McDonald's and other CEOs tell investors a $15 minimum wage won't hurt business

[Stevicus]

McDonald's, other CEOs have confided to Investors that a $15 minimum wage won't hurt business

I thought this was interesting, as numerous restaurant executives and employees are saying that they're doing just fine in states which have minimum wage increase and some report increases in guest traffic. This is in contrast to the claims made by their lobby group, the National Restaurant Association, which continues to claim that raising the minimum wage would be a disaster for the economy.

Big restaurant chains are telling investors that a national minimum wage hike wouldn't be a big deal—even as their corporate lobbying groups in Washington fight plans for a $15 minimum wage.

"We share your view that a national discussion on wage issues for working Americans is needed—but the Raise the Wage Act is the wrong bill at the wrong time for our nation's restaurants," the National Restaurant Association wrote in a letter to congressional leaders in February. "The restaurant industry and our workforce will suffer from a fast-tracked wage increase and elimination of the tip credit."

The following day, a top executive at Denny's, one of the association's members, told investors that gradual increases in the minimum wage haven't been a problem for the company at all. In fact, California's law raising the minimum wage to $15 by 2023 has actually been good for the diner chain's business, according to Denny's chief financial officer, Robert Verostek.

"As they've increased their minimum wage kind of in a tempered pace over that time frame, if you look at that time frame from us, California has outperformed the system," Verostek said on an earnings call. "Over that time frame, they had six consecutive years of positive guest traffic—not just positive sales, but positive guest traffic—as the minimum wage was going up."

This seems to be at odds with claims made by the National Restaurant Association and others who oppose the wage increase, such as the US Chamber of Commerce and the National Small Business Association. The McDonald's CEO said "McDonald's will do just fine."

The National Restaurant Association, which represents restaurants around the country, has been a staunch opponent of federal efforts to raise the minimum wage to $15 an hour. Last year, the group spent $2.6 million on federal lobbying, including on lobbying against the Raise the Wage Act.

Other trade associations that have lobbied against a wage hike include the U.S. Chamber of Commerce, the nation's top business lobby, and the National Small Business Association, according to federal lobbying data.

Fast food giant McDonald's told the National Restaurant Association in 2019 that it would no longer participate in the group's lobbying efforts to oppose increases to the minimum wage at the federal, state, or local level, according to Politico.

In January, McDonald's CEO Chris Kempczinski told investors the company "developed quite a bit of experience" with minimum wage hikes at the state level, and they haven't been a problem.

"Our view is the minimum wage is most likely going to be increasing whether that's federally or at the state level as I referenced, and so long as it's done... in a staged way and in a way that is equitable for everybody, McDonald's will do just fine through that," Kempczinski said.

The National Restaurant Association has been saying that restaurants—because they operate on tight margins, rely on tips, and have been hit hard by the pandemic—can't handle a $15 minimum wage and the elimination of the tipped minimum wage.

However, on recent earnings calls, executives at restaurant chains that belong to the association have explicitly debunked these talking points when answering questions about how a higher minimum wage would impact business.

"Our industry runs on a 3- to 5-percent pre-tax profit margin in a good year—during a pandemic is not the time to impose a triple-digit increase in labor costs. Far too many restaurants will respond by laying off even more workers or closing their doors for good," the National Restaurant Association said in a January statement on the Raise the Wage Act.

Some companies don't seem to think that the minimum wage is really much of an impact, since they can't really find workers willing to work at such a low wage anyway.

Domino's Pizza CEO Ritch Allison told investors in a February earnings call, "We've been able to manage our way through a lot of minimum wage increases across the country. And I'll tell you, quite honestly, in our corporate store business, we're not paying the federal minimum wage anyway. You can't go out there and hire people at that rate anyway. We're above the minimum wage, both for our folks that work inside the stores and our tip drivers on the road. And then in our supply chain business, we're in excess of $15 an hour everywhere we operate."

"Labor input is just a cost input," said Matt Clark, Cheesecake Factory's chief financial officer. "And you can try to put some technology around it to improve efficiency and such. But at the end of the day, most competition prices for it. And I think that's the necessity to maintain margin structures that are competitive and attractive for continued investment."

Clark added that a wage hike could affect some of the company's competitors, and "ultimately the stronger survive and take market share."

Of course, the upside of raising the minimum wage is that it can be expected to increase consumer spending, which would also be good for business.

