What McDonald’s Shows Us About Raising the Minimum Wage

From today’s NPR News Online:

On November 29, 2012, dozens of fast-food workers assembled at a McDonald’s in midtown Manhattan to demand better pay. Their demonstration kicked off a massive wave of protests for a $15 minimum wage. Since then, cities and states around the nation have taken action. And now, the federal government, led by President Biden and a Democratic-controlled Congress, has begun to consider making the $15 minimum wage national.

McDonald’s is one of the nations’ biggest employers of low-wage workers. As such, it was kind of the perfect place to launch what was, in retrospect, the beginning of an historic labor movement. A new study by economists Orley Ashenfelter and Štěpán Jurajda suggests McDonald’s is also kind of the perfect place to test the effects of the minimum wage increases that workers have been fighting for.

Ashenfelter is an economist at Princeton University, and he’s spent a couple decades studying McDonald’s. Back in 2012, when he was president of the American Economic Association, he even dedicated part of his big presidential address to the company. And it’s not just because, as he told us, his “favorite meal is fries, a chocolate shake, and a Big Mac.” He views McDonald’s as a kind of natural “laboratory” to compare and contrast different labor markets. I mean, think about it: each McDonald’s restaurant is pretty much the same; the workers have almost identical jobs, regardless of which part of the world they’re in; the food they make is generally the same; and McDonald’s are basically everywhere.

Meanwhile, over the last decade, a McFlurry of cities and states has been raising their minimum wages. In their new study, Ashenfelter and Jurajda use McDonald’s restaurants as a kind of treatment and control group to assess the impact of these new minimum wage laws. They obtained data on hourly wage rates of McDonald’s “Basic Crew” employees, the prices of Big Macs, and other information from about ten thousand 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 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 a higher minimum wage. “We couldn’t find any relationship between minimum wage increases and the adoption of touch screen technology,” Ashenfelter says.

Read the complete article here.