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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1472Comments
Feb 15, 2013 9:27AM
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When minimum wage goes up, prices go up. Business will go down for many. The individual making minimum wages is then no better off.
Feb 15, 2013 9:27AM
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I THOUGHT MINIMUM WAGE JOBS WERE FOR HIGH SHCOOL KIDS. I DON'T THINK YOU'RE SUPPOSE TO SUPPORT A FAMILY ON IT.

Feb 15, 2013 9:26AM
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Minimum wage law is linked to the big government philosophy that the individual worker has insufficient bargaining strength to obtain a fair wage from his powerful employees. It came into existence during FDR's presidency and is supposed to be increased only to keep pace with inflation.

 

It should come as no surprise that economists are divided over whether a minimum wage is good or bad for the economy, but I believe that if you set a minimum wage that employers must pay without setting a minimum standard for the work to be performed to earn that pay, you create an imbalance in the economic system that leads to a chicken and egg problem.  If the minimum wage is increased because workers cannot afford to buy a hamburger, then the price of a hamburger goes up to cover the increased wage cost.

 

The government has been successful in only one area - proving that it knows nothing about running a business, so maybe it's time to listen to Rand Paul.

Feb 15, 2013 9:26AM
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Minimum wage works for all business. Not just for fast food industry. This question suggests that you have not been grocery shopping lately, or own a car, pay insurance, and so on.  People in these so called minimum wage positions more than likely are working harder than the people that say they don't desire better pay. This question stinks!!!
Feb 15, 2013 9:19AM
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Sorry but any crying over raising the minimum wage in the restaurant business just doesn't fly. Why? Chain restaurants basically charge the same for the same menu items all over the country. The cost for a Big Mac in California is usually identical to that  in Alabama even though the cost of doing business is much higher in Cali. If there is a price difference it is very slight. Look at other chains such as Olive Garden, Denny's, on and on. Also remember that California minimum wage applies to all workers including wait staff in full service restaurants where in many states wait staff makes peanuts (like 2.50 an hour) because state laws allow tips to be part of the wage calculation. Sure that doesn't apply to McD but its an example of the food service industry crying wolf about wage costs. Believe it when I say McDonalds make a very nice profit in California and all other high minimum wage states.
Feb 15, 2013 9:19AM
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Just go's to show you that business still hold all the cards. Even if someone tries to help out on the one's with low income(Mininum Wage) Salaries. Mininum wage go's up. They raise prices on products and then the low income fall behind again. Businesses need to have stander of living pay scale. That way low-Income workers don't fall behind and then need help from state and Federal Goverments for help. With food for there families, Bills that go up more and more. And people have to work these jobs. Businesses Cry Wolf! But in the end they hold all the Cards!!
Feb 15, 2013 9:19AM
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Obama is going to lead us to hell. Thanks to all the people that voted for him!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
Feb 15, 2013 9:18AM
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get rid of the black a$$  king we got you dumb people
Feb 15, 2013 9:18AM
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Too Bad Corporations didn't hit the Floor, like BUTTERED TOAST! TOP DOWN!
Feb 15, 2013 9:15AM
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How about instead of lobbying, spending millions, don't these companies actually pay their workers!  Strange concept I know, but that is what is wrong with corporate America today, businesses unwilling to pay workers for the work they do perform.
Feb 15, 2013 9:14AM
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Here we go again; multi billion dollar corporations who pay their CEO's and other executives, multi millions objecting to paying their employees about $18k a year.  I've lived through enough minimum wage hikes to know that their objections are made of massive amounts of BS.
Feb 15, 2013 9:14AM
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I am tired of hearing about the poor corporations being hurt by having to pay their people a decent wage. At every turn, the businesses are cutting every expense that was of benefit to its employees. No more are pension plans. Companies loyalty to its employees in many ways is gone. Tenure means nothing, you can be cut and replaced by someone who costs less to employ and does not have the experience, or abilities that was lost. All of this is done to increase the bottom line, the profit, for its investors. Profits are growing, and the workers are the ones who continue to fund it. Lets get real, things will regulate once businesses realize, people are what make companies great. Pay them, respect them, reward them. All walks of life need employment and whether it's flippin burgers, or managing a company, wake up and pay people what they are worth to your organization. If they don't do the job, get rid of them and pay someone else that wants to work.
Feb 15, 2013 9:13AM
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The illusion is that only a small percentage of the population receive wages based on minimum wage and that's clearly no longer true. Forty years ago when we were the worlds largest manufacturer most jobs other than jobs like McDonalds filled by kids paid 3 to 4 times minimum wage and were stepping stones to better jobs. Today 30% of jobs such as 7-11, Best Buys, Walmarts, Targets, Liquor stores, Grocery stores and virtually all retail jobs have pay based on minimum wage even if paying 50c or a $1 over it. There are probably 50 million Americans filling these types of jobs who will work these types of jobs till they die. Hardly a  stepping stone to better jobs. It's time these companies paid enough and provided enough benefits that full time workers can survive without government help. Funny that the same people that complain about able bodied people receiving food stamps and other benefits are the same ones who oppose any minimum wage.
Feb 15, 2013 9:11AM
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Why do we keep having these same stupid arguments.  We've had minimum wages since I believe the 1930's and periodically it goes up and every time the business people cry that jobs will disappear.  McDonalds is not going to go out of business because they have to pay people a little more.  A Hamburg may cost an extra nickel but we'll adjust.