The comments were hardly anomalous: over the last two months of earnings seasons, top executives from DiamondRock Hospitality, Kroger, HCA Healthcare, Hilton and Six Flags all downplayed the negative effects of a prospective minimum wage increase, and some have argued it would boost consumer spending. The statements from leaders across various service industry sectors undercut corporate lobbying groups in Washington that have pretended such a wage increase would destroy the economy.

"Many including me are supportive over time that the minimum wage needs to move up," said Hilton CEO Chris Nassetta in a February earnings call. "I think we should all assume that the minimum wage is going to be going up over time. In fact, because it needs to."

"To the extent that there is minimum wage increases in certain of our demographics where we operate, that has got a halo effect on the revenue side," said Six Flags chief financial officer Sandeep Reddy during a February earnings call, in response to a question about whether a higher wage helps boost spending at its parks.

I like that line: "The statements from leaders across various service industry sectors undercut corporate lobbying groups in Washington that have pretended such a wage increase would destroy the economy."

But this also makes one wonder whether these corporate lobby groups are representing their industries in good faith. There seems to be a disconnect between the ideologue lobbyists and the people who actually work in the industry they represent.

They also claim that it will affect tipped employees the hardest.

The federal minimum wage for jobs that rely on tips, such as restaurant servers, is currently $2.13, although most states require companies to pay more than that. The Raise the Wage Act would phase out this subminimum wage by 2025, and then companies will have to pay tipped workers the federal minimum wage.

There is no evidence that workers are tipped less in states that have eliminated the minimum wage. In February, a top executive at the steakhouse chain Texas Roadhouse said on an earnings call that the company's employees haven't been losing out on tip money in states like California and Minnesota, where there's no subminimum wage for tipped workers, or in Colorado and Arizona where tipped workers must be paid more than $9 an hour.

"We don't really see an impact to tips for those servers in those higher wage states," said Tonya Robinson, Texas Roadhouse's chief financial officer. "They continue to get tipped well, and their overall average wage is pretty high."

 

[Twilight Hue]

McDonald's, other CEOs have confided to Investors that a $15 minimum wage won't hurt business

I thought this was interesting, as numerous restaurant executives and employees are saying that they're doing just fine in states which have minimum wage increase and some report increases in guest traffic. This is in contrast to the claims made by their lobby group, the National Restaurant Association, which continues to claim that raising the minimum wage would be a disaster for the economy.





This seems to be at odds with claims made by the National Restaurant Association and others who oppose the wage increase, such as the US Chamber of Commerce and the National Small Business Association. The McDonald's CEO said "McDonald's will do just fine."





Some companies don't seem to think that the minimum wage is really much of an impact, since they can't really find workers willing to work at such a low wage anyway.





Of course, the upside of raising the minimum wage is that it can be expected to increase consumer spending, which would also be good for business.



I like that line: "The statements from leaders across various service industry sectors undercut corporate lobbying groups in Washington that have pretended such a wage increase would destroy the economy."

But this also makes one wonder whether these corporate lobby groups are representing their industries in good faith. There seems to be a disconnect between the ideologue lobbyists and the people who actually work in the industry they represent.

They also claim that it will affect tipped employees the hardest.

Wonder if that assessment included franchise owners, or was it strictly corporate top tier?

 

[Stevicus]

Wonder if that assessment included franchise owners, or was it strictly corporate top tier?

Not sure, although one of the people quoted said that it could affect some of their competitors and "ultimately the stronger survive and take market share."

I do find it interesting that some business people seem to view wages in a different way than they seem to view other overhead and costs they might incur. You don't hear them bellow much if the oil companies raise prices or if the costs of equipment, rents, or utilities go up. They seem to take it all in stride. But any talk about raising wages, and suddenly the "sky is falling."

 

[Revoltingest]

Not sure, although one of the people quoted said that it could affect some of their competitors and "ultimately the stronger survive and take market share."

I do find it interesting that some business people seem to view wages in a different way than they seem to view other overhead and costs they might incur. You don't hear them bellow much if the oil companies raise prices or if the costs of equipment, rents, or utilities go up. They seem to take it all in stride. But any talk about raising wages, and suddenly the "sky is falling."

I think you're imagining the bellowing.
When costs rise, they do so for all. So generally no
company's relative advantage or disadvantage changes.
And it the rise doesn't affect demand significantly, there's
no problem. Everyone raises prices.
Caution: Businesses who are inefficient with labor will suffer.

The minimum wage effects that should be of concern....
- Effect on workers who aren't worth what they cost.
- Increased incentive to automate, & reduce the workforce.

 

[Stevicus]

I think you're imagining the bellowing.

Well, I just see what I see and call it as I see it.

