McDonald's is now testing automated drive-thru service in select Chicago-area restaurants, yet another indication that forced minimum-wage increases drive low-skill industries to outsource work to computers.
As municipalities and some states enact a $15 minimum wage, low-skill industries, such as fast-food restaurants, have been exploring methods of automation to keep labor costs down while complying with wage laws.
For example, many McDonald's restaurants now include automated ordering machines, allowing customers to order food inside the restaurant without directly interacting with employees. In theory, such machines eliminate the need for a cashier position, which means McDonald's owners can save money by employing fewer people.
CEO Chris Kempczinski announced last week that McDonald's is testing voice-recognition machines at 10 Chicago-area locations to automate the drive-thru experience.
Kempczinski told investors their automated system is about 85% accurate and is able to process most orders. However, he also predicted that automated drive-thru lines won't become a mainstay — at least for the next few years.
"Do I think in five years from now you're going to see a voice in the drive-thru?" Kempczinski said, according to Nation's Restaurant News. "I do, but I don't think that this is going to be something that happens in the next year or so."
"There is a big leap between going from 10 restaurants in Chicago to 14,000 restaurants across the U.S. with an infinite number of promo permutations, menu permutations, dialect permutations, weather — I mean, on and on and on and on," he explained.
The news comes after McDonald's recently announced plans to hike wages for employees who work at McDonald's-owned McDonald's restaurants. The vast majority of McDonald's locations are owned by franchisees, who determine wages at their own restaurant.
"These increases, which have already begun, will be rolled out over the next several months and include shifting the entry level range for crew to at least $11-$17 an hour, and the starting range for shift managers to at least $15-$20 an hour based on restaurant location," McDonald's explained in a news release.
Former McDonald's CEO Ed Rensi said forcing businesses to increase their minimum wage will result in one of two outcomes: increased prices for consumers or further automation of the industry.
"When you raise prices 1%, you lose about 1% of your transaction costs," Rensi told Fox Business. "And you have to work really hard to recover that through promotion, marketing, you know, all kinds of local events and it's not an easy thing to do, particularly when you're living on a very high number of transactions.
"You got a choice, you go broke by raising prices or you go broke by losing money because you can't raise prices," Rensi continued. "So I understand the need to perhaps make a public statement that you're going to $15 and I don't quarrel with that aspect of it. But when the rubber meets the road, you've got to look at what are the franchisees going to do because they're 80% to 90% of the system and a lot of them are already there."
Chipotle chief financial officer Jack Hartung agrees that the cost of forced minimum wage increases will be passed onto customers.
"We're not that far off of like for example, a $15 number. But let's say, for example, that there's going to be an across-the-board 10% increase in our wages," Hartung said in April, Business Insider reported. "And that would, to offset that with menu pricing, that would take us 2% to 3% price increase."
New research studying the impact of government-mandated minimum wage hikes found exactly what critics of such policies predict: The cost is pushed onto consumers.
Proponents of hiking the federal minimum wage to $15 argue that every American is entitled to earn a "living wage" and that no person should work hard each week, yet still live below the poverty line.
But if the government forces businesses to increase their wages, Princeton economist Orley C. Ashenfelter and Czech economist Štěpán Jurajda found through studying price and wage data from nearly every McDonald's restaurant in the U.S., businesses themselves do not cover the cost of increased wages.
Instead, they found that businesses simply pass that cost on to consumers.
"Our data imply that McDonald's restaurants pass through the higher costs of minimum wage increases in the form of higher prices of the Big Mac sandwich," the researchers said.
Indeed, businesses will incur significant cost increases if politicians hike the federal minimum wage to $15 per hour, which would be more than double the current standard. For companies that employ large numbers of low-skilled positions, monthly payrolls would ballon thousands of dollars per month, at minimum.
As Brad Polumbo at the Foundation for Economic Education noted, having more money in one's pocket is not necessarily most important.
Rather, only increasing the purchasing power of one's money increases one's standard of living.
From FEE:
If a McDonald's cashier's take-home pay increases 20% after a minimum wage hike, but the prices for the food and other things they spend their wages on increase by a similar amount, they aren't actually any better off. This would happen throughout the economy, not just in fast food.