 

In my opinion the minimum wage should be equal to the average cost of a movie ticket.  A kid should be able to buy his girlfriend a movie ticket for an hours work

Feb 15, 2013 9:10AM
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John Simon, when on earth has it been so difficult to "bag your own groceries, pump your own gas ", to have "kids pump gas ,landscape your yard " is totally unacceptable these days , what the heck do you do? sit at home counting your hard earned money that you would prefer to deprive from the less priviledged.If you are not already aware ,the minimum wage does not exist in some restaurants , how does $2 to $3 an hour plus tips (if given )sound to you , a comment in this story sums it all up,("It would mean less money for shareholders," ) rich fat cats all wanting to be Billionaires.................
Feb 15, 2013 9:09AM
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What's the problem?  Big business does't want people to earn a decent wage in this never ending economy raising prices for more profits.   Not only is having all the money in the world now they want more sweat and blood for the bucks..  What would they do if consumers didn't go to fast food joints for a day.  Imagine the message that would send!
Feb 15, 2013 9:08AM
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Let me explain something to most of you… These companies have been raking in huge profits for long enough. They don’t do what is right and pay their employees a living wage on their own… the almighty dollar means more to them. That’s the problem and has been the problem.

No if a company pays a living wage the employee will spend more money in the community and that will help the companies that would be paying a higher wage. More taxes are paid; more people off government help and better customer service because the employee is happier with their job.

Very simple economic growth that does not cost the government any money.  

Feb 15, 2013 9:02AM
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and that is what needs to be done when need a new food chain that would make all these places work towards better service because they are all nasty places to eat at

 

Feb 15, 2013 9:01AM
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Minimum wage is not the problem.  Corporate Greed is the problem.  That's why they fuss about raises for the lower level people, increases business taxes, raising min. wage, etc and give themselves golden parachutes, 100K raises/bonuses, etc.  Until the entitlement attitude is gotten rid of, this will exist.  As long as corp businesses and CEOs have this attitude, we also can't blame the younger generation for this attitude.  They learned it someplace. 

 

I heard the CEO of the office tell someone once that they should sent their kids to private schools so they could associate with the proper people in society.  This says it all.  Regular folks aren't worth dealing with.  If that is not arrogant entitlement, I don't know what is.

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We have a wage problem in America. First, no matter how you raise taxes or mandate things like wages or health care, the rich make money. They simply raise prices or are "in" on the basement floor of any idea thanks to their network. You and I end up with politics of the far left and right reported in the news, all designed to make Joe Average either recoil in disgust or do something uneducated (not realizing the reaction plays directly into the designers hands). Y'all need to wise up, it is not Republican or Democrat, they all do the same things behind doors and say something else to the cameras. It boils down to Money Power and Control by the elite.
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