Would a $9 minimum wage hurt McDonald's?

Some investors worry that Burger King and other fast-food chains might get dinged by Obama's proposal for a higher federal baseline wage.

By Aimee Picchi Feb 14, 2013 2:47PM

A sign outside the fast-food chain McDonaldsWhile millions of Americans working low-paying jobs would cheer if President Barack Obama's call for a $9 minimum hourly wage were successful, not everyone is happy about the idea. 


Shares of McDonald's (MCD) slid more than 1% Wednesday, the day after Obama called for boosting the minimum wage from its current $7.25 per hour. Yum Brands (YUM), which operates KFC and Taco Bell, and Burger King (BKW) also saw shares take a hit. 


A $9 minimum wage "definitely adds some kind of pressure" to the stock prices of fast-food chains, S&P Indices analyst Howard Silverblatt told The Huffington Post.


Paying fast-food workers higher wages "would definitely push profits down. It would mean less money for shareholders," he added. 


Already, Obama's proposal is receiving push-back from businesses, which predict a boost in the minimum wage would damper hiring.


If history is anything to go by, it's likely fast-food chains will lobby against the proposal. 


Restaurant chains and their franchisees spent almost $1 million in 2006 to lobby against minimum-wage increases in several states, according to Bloomberg News, citing Followthemoney.org. 


It's clear that minimum-wage workers would find the extra money useful. As Obama noted in his address, a family with two children that earns the minimum wage still lives in poverty. 


More fast-food employees now depend on food stamps to feed themselves, according to the Bloomberg report, which cited data from the University of Minnesota Population Center. While 15% of the overall U.S. population receives food stamps, almost 27% of fast-food employees require assistance to buy groceries.


So how much does McDonald's pay its employees? According to Glassdoor.com, which compiled reports from hundreds of McDonald's employees, a typical crew member, or an employee who flips the burgers, makes $7.66 an hour


That translates into gross income if less than $16,000 per year. Under Obama's proposal, a worker would make $18,720, or an annual raise of about $2,788. 


Multiply that by the dozens of workers at each fast-food restaurant, and McDonald's and others would most likely feel an impact. Then again, consumers might be the ones paying -- in the form of higher burger prices. 


Aimee Picchi owns shares of YUM but hasn't traded the stock in at least 12 months.


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1468Comments
Feb 15, 2013 8:18AM
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 Canada's minimum wage is $10 but the price of living is higher but some of lifes situations there are better.
Feb 15, 2013 8:18AM
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I worked for minimum wage in High school. I've accumulated skills and experience that enable me to earn more now.
Feb 15, 2013 8:16AM
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If McDonald spent the money on the workers instead of spending it on lobbing, you would have 1 million workers making $8.66 per hour. 
Feb 15, 2013 8:13AM
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Higher minimum wage would be nice. Maybe then people could spend more time with their families instead of slaving 24/7 just to make ends meet. I realize that a minimum wage job isn't meant to be a life career, but the economy waits for no one and people need to make a decent salary that will help them survive until they can find something better.
Feb 15, 2013 8:09AM
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Would a $9.00 hamburger hurt the consumer?
Feb 15, 2013 8:07AM
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The car wash down the street has 20 employees, all at minimum wage.  With Obamas increase in minimum wage, the owner's  direct cost of labor would increase $72,800.00 a year.  As I see it the owner has three choices;

1.  Lay off 6 - 7 employees to keep the same labor expense for the year, asking the rest to work harder.

2.  Raise his prices and seriously risk losing customers.

3.  Accept the fact he will earn $72,800.00 less the next year,  ( I sure as heck wouldn't accept this)

 

Why can't Obama and the government see the mistake in raising the minimum wage?..............BECAUSE NONE OF THEM HAVE EVER RUN A BUSINESS!!!   Had to pay taxes on a business, had to make a payroll, had to pay for insurance etc.  had to handle employee issues or ever had to be a responsible business owner.

 

I am a small business owner and after all the crap the local, county, state and federal government throw at me each year, I am not encouraging my childre to take over my business, I am suggesting to go to work for the governement and get on that government "gravy train".  Work 10 hours a week and goof off the other 30. 

Feb 15, 2013 8:02AM
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No, it will not hurt Mcdonald's. It will hurt the consumer. Mcdonald's will raise their prices.
Feb 15, 2013 7:59AM
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ITS A GREAT PLACE to START  $'9.oo an hour will pay for 1gallon of gas  and a milk!
Feb 15, 2013 7:55AM
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If you do not want to get an education and work to achieve a better life than stay at minimum wage. I have a business where some are minimum wage and when I heard the head guy say $9.00 per hour I right away decided that I would just raise prices to compensate.

Minimum wage was not meant to be a life long profession.....it will only cost the average person more in goods and services if he raises this again. Hence the vicious cycle continues. All we are doing is empowering the poor to stay poor and never strive to get ahead and work hard to increase their earning power.