When costs rise, they do so for all. So generally no
company's relative advantage or disadvantage changes.
And it the rise doesn't affect demand significantly, there's
no problem. Everyone raises prices.
Caution: Businesses who are inefficient with labor will suffer.

Well, I guess that said about any costs a business might incur. If they spend unwisely or are inefficient/wasteful, then they'll face consequences. I've known companies which penny pinch on wages for employees, yet spend big bucks on lavish decor and expensive furnishings for the manager's office.

The minimum wage effects that should be of concern....
- Effect on workers who aren't worth what they cost.
- Increased incentive to automate, & reduce the workforce.

Well, when you say they aren't worth what they cost, that's a subjective judgment. One could just as easily opine that the executives and CEOs aren't worth what they cost. There's no science to it; it's just opinionated statements of what people think they're "worth."

As for automation, I think we're likely headed in that direction anyway. Why would a business hire workers if they can get the same job accomplished with a machine?

 

[Revoltingest]

Well, when you say they aren't worth what they cost, that's a subjective judgment.

No, it's not only objective, it's quantitative.
We can calculate their productivity & their cost.
I found this particularly so with staff whose time I'd bill to
clients. Different workers had different wages & bill rates.

As for automation, I think we're likely headed in that direction anyway. Why would a business hire workers if they can get the same job accomplished with a machine?

To incentive automation accelerates the pace. We'd have to face
increasing ranks of unemployable people sooner. UBI perhaps?
It's a consequence unanticipated by min wage advocates.

My advice: Look before leaping.
You might still want to raise the min wage, but be prepared
for all consequences. Consider Biden's border policy change,
which incentivized unaccompanied kids. He didn't plan for the
surge, & is only now addressing the crisis he should've foreseen.
Doing the right thing isn't enuf. We should plan ahead.

 

[Thief]

I am reminded of a docu/drama some years ago....

Too Big To Fail

must see it.....yes you should

 

[Stevicus]

No, it's not only objective, it's quantitative.
We can calculate their productivity & their cost.
I found this particularly so with staff whose time I'd bill to
clients. Different workers had different wages & bill rates.

I don't know if that would work in every industry. Perhaps some of it can be quantified, but I've observed that when people make evaluations of who is a "good employee" versus who is a "bad employee," it can often be very subjective and opinionated.

To incentive automation accelerates the pace. We'd have to face
increasing ranks of unemployable people sooner. UBI perhaps?
It's a consequence unanticipated by min wage advocates.
My advice: Look before leaping.

I support UBI. I don't see it as a "consequence" but a necessity and step towards greater progress.

 

[Revoltingest]

I don't know if that would work in every industry. Perhaps some of it can be quantified, but I've observed that when people make evaluations of who is a "good employee" versus who is a "bad employee," it can often be very subjective and opinionated.

Employee evaluations typically aren't economic.
Decisions about cost effectiveness are a separate analysis.

I support UBI. I don't see it as a "consequence" but a necessity and step towards greater progress.

I see the UBI not as a consequence, but as addressing consequences.

 

[Quetzal]

Wonder if that assessment included franchise owners, or was it strictly corporate top tier?

This is an important distinction.

 

[PureX]

I really don't care if a $15 minimum wage drives some restaurants out of business. If a business can't afford to pay a living wage to it's workers it shouldn't be in business in the first place. It's not an economically viable commercial enterprise.

 

[Shadow Wolf]

The minimum wage effects that should be of concern....
- Effect on workers who aren't worth what they cost.
- Increased incentive to automate, & reduce the workforce.

There simply is no objective way to measure this "worth." Such as those McDonald's CEOs, they don't have a damn thing without without store associates. And plenty of companies simply just do not concern themselves with such. One company I worked for, salaried managers made less than minimum wage when you divided their salary by the hours the worked. The value of labor has been so far removed from labor that we like to pretend people have to start working crappy jobs that pay very little, allegedly to learn basic job skills even though "basic job skills," like showing up on time, aren't taught and learned growing up. There simply is nothing "work related" to learn at those jobs, but we place a value on them by thinking people have to start there, many of them are legit hard and stressful jobs, and we end up not paying a real value wage for them but rather a perceived value based upon the erroneous assumption that they are "beginner's jobs" and would only have teens and very young adults working there anyways.
They are automating regardless. Like, when the unveiled those automated kiosks shortly after some states raised their wages? They didn't research them and build them overnight. They already had them coming along the way. Automated jobs are going to happen regardless of wages. And we can expect such a deep automation of jobs that UBI is going to be a bandaid for a trauma patient who is hemorrhaging blood. Our society is build upon manufacturing, industry, and jobs. However, those are yesterday, they are dying off today, and they won't be here tomorrow. We must have a paradigm shift in our economy moves beyond the models of the industrial age and Fordism. They worked for awhile, but we just don't live in that world anymore.