One poignant example comes courtesy of the Heritage Foundation's Rachel Grezler, who studied how minimum wage hikes would impact the cost of childcare; an enormous expense for many working-class families. "Childcare costs would increase by an average of 21 percent—an extra $3,728 per year for two children—and up to 43 percent, or more than $6,000, in some states," Heritage reports. "The impacts would be greatest in lower-cost areas; in Louisiana, Oklahoma, and Mississippi, costs would surge between 37 percent and 43 percent."
The Congressional Budget Office found in a 2019 report that despite lifting some Americans out of poverty, raising the minimum wage would leave perhaps even more Americans out of a job.
In fact, nearly 4 million Americans could lose their jobs, with 1.7 million lost jobs being the CBO's median estimate.
"In an average week in 2025, the $15 option would boost the wages of 17 million workers who would otherwise earn less than $15 per hour. Another 10 million workers otherwise earning slightly more than $15 per hour might see their wages rise as well," the CBO explained.
"But 1.3 million other workers would become jobless, according to CBO's median estimate. There is a two-thirds chance that the change in employment would be between about zero and a decrease of 3.7 million workers. The number of people with annual income below the poverty threshold in 2025 would fall by 1.3 million," the report added.
On Monday's show, Steven Crowder delved into why he believes a minimum wage increase would only help the rich and why the liberal elites appear to support it.
In this clip, Crowder asserted that, in his opinion, corporations support raising the minimum wage because small business owners would likely struggle to pay their employees $15 per hour and would be crushed out of business as a result.
Watch the clip for more from Crowder. Can't watch? Download the podcast here.
President Joe Biden's economic relief package, which includes raising the federal minimum wage to $15 per hour, is being worked on in a House committee. For the latest information on the wage hike, click here.
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Congressional Democrats have vowed to push through a $15 minimum wage, one that President Joe Biden attempted to make part of his COVID relief package, with the hope that it could be pushed through the legislature via the budget reconciliation process.
In recent days, the "fight for 15" has suffered a couple setbacks.
Over the weekend, Biden himself admitted to CBS News that his minimum wage hike probably won't survive the budget negotiation process and will have to be addressed separately later this year.
Then, on Monday, the Congressional Budget Office released analysis of the minimum wage plan that said the proposed hike would cost the economy 1.4 million jobs.
Despite the bad news for the "fight for 15" movement, House Democrats have said they're not giving up.
But do they really believe in paying all Americans $15 per hour?
A Tuesday report from the New York Post indicated that at least some Democratic lawmakers who want to force businesses to pay all workers $15 per hour — even for workers whose labor is not worth that much — have a record of not paying their own workers the minimum wage they're currently demanding.
The Post took a look at job listings posted by four House Democrats who support the minimum wage hike — Tom Malinowski (N.J.), Susan Wild (Pa.), Sharice Davids (Kan.), and Chris Pappas (N.H.) — and found that all four of the lawmakers "have offered positions that paid below the minimum wage they claimed to be fighting for."
Rep. Malinowski: According to the Post, the congressman's campaign team listed an opening for a communications fellow in September 2018. The four-day-a-week job included "staffing the candidate at events on work days and potentially over the weekend" and offered a $500 per month stipend. The Post attempted to contact the lawmaker's spokesman but did not get a response.
Rep. Wild: The Post noted that Wild's campaign posted a job listing in March 2018 that was similar to Malinowski's. Along with a $500 monthly stipend, the campaign also offered housing. College credit was also an option for payment. Wild's press shop did not respond to the Post's request for comment.
Rep. Davids: In the final month of Davids' 2018 race to unseat GOP Rep. Kevin Yoder, Democrats in Kansas posted a paid fellow opening that paid between $1,500 and $2,500. The pay would work out to between $9.38 per hour and $15.63 per hour, depending on experience, the Post reported. Davids' office, the Post said, could not be reached for comment.
Rep. Pappas: The lawmaker owns a restaurant in Manchester, New Hampshire, called the Puritan Backroom. Despite Pappas' demand for a $15 minimum wage, job listings at his eatery offer $12.50 per hour, the Post reported. When asked about his employees' wages in June 2018, Pappas said he paid "on average" over $15 per hour to people in his kitchen, the newspaper said. In 2019, after the Democrat had changed his minimum wage position to support $15, he was found to still be offering jobs at $12.50 per hour. Pappas' office did not respond to the Post's request for comment.
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