Can Walmart and McDonald’s Afford a $15 Minimum Wage?

[aGameOfThrones]

Can Walmart and McDonald’s Afford a $15 Minimum Wage?

The holiday season seems as good a time as any to question whether Wal-Mart Stores Inc. (WMT) can afford to pay its workforce, some of whom make as little as $8 an hour, a higher wage -- as much as $15 per hour. The pressure has mounted ceaselessly for months. The city of Washington may raise the minimum wage to $11. On a national basis, Congress has considered a national minimum wage as high as $10.10.

Walmart is the primary target of unions and groups that claim that low-paid workers at the retail company do not make enough to live above the poverty level. The fast-food target is also the largest in its field -- McDonald's Corp. (MCD). The argument is not as simple as what workers should make. The interests of shareholders have a place in the debate. So does the longer term damage a higher wage could do to both companies.

There are two fundamental arguments about why the two giants should lift hourly wages to $15. The first is that they can afford to. Walmart's worldwide revenue is $425 billion, and about two-thirds of that in the United States. McDonald's is much smaller, with worldwide revenue of $28 billion. However, McDonald's has returned billions of dollars to shareholders in recent years via higher dividends and share buybacks, which make it particularly vulnerable to charges that it has surplus cash.

The math of exactly how much a move up to a $15 an hour minimum wage would total is not simple. McDonald's and its franchises likely employ 300,000 people in the United States. McDonald's does not provide an exact number, or separate its own workers from those of its franchises. The Walmart number is easier to calculate. The company puts its U.S. workforce at 1.2 million. The other challenge to setting a calculation of expenses for the two companies to raise the minimum wage is that neither breaks out its pay bracket levels in groups. How many people at McDonald's or Walmart actually make $8 an hour? Only the companies know.


Here is some simple but not entirely accurate math about what each company would pay if its hourly minimum wage rose to $15. If 75% of the workers at both companies make $8 and the number rose to $15, Walmart's expense increase would be $18 billion a year. McDonald's would be $4.5 billion. In the case of McDonald's, profits would be cut in half. Walmart's profit would be cut by 80%.

The defense of the current wage structure that Walmart and McDonald's make is that their shareholders would be badly damaged if increased wages decimated profits. Even if the minimum wage rose slowly, perhaps over three years, the harm might be devastating. Economists and labor advocates argue that if the increase was spread over several years, each company would have the chance to increase prices to consumers as a means to offset that expense. That assumes consumers will pay higher prices, which may not be the case at all.

http://finance.yahoo.com/news/walmart-mcdonald-afford-15-minimum-111559234.html


Comment from site:

Richard 2 hours ago 1 41
Something that none of these types of articles seem to deal with is these jobs in retail and fast food and low skill/unskilled entry level jobs. So if these workers get $15 an hour, what does that do to the workers that now make $15 an hour doing skilled work that is not an entry level job, like carpenters, electricians etc? They will want a raise above what is a low skill entry level job rate. And then the workers that are in that wage level that the skilled low wage workers moved up to will want a raise too. And it keeps going up the ladder

 

[erowe1]

I don't know if they can. But all their employees who will be out of a job if that happened sure can't.

 

[Schifference]

Sure they can but the question is can we? This is a good tactic toward achieving wage equality. Do you think if minimum wage goes to $15 a skilled person making $15 or $20 will get a $7 cost of living increase? Highly doubtful. Why work skilled labor with responsibility if you can work minimum wage with none?

 

[angelatc]

Wow - here's some simple but not entirely accurate math...that's what he said.

So that's the excuse for ignoring the effective increase in payroll taxes, I suppose. What's another 6% among socialists, right?

 

[tod evans]

Can Walmart and McDonald’s Afford a $15 Minimum Wage?

Of course they can.

I seriously hope they choose not to though.

I'd like to see 'em both voluntarily shut down for 90 days, just shut the doors and send everyone home. Call it a "paid training seminar" and give every employee $10.00 a week to log in to the company website for training...That way they'd not be liable to foot unemployment during the 90 days.

