including some salaries already paid). Other overhead and depreciation accounts for another $3.5bn, and interest expenses contribute $235m.

The net pre-tax profit for Starbucks is $3.9bn, and if that were distributed equally among all employees (from your figure) it would result in about $11,200/worker over and above their existing salary.

That's closer to the break-even-wage-rate that Starbucks could conceivably offer, if it's intended to have zero return on capital (about $19bn in current assets for FY2019). And that figure is volatile; if you repeat for this fiscal year you'd calculate about $3200/worker.

It's net revenue, not "revenue", and that accounts for salaries. Arguably depreciation ought to be included in that number, but not capital investment.

When Amazon made zero gross profit for a decade (or was it two?) it wasn't because they weren't making profits.

> It's net revenue, not "revenue",

Check the financial statements again. The $26.5b figure you cite is gross revenue, of which $24.4b is operating revenue. From that revenue you deduct the $19b cost of goods sold (including salaries) to find $7.5b of operating profit, and from that you deduct depreciation and administration expenses.

New investment does not show up as an expense on a financial statement, since it builds capital -- at the accounting level it's a transformation of one asset (cash) to another (land/equipment/etc).

$26.5 billion dollars in revenue, not profit. 2019 was a particularly good year with $3.599B in net profit. That is $10K per employee. 2020 was worse with $0.928B in net profit: $2.7K for each employee. There really isn't much wiggle-room for significantly higher salaries. And during good years, Starbucks tend to hire more employees rather than increasing salaries (employee count went from 277k in 2017 to 346k in 2019).

That’s $26 billion in revenue: profit was $4 billion. Note also that half of their stores are “licensed”. The difference between that and franchised is unclear to me at present.

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