They obtained data on hourly wage rates of McDonald's "Basic Crew" employees, the prices of Big Macs and other information from about 10,000 McDonald's restaurants between 2016 and 2020. And they crunched the numbers to see what happens when a city or state increases its minimum wage.
One big fear of a higher minimum wage is that it could cause businesses to replace their workers with machines. Ashenfelter and Jurajda found that some McDonald's restaurants have already installed touch screens so customers can input their meal orders without interacting with a human being. But they also found that those touch screens weren't installed in response to higher minimum wages. "We couldn't find any relationship between minimum wage increases and the adoption of touch-screen technology," Ashenfelter says.
Not surprisingly, Ashenfelter and Jurajda found that McDonald's restaurants raise their wages after a city or state raises its minimum wage. More surprisingly, they found that a substantial fraction of restaurants preserve their pay premiums for workers who were previously earning more than the minimum wage. That is, if a worker was making a dollar more than the old minimum wage, many McDonald's will make sure those workers continue to make a dollar more than the new minimum wage. Ashenfelter says they don't have hard evidence for why this is, but he believes it's because certain restaurants want to offer wages slightly higher than the legal minimum as a way to reduce turnover. Paying above the minimum wage creates a kind of magnet for workers. Overall, the economists found that if the minimum wage goes up by 10%, the average McDonald's restaurant will increase worker wages by about 7%.
Finally and perhaps most thought provokingly, the economists looked at the effects of minimum wage hikes on the prices of Big Macs. They found that when the minimum wage goes up, the price of a Big Mac goes up too. Ashenfelter says the evidence from increased food prices suggests that basically all of the "increase of labor costs gets passed right on to the customers." But because low-wage workers are also usually customers at low-wage establishments, this suggests that any pay raise resulting from a minimum wage increase might not be as great in reality as it looks on paper. In econospeak, the increase in their "real wage" — that is, their wage after accounting for the price of the stuff they buy — is not as high, because the cost of some of the stuff they buy, such as fast food, goes up too.
www.npr.org
One big fear of a higher minimum wage is that it could cause businesses to replace their workers with machines. Ashenfelter and Jurajda found that some McDonald's restaurants have already installed touch screens so customers can input their meal orders without interacting with a human being. But they also found that those touch screens weren't installed in response to higher minimum wages. "We couldn't find any relationship between minimum wage increases and the adoption of touch-screen technology," Ashenfelter says.
Not surprisingly, Ashenfelter and Jurajda found that McDonald's restaurants raise their wages after a city or state raises its minimum wage. More surprisingly, they found that a substantial fraction of restaurants preserve their pay premiums for workers who were previously earning more than the minimum wage. That is, if a worker was making a dollar more than the old minimum wage, many McDonald's will make sure those workers continue to make a dollar more than the new minimum wage. Ashenfelter says they don't have hard evidence for why this is, but he believes it's because certain restaurants want to offer wages slightly higher than the legal minimum as a way to reduce turnover. Paying above the minimum wage creates a kind of magnet for workers. Overall, the economists found that if the minimum wage goes up by 10%, the average McDonald's restaurant will increase worker wages by about 7%.
Finally and perhaps most thought provokingly, the economists looked at the effects of minimum wage hikes on the prices of Big Macs. They found that when the minimum wage goes up, the price of a Big Mac goes up too. Ashenfelter says the evidence from increased food prices suggests that basically all of the "increase of labor costs gets passed right on to the customers." But because low-wage workers are also usually customers at low-wage establishments, this suggests that any pay raise resulting from a minimum wage increase might not be as great in reality as it looks on paper. In econospeak, the increase in their "real wage" — that is, their wage after accounting for the price of the stuff they buy — is not as high, because the cost of some of the stuff they buy, such as fast food, goes up too.
What McDonald's Shows About The Minimum Wage
McDonald's is one of the nation's largest employers of low-wage workers. And because it's everywhere, it's a great place to test the effects of minimum wage laws.
www.npr.org
