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.
While 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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I THOUGHT MINIMUM WAGE JOBS WERE FOR HIGH SHCOOL KIDS. I DON'T THINK YOU'RE SUPPOSE TO SUPPORT A FAMILY ON IT.
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.
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
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.
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
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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