 

[sun rise]

@Shadow Wolf said a lot of what I was going to say.

If people who work hard can't afford decent food, basic clothing and adequate shelter then the economy is utterly out of whack and drastic measures are needed.

As far as restaurants and places like McDonalds go, a happy employee (note I'm not using the crap word associate) is one of the thing people look for.

Someone who can't make a decent living and feels stressed all the time is not going to communicate positivity to diners and people who go out to eat now want not only a meal but a good experience.

Businesses that realize this are not bothered by paying a living wage because they know the consequences will be positive.

 

[Revoltingest]

There simply is no objective way to measure this "worth."

That's been your experience analyzing how
much money your employees make for you?

They are automating regardless.

Does this mean that you think wage pressures
have no effect on the rate of automation?

Like, when the unveiled those automated kiosks shortly after some states raised their wages? They didn't research them and build them overnight. They already had them coming along the way. Automated jobs are going to happen regardless of wages.

I don't subscribe to the view that whatever happens is
going to happen as it does independently of governmental
influences. An old saying...
If you pay people to grow bananas, you'll get more bananas.
.....holds true.

And we can expect such a deep automation of jobs that UBI is going to be a bandaid for a trauma patient who is hemorrhaging blood. Our society is build upon manufacturing, industry, and jobs. However, those are yesterday, they are dying off today, and they won't be here tomorrow. We must have a paradigm shift in our economy moves beyond the models of the industrial age and Fordism. They worked for awhile, but we just don't live in that world anymore.

I know things will change. People who cannot do anything
useful enuf to get a living wage will be a powerful voting force.
The UBI addresses that.
I'm just urging people to think about the consequences of
what seems to be a good idea. And that even good ideas
require some groundwork before implementation, lest the
good idea have bad results.

BTW, your font color really messes
up the inserted quotation device.

 

[Shadow Wolf]

Someone who can't make a decent living and feels stressed all the time is not going to communicate positivity to diners and people who go out to eat now want not only a meal but a good experience.

Nope. Because then they become annoyances. Especially if it's not a smooth transaction. And you know you only are going to see pennies of all that money handed over; advertisement for a company damn near everyone in the world already knows about is going to get more than you. You drip sweat all over the grill and into the friers, because it's crazy busy and hot, and there is no moment to take to at least wipe your face dry. And there's a pretty good chance you'll get a burn or cut severe enough to go to the emergency room, and repetitive motion injuries are common. And you add in a crap manager who also hates their job and everyone else, and the environment does become toxic, and customers do get mistreated and no one cares if they make a mistake. And to top it off, you can barely afford to eat there yourself if you don't get an employee discount.

 

[Shadow Wolf]

That's been your experience analyzing how
much money your employees make for you?

Don't need the actual experience for this one, as we have sufficient data to break this one down. Kind of like how they aren't much looking at the stars to learn about the cosmos anymore. It's a lot of computers and data.
And personal experience--aka anecdotal evidence--is insufficient for such a thing anyways. There must be a larger pool of data to draw from anyways so one can observe general trends.

Does this mean that you think wage pressures
have no effect on the rate of automation?

Not really. Automation is going on with or without.
As far as things like the fast food kiosks, there timing is sort of like all the alcohol when prohibition ended, or all the cannabis for sale on day 1 of a state allowing it for recreational sale. It was already coming along ahead of legislation, despite it even being illegal prior to the legislation coming into effect.
Reductions in work force and automation, those trends won't be slowing down.

I don't subscribe to the view that whatever happens is
going to happen as it does independently of governmental
influences. An old saying...
If you pay people to grow bananas, you'll get more bananas.
.....holds true.

I don't challenge that necessarily, but a lot does happen independently of the state. Like a business cutting costs. That happens regardless.
And then there are times when the government is lead by corporate lobbying influence, such as we saw with NAFTA.

I know things will change. People who cannot do anything
useful enuf to get a living wage will be a powerful voting force.
The UBI addresses that.
I'm just urging people to think about the consequences of
what seems to be a good idea. And that even good ideas
require some groundwork before implementation, lest the
good idea have bad results.