 

[Contumacious]

Can Walmart and McDonald’s Afford a $15 Minimum Wage?

Of course they can.

The question is can WE THE PEOPLE afford to pay $50 for hamburgers and for another Neiman Marcus-like department store ?

.

 

[Philhelm]

If they can afford $15.00/hour, then I would quit my job and work for Chick-fil-A.

 

[Brian4Liberty]

Can Walmart and McDonald’s Afford a $15 Minimum Wage?

Or more relevant, can that wage compete with welfare and SSDI? Obama recently talked about expanding those programs, and maybe giving them a raise too.

 

[Lucille]

They can be replaced...with no one.

As Fast Food Workers Go On Strike In 100 Cities, Applebees Unveils The "Waiter Terminator"
http://www.zerohedge.com/news/2013-...00-cities-applebees-unveils-waiter-terminator

Community leaders took turns giving speeches for about 15 minutes until the police arrived and ordered protesters out of the store. The crowd continued to demonstrate outside for about 45 more minutes while a handful of customers remained inside. A McDonald's manager declined to be interviewed and asked that customers not be bothered.

Tyeisha Batts, a 27-year-old employee at Burger King, was among those taking part in the demonstrations planned throughout the day in New York City. She said she has been working at the location for about seven months and earns $7.25 an hour.

"My boss took me off the schedule because she knows I'm participating," Batts said.

Considering there are a few hundred thousand applicants for your position , Ms. Batts, we find that perfectly explainable. Then again, if you are unhappy with your position, you are welcome to quit and find a better paying job. Especially since in the very near future you may not even have the option of choosing, as it will be done for you. Earlier this week, restaurant chain Applebees unveiled what may soon be the "Waiter Terminator."

From the company's press release: "Applebee’s steps into the future to redefine and enhance the guest experience through the installation of 100,000 E la Carte Presto tablets, powered by Intel, on every table and multiple bar positions at more than 1,800 Applebee’s restaurants in the United States by the end of next year."

[...]
Also, much more time to work on their resume. In other words, Applebees is already taking steps at outsourcing its minimum wage waiters with tablets. Which incidentally is a brilliant idea, especially in a cost-cutting environment. So brilliant in fact that others are already joining in..

DineEquity said it might consider introducing the tablets at its IHOP restaurant chain as well. The company joins many others in the industry that have begun incorporating technology into the customer experience, installing ordering kiosks, equipping servers with mobile devices and more.

In other words, a funny thing happened as fast food workers were striking across the land - they were all just made obsolete courtesy of iPads.

The Biggest Threat To Minimum Wage Restaurant Workers Everywhere?
http://www.zerohedge.com/news/2013-11-12/biggest-threat-minimum-wage-restaurant-workers-everywhere

Over the past year, unionized restaurant workers across numerous fast-food chains but mostly at McDonalds, expressed their dissatisfaction with compensation levels by striking at increasingly more frequent intervals - a sentiment that has been facilitated by the president himself and his ever more frequent appeals for a raise in the minimum wage. Unfortunately, as we have pointed out previously, in the context of corporations that have given up on growing the top line (as virtually all free cash goes into stock buybacks and dividends and none into growth capex), and in pursuit of a rising bottom line, employee wages are the one variable cost that corporations will touch last of all. But what's worse, these same unionized employees have zero negotiating leverage.

Perhaps nowhere is this more visible than in the recent strategy of smoothie retailer Jamba Juice, which in order to battle a 4% drop in Q3 same store sales has decided to radically transform its entire retailing strategy by getting rid of labor, cheap, part-time or otherwise, altogether. Presenting the biggest threat to minimum-wage restaurant workers everywhere: the JambaGo self-serve machine that just made the vast majority of Jamba's employees obsolete. Coming soon to a fast-food retailer near you.

