The Outcome Realities of Minimum Wage

The constant refrain when it comes to the economy is raising the minimum wage because one just cannot support a family on the current one. Well, entry-level positions have traditionally been transition points for the first-time hired or someone who just wants to earn a little extra money. In spite of crunching the numbers, liberals, especially want to see the minimum wage increased nationally to fifteen dollars an hour. Even in the face of fact, they hold strong to their stand. Naturally, people earning ten or twelve dollars are willing to protest and demand the extra money because all those business owners are rolling in dough, right. A former employee of McDonald’s was quoted in Forbes on the reality of increasing the minimum across the board.

I worked for the company for three decades, and served as its USA President for 13 years. I can assure you that a $15 minimum wage won’t spell the end of the brand. However it will mean wiping out thousands of entry-level opportunities for people without many other options.

The $15 minimum wage demand, which translates to $30,000 a year for a full-time employee, is built upon a fundamental misunderstanding of a restaurant business such as McDonald’s. “They’re making millions while millions can’t pay their bills,” argue the union groups, suggesting there’s plenty of profit left over in corporate coffers to fund a massive pay increase at the bottom.

In truth, nearly 90% of McDonald’s locations are independently-owned by franchisees who aren’t making “millions” in profit. Rather, they keep roughly six cents of each sales dollar after paying for food, staff costs, rent and other expenses.

Let’s do the math: A typical franchisee sells about $2.6 million worth of burgers, fries, shakes and Happy Meals each year, leaving them with $156,000 in profit. If that franchisee has 15 part-time employees on staff earning minimum wage, a $15 hourly pay requirement eats up three-quarters of their profitability. (In reality, the costs will be much higher, as the company will have to fund raises further up the pay scale.) For some locations, a $15 minimum wage wipes out their entire profit.