I agree. But there is a great deal of resistance to laying the groundwork we need to start laying yesterday. UBI probably will be needed as we transition, but eventually even manufacturing will be on a much smaller scale (it's gonna have to be, the Earth requires it) and jobs themselves as we know them will be so scarce we may end up with something that looks more like the precursor to the DS9 Bell's Riot. Especially if UBI fails to keep up with inflation as minimum wage does.
We're going to have to start investigating ways to ensure basic and necessary resources are fairly distributed for when we can no longer depend on work to acquire the means for those things. Such as allotting a basic amount of water and electricity, but charging for usage beyond that, or charging extra for things such as swimming pools and water fountains. And the sooner we start, the smoother the transition will be.

 

[Kooky]

Not sure, although one of the people quoted said that it could affect some of their competitors and "ultimately the stronger survive and take market share."

I do find it interesting that some business people seem to view wages in a different way than they seem to view other overhead and costs they might incur. You don't hear them bellow much if the oil companies raise prices or if the costs of equipment, rents, or utilities go up. They seem to take it all in stride. But any talk about raising wages, and suddenly the "sky is falling."

Wages go to the working class, while the revenues from raised commodity prices and rents ultimately cycle back into the capitalist class. Perhaps that might have something to do with their reactions. The capitalist class is typically rather conscious of its class interests, and willing to exert considerable effort in their pursuit.

 

[Revoltingest]

Don't need the actual experience for this one, as we have sufficient data to break this one down. Kind of like how they aren't much looking at the stars to learn about the cosmos anymore. It's a lot of computers and data.

What data?

And personal experience--aka anecdotal evidence--is insufficient for such a thing anyways. There must be a larger pool of data to draw from anyways so one can observe general trends.

In this case, If my anecdote of analyzing worker productivity
is useful, then certainly more sophisticated businesses would
employ the same tool.

Not really. Automation is going on with or without.

The issue I raise is an increase...which should be considered
in advance so as to avoid unintended deleterious consequences.
I don't see min wage increase advocates doing anything about this.

As far as things like the fast food kiosks, there timing is sort of like all the alcohol when prohibition ended, or all the cannabis for sale on day 1 of a state allowing it for recreational sale. It was already coming along ahead of legislation, despite it even being illegal prior to the legislation coming into effect.
Reductions in work force and automation, those trends won't be slowing down.

Speeding these changes up should be addressed.

I don't challenge that necessarily, but a lot does happen independently of the state. Like a business cutting costs. That happens regardless.
And then there are times when the government is lead by corporate lobbying influence, such as we saw with NAFTA.

I agree. But there is a great deal of resistance to laying the groundwork we need to start laying yesterday. UBI probably will be needed as we transition, but eventually even manufacturing will be on a much smaller scale (it's gonna have to be, the Earth requires it) and jobs themselves as we know them will be so scarce we may end up with something that looks more like the precursor to the DS9 Bell's Riot. Especially if UBI fails to keep up with inflation as minimum wage does.
We're going to have to start investigating ways to ensure basic and necessary resources are fairly distributed for when we can no longer depend on work to acquire the means for those things. Such as allotting a basic amount of water and electricity, but charging for usage beyond that, or charging extra for things such as swimming pools and water fountains. And the sooner we start, the smoother the transition will be.

Look before you leap.
And if leaping into cow pies, put on boots beforehand.

 

[Stevicus]

Employee evaluations typically aren't economic.
Decisions about cost effectiveness are a separate analysis.

But you were talking about determining whether an employee was making more than he/she is worth. How can that not be subjective?

Are they following the principles of the free market, supply and demand? It would seem not, since many companies complain of labor shortages and have to make do with low-skilled employees and high turnover.

How much is it worth to a business to have a steady, long-term, quality workforce, as opposed to a high turnover of lesser qualified individuals who may be a bit cheaper - but might end being more work for other staff who have to train a new person every month or two. Regular customers might get put off by having to deal with a different person every few months. Some companies may put this into their analysis, while others apparently do not.

I see the UBI not as a consequence, but as addressing consequences.

Well, there are plenty of consequences due to political incompetence, bureaucratic intransigence, and economic mismanagement. Not to mention many other things.

 

[Revoltingest]

But you were talking about determining whether an employee was making more than he/she is worth. How can that not be subjective?

By quantitatively examining their cost vs their benefit.

Are they following the principles of the free market, supply and demand? It would seem not, since many companies complain of labor shortages and have to make do with low-skilled employees and high turnover.

When the market changes, it can be difficult to
determine wages. Paying too much or too little
doesn't work. It's not always easy.