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Two Views on Fast Food and Minimum Wages

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Turns out if you treat workers like humans, they work better. Who knew!

Turnover is down, and customer service scores are up, company says.

Last year, McDonald’s MCD -0.08% joined a chorus of struggling U.S. companies offering workers pay hikes to help spur a turnaround. And it looks like the move is paying off for the fast-food giant.

The hamburger chain in April announced it would raise the average hourly rate for workers at the U.S. restaurants it owns to $9.90 from $9.01 starting July 2015, with average wages climbing above $10 per hour by the end of 2016. The company also said it would allow those employees to earn up to five days of paid vacation every year following one year of employment. (The higher wages remain very far from the $15 rate many labor advocates are pressing McDonald’s to adopt.)

The raises, which affected only about 10% of workers (the vast majority of McDonald’s U.S. restaurants are franchised), were announced while McDonald’s was developing a plan to shake off a multi-year comparable sales slump and bring people back to its stores.

McDonald’s CEO Steve Easterbrook, who took the helm in 2015, has since moved swiftly, closing hundreds of weak stores, bringing back all-day breakfast, and simplifying the chain’s menu, reducing bottlenecks in serving customers quickly. But improving the customer experience hinges on workers being on board with all these changes, hence the raises.

“It has done what we expected it to—90 day turnover rates are down, our survey scores are up—we have more staff in restaurants,” McDonald’s U.S. president Mike Andres told analysts at a UBS conference on Wednesday. “So far we’re pleased with it—it was a significant investment obviously but it’s working well.”

The move reportedly created friction with franchisees, who hire and pay their own workers, as they felt pressure to match the wage hikes. Still, there are early signs it is paying off: In October, McDonald’s reported its first quarter of comparable sales gains in two years. The company built on that growth with a huge 5.7% increase in the following quarter.

The improvements echo those at Walmart which also offered U.S. workers wage increases that were followed by improved customer service scores.

On the other hand, you have Carl Jr’s automating all the ordering, supposedly because of that dastardly minimum wage. Thus it is evidently the fault of workers themselves they are losing their jobs:

Is he being heartless? No. Just responding to the government’s foolish plans to jack up the minimum wage and put restaurants, hotels, bars and other service industries out of business. “With government driving up the cost of labor, it’s driving down the number of jobs,” said Puzder. “You’re going to see automation not just in airports and grocery stores, but in restaurants.”

He’s right. That’s why whenever the minimum wage rises above the market-set prevailing wage, jobs are destroyed. Who would pay someone $15 an hour to do a job that’s worth less than that? No one.

This isn’t rocket science or even advanced economics. It’s plain common sense — something that populist demagogues on the left seem to be missing entirely.

This is of course ridiculous. While there may be a point where higher wages could directly lead to automation, the minimal moves toward higher wages over the last couple of years is not freaking out fast food CEOs. Current minimum wages in the large majority of the nation are still below inflation-adjusted minimum wages decades ago. This is just a shunt to find someone to blame for throwing people out of work in order to maximize profit.

But given how much so many people love to do work for Kroger and Safeway while throwing grocery clerks out of work by checking out their own groceries just so they don’t have to interact with another human being, I’m sure there will no major backlash to Carl Jr’s actions. In fact, I’m sure this will expand. It won’t have anything or much to do with the minimum wage. It’s part of the broader move toward automation. Were there actually a jobs program in this country for people who do not have a college education, I might say that something like a fast food cashier is a job that one might want eliminated. But there are no jobs program. The alternative to the fast food job is nothing. And that’s where the working class is headed because of automation and because of capital mobility. To nothing. Carl’s Jr and your own willingness to embrace automation are part of the reason for that.

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