 

Feb 15, 2013 7:55AM
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He through out a figure of 9,  knowing that he will be lucky to get 50 cents.   It's politics,  50 cents more for minimum wage will have more impact on the worker then the business.   Relax people
Feb 15, 2013 7:50AM
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Would it hurt.  Stupid question.  It has got to hurt somewhat.  I live in Michigan and do you recall what a meal at Mcdonalds now costs?  My family of five is over $30 for freaking meal for us.  If you raise the minimum wage, restaurants cannot eat the increase.  You with lay off people and/or raise prices.  We used to eat out about once per week.  Now it is once every two weeks or longer. 
Feb 15, 2013 7:47AM
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a $9 minimum wage make good sense, but not  NOW. we are having problems with jobs ,finances, and high gas prices. i think the president spoke prematurely. he gives his "haters" too much "ammo".
Feb 15, 2013 7:45AM
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Just remember that the sandwich you just ate...was mostlikely spit in by someone that works for poverty wages you demand.

 

Feb 15, 2013 7:42AM
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Certainly NOT! They have chains throughout the world and they're worried of a minimum pay increase??? That's absurd!! I believe a wage increase at $11.25 would sufice! Stop holding workers to a lower standard and start paying them for the work they do!!!
Feb 15, 2013 7:39AM
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If you are making minimum wage then you are for the most part in 1 of 3 categories

1. A student

2. unskilled/uneducated

3. lazy

 

If you are STILL making minimum wage after a while then you are just lazy.

Why?

1. a student(youth) has no work experience. Once the get it, their wages will rise

2. if you are uneducated/unskilled, then go back to school. If you are poor then it is free(grants)

3. still lazy.

The min. wage was never meant as a living wage. Unions love the min. being raised because union wages are based on a %/multiple of min. in many cases.

 

I agree with many posts. The 9.00 minimum wage looks good, feels good but is very bad for business and our economy. If you want more money, get more education. training and/or experience.

Feb 15, 2013 7:39AM
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Not all of us have the means to go back to school and some employers discriminate againt age.  Also these fast food places don't always give full time either. I have any availability and take any extra hours offered.  Most of the adults there work 2 jobs !

 Plus with the new healthcare laws one has to have qualifying insurance or also pay for it.  I worked in a grocery store for over 10 years, but quit after they knew months in advance of another employee retiring and didn't even try to replace him.  I was going to take over his job as dairy manager, but I had the feeling that I was just going to get all the work and no more $.  Got tired of being so run down that I was losing too much weight and getting sick. 

Feb 15, 2013 7:38AM
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It is crystal clear that Obama does not see the negative effects of his campaign speeches which is what he gives every time he confronts a audience. minimum wage jobs are not what he should be concentrating on. Those type of jobs are not supposed to be filled by adults who are looking for a career in flipping hamburgers. What he should be doing is bringing the school standards up so more young adults can graduate from high school and get a interim job in a industry that will afford a better paying job that supports a man/woman supporting a family. It's the teachers that are failing  to inspire young people and it's the unions that protect teachers that should be fired or reprimanded so in the long run we have a more competent staff so that we will have a brighter bunch of young adults graduating. That's what he should be talking about but he won't because the union will not like what he says and that is where the problem is. We need a president who doesn't depend on the unions or any other  organization to support his election or re-election, Obama is indebted to the unions so he won't say any thing bad about them, but he will attack business, corporations, and not come face to face with the real problems. Obama is the enemy here. His restrictions, policies, that he brings forward stifle job growth, his negative words & actions are what's holding us back.  
Feb 15, 2013 7:37AM
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Yeah, increasing the minimum wage would mean these places only make 3 billion instead of 3.8.  Corporate greed at it's finest.
Feb 15, 2013 7:36AM
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Why is it that the right can manage to both at once criticize those who need government assistance because they earn low wages (see data on foodstamps amongst low-wage workers,) and simultaneously criticize any legislation aimed at raising wages? We can't all have great jobs, and boosting the minimum might just boost spending, which would seem to help out the overall economy. I've had the pleasure of having to subsist on a minimum wage while looking for better work, and at the worst points, had to accept foodstamps as a temporary measure-- like many people unfortunate enough not to rake in the big bucks. It quite frankly sucks  to work a thankless job for low pay, and still deal with the humiliation of paying for your groceries with foodstamps-- while trying to ignore all those self-righteous stares and folks muttering "get a job." It's not always a question of ambition, often just circumstance. If you've managed to work your whole adult life and never had to subsist on a low-wage job, count yourself lucky-- or maybe not, because if you had, perhaps you'd have a little more sympathy for the folks who, for whatever reasons, can't find better work and bust their respective tails at one-- sometimes more-- minimum-wage jobs just to (barely) get by.

Feb 15, 2013 7:35AM
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The benefit of the minimum wage increase to poor families would far outweigh the expense. In retail industry this would result in a small hike in prices to stabilize. Lets say Papa Johns. They would have to raise the price of pizza .50cents. Really people would be able to handle that with little or no impact. If not then why are they buying the stuff to begin with. An extra dollar for a pair of jeans from walmart would be hardly noticed by most middle class families. Most pizza restaraunts have sleezed themselves out to pay drivers server wages below minimum wage while driving and only pay regular wages when in store slaving away all in the name of saving a few dollars. They charge 2-3 dollars for a "delivery" fee and give the drivers .95 cents and pocket the rest. The cost would be spread over a large base of items and almost invisible to most consumers. The raise to 7.25 an hour did little to affect the restaraunt I was managing. Small changes in menu and prices happened over time and the company stayed more than profitable. Realistically if you paid 9.00 an hour you might get more productivity out of people that can actually feed their family and pay their rent. They could restructure the minimum wage law to apply in a tiered method for those under 18 to allow a smaller wage for minors that are getting job skills and don't need to support families. Just a thought.

 

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