On Wednesday, Sen. Bernie Sanders (I-Vt.), a candidate for the 2020 Democratic presidential nomination, took aim at McDonald’s, America’s largest restaurant chain, demanding it increase its minimum wage to $15 per hour. Sanders attributed the company’s low wages to greed and featured a video of a female worker and grandmother who says her job at McDonald’s does not offer “a living wage.”
“McDonald’s employees like Kelly are making $8.25/hour and can barely survive,” Sanders tweeted. “Yet McDonald’s made $6 billion in profits last year and paid its CEO $22 million in compensation. The greed must end. We demand $15 an hour and a union for all workers!”
McDonald’s employees like Kelly are making $8.25/hour and can barely survive.
Yet McDonald's made $6 billion in profits last year and paid its CEO $22 million in compensation.
The greed must end. We demand $15 an hour and a union for all workers! pic.twitter.com/LVuT5hEwyD
— Bernie Sanders (@BernieSanders) July 10, 2019
In this message, Sanders — a self-proclaimed Democratic Socialist — is declaring war on economic reality. Humongous global companies like McDonald’s manage billions in costs and profits in order to reach hundreds of millions of customers.
Companies have to make profits in order to stay afloat — to reward shareholders and to keep the business running. Profits demonstrate that a company is bringing more value to an economy — that customers are choosing that product in a free market.
If McDonald’s were to raise its minimum wage to $15 per hour, it would have to cut costs to maintain its bottom line. For this reason, higher minimum wages actually decrease the number of jobs available and often lead to low-income workers earning less money in the long run.
After Seattle raised its minimum wage, the University of Washington ran a study to measure the economic impacts. The study found that the minimum wage law “had reduced the total number of hours worked by low-wage employees by 9.6 percent,” Slate reported. The number of jobs paying less than $19/hour fell by 6.8 percent. Thanks to shortened shifts and lost jobs, the average low-wage worker ended up taking home $125 less each month.
In the case of McDonald’s, the results would be even more predictable. In recent years, the company has been installing self-service ordering kiosks: touchscreens that allow consumers to order without human interaction. As a frequent consumer, I greatly appreciate these.
Last June, CNBC reported that McDonald’s planned to upgrade 1,000 stores with touchscreens every quarter for the next 8-9 quarters. In other words, 8,000 to 9,000 stores would get self-service ordering kiosks, making many employees superfluous. By 2020, every single location in the U.S. will have the touchscreens.
McDonald’s has insisted that the displacement of cashiers by touchscreens will not result in mass layoffs, as workers will be moved to different jobs. However, the opportunities are changing and it stands to reason that McDonald’s may hire fewer workers per restaurant, even if it does not fire employees.
Bernie Sanders seems to think he is helping workers like Kelly by pressuring McDonald’s to raise its wages. In reality, he is harming them. If McDonald’s pays its workers more, it will have an incentive to further automate its services. In an era where more and more entry-level jobs require a college degree, such wage increases will make entry-level jobs harder to come by, as rising wages lead employers to seek higher-skilled candidates.
Low-wage McDonald’s jobs serve a wide variety of functions in the economy. Teenagers looking for their first job often find it in fast food, making enough money to supplement their lifestyle but not enough to maintain themselves. Low-wage jobs often serve as a stepping-stone to more lucrative positions with higher wages.
If activists like Sanders were to get their way, an entire segment of the economy that provides opportunities for millions would suddenly vanish, making it harder for teenagers to find their first job and erasing options for workers searching for a new career.
Naturally, this is far from the first time Sanders has targeted a massive American company on the minimum wage. He attacked Disney last June, saying, “We need to shame Disney.” The company had already pledged to increase wages.
Sanders is not just attacking McDonald’s and Disney, he’s attacking a vanishing segment of opportunity in the free market. A minimum wage hike sounds nice, but it’s the perfect excuse to automate more jobs — and last thing low-income workers need.
Follow Tyler O’Neil, the author of this article, on Twitter at @Tyler2ONeil.