Why did Jamba just make its retail sales force obsolete? Part of the problem is heightened competition: McDonald’s has entered the smoothie market, and others like Dairy Queen and Panera spent the summer promoting their rival drinks. Which means even less top-line growth potential. It also means that in order to push more of the top line straight to earnings, and bypass variable costs, a problem that will be faced by increasingly more corporations, Jamba's corner office had no choice but to unleash JambaGo...

 

[Brian4Liberty]

Of course they can.

The question is can WE THE PEOPLE afford to pay $50 for hamburgers and other Neiman Marcus-like department store ?

.

You will have to sign up for food stamps.

 

[69360]

$15 no.

Slight raise in prices, small reduction in profit and give them $10 or 11 might be workable.

 

[alucard13mm]

How about telling workers they will get a raise only if...

1/2 of them get fired. 1/2 that is still around has to work twice-three times as hard to make up for it.

But don't complain if you get fired.

 

[parocks]

$15 no.

Slight raise in prices, small reduction in profit and give them $10 or 11 might be workable.

That's how I see it. I mean, we've had a minimum wage since 1938. Just keep pace with inflation.

 

[Bastiat's The Law]

Something like 94% of people already make more than minimum wage.

 

[DamianTV]

No worries here.

As soon as Minimum Wage hits $20 per hour (eventually), the price of EVERYTHING will go up by at least that same ammt, thus nullifying any good that an increase in Minimum Wage achieves. People keep demanding more Quantity instead of wanting the Value of what they get to be retained.

---

Something like 94% of people already make more than minimum wage.

And according to the 1%, that makes us ALL a part of the 1%.

 

[belian78]

Wow - here's some simple but not entirely accurate math...that's what he said.

So that's the excuse for ignoring the effective increase in payroll taxes, I suppose. What's another 6% among socialists, right?

I got the impression that it was more of a 'this isn't quite right, but you still get the idea' kind of estimate. Kinda like, if the true numbers were told, it'd be worse. But I'm a bit into my cups this evening, so I may have read it wrong. heh..

 

[DamianTV]

They cant afford to pay their workers $15 / hour, but YOU can.

See, the trick here is that they dont pay their employees jack shit. Then those employees have to apply for Welfare, Food Stamps, and any other form of monetary assistance they can qualify for. And THAT cost is passed directly on to you by way of your Govt printing up more money, which as we all well know is Inflation.

This racket costs the Taxpayers (I hate using that term) literally Billions.

 

[CaptLouAlbano]

Why should they? An employer needs to keep his costs as low as possible, including labor costs. Fast food jobs are for those who have little to no skills, and therefore pay poorly. Those jobs are not intended to be careers, they are entry level jobs for teenagers and/or part time jobs for those looking to make extra money (housewives, college students, retirees, etc). If someone is of adult age, and the best job they can attain is flipping burgers, I have zero sympathy for them - they made choices in their life that relegated them to only being able to obtain this low paying job. If they cannot support themselves on this job, they have no one to blame but themselves.

 

[CaptLouAlbano]

They cant afford to pay their workers $15 / hour, but YOU can.

See, the trick here is that they dont pay their employees jack shit. Then those employees have to apply for Welfare, Food Stamps, and any other form of monetary assistance they can qualify for. And THAT cost is passed directly on to you by way of your Govt printing up more money, which as we all well know is Inflation.

This racket costs the Taxpayers (I hate using that term) literally Billions.

You have to put some blame on the employers for hiring adults for jobs that are supposed to be for teens. I used to hire a lot of minimum and low wage employees for my businesses. If someone of adult age old applied for a job scooping ice cream for minimum wage, that would be a HUGE red flag.

 

[AlexAmore]

Recently, I saw a liberal citing all sorts of studies that on one hand accurately argued that the mechanization process creates more jobs, but then argued that forcing a wage increase will propel us there quicker. It's a perfect bullshit argument because it's full of half truths. Of course, forcing the wage increase will just give Big Business a huge competitive advantage over small business...effectively wiping the small guy out. So any study that claims there are no job losses with a wage increase, what they're probably seeing is a job migration from small business to a more monopolized big business.