“I guess Biden’s gonna undo all the good Trump did,” a Republican said to me with a straight face on Inaugaration Day. I resisted the urge to query as to what in the U.S.’s decreased respect around the world or Covid death rate two and a half times higher per capita than neighboring Canada’s there was that was good. “He’s going to raise the minimum wage to $15, then it’ll be $15 for a hamburger.”
There are many things wrong with that assumption. Many, many things, but I find it is a fairly common assumption among the right-wing segment of the population, so I figured it was time to look at the theory.
To begin, let’s look at that idea that he’s bound to do so. While it is true several prominent Democrats like Bernie Sanders made a $15 minimum wage a major plank in their platform, Biden didn’t. And his rise to power was largely facilitated working as Barack Obama’s Vice President. Obama had eight years to increase the minimum wage and ended up raising it by … 70 cents an hour, or about 10%. For better or worse, the last Democrat president did very little to increase the pay of the lowest end of the workforce. It takes a leap of faith to assume that his second-in-command will thus radically change course and more than double it.
However, Joe Biden is expected to sign an executive order today regarding a $15 minimum wage. But it won’t raise the national minimum wage to that amount. Instead it only mandates federal contractors to pay their employees at least that much. As long as McDonald’s or Dollar Tree aren’t federal contractors, they can continue business as usual, paying as little as $7.25 an hour in much of the country. Because that, $7.25 an hour, is the federal minimum wage, although a number of states like Florida and Massachusetts have raised their minimums state-wide with no ill repurcussions. In California, the minimum is already $14, so a $15 wouldn’t really make a great deal of difference. Even staunchly Republican Alaska recognize that $7.25 isn’t a living wage and have their floor set at $10.34. For a point of comparison, to the north, Ontario in Canada has a minimum wage of $14, which converts to about $11 when currency exchange rates are factored in, and across the sea, Britain’s is 8.72 pounds per hour, or around $11.75 American.
The $7.25 might have been an adequate, though mediocre, minimum wage when it was set – in 2009. Back in 1968, it was $1.60 an hour… but a buck sixty bought a lot more then than it does now. Back then, gas averaged 34 cents per gallon, the average American car to put it in cost $2800 and the house with the driveway you’d park it in would be in the range of $20-25 000. If the wage had kept pace with inflation since then, it would now be around $19.33 an hour. Little wonder there’s a common perception that the rich keep getting richer and the poor, poorer.
But what about that $15 hamburger? Who could afford that? Well, obviously that would be rather prohibitive and no doubt cut into the viability of fast food chains, if nothing else. But at McDonald’s the golden standard for these types of hypotheticals, I find, the cost of a Big Mac, their prize burger, is $3.99. So even if it doubled, along with the minimum wage, it would be around $8. Still pricey to be sure. But…
…that argument somehow assumes that the cost of your two all beef pattied, sesame-seeded lunch is determined by the wages of the cashier and fry cook and nothing whatsoever else. In fact, needless to say, many factors come into play – the cost of the food itself (beef ain’t cheap!), the rent or mortgage on the restaurant building, the chunk of money the franchisee pays head office to cover advertising, the electricity, and of course, if things work out properly, a tidy profit. In fact, in their fiscal 2018 year, the Golden Arches reported total revenue of $21.1 billion, with a profit of some $5.9 B. That’s a lot of french fries!
It’s also a 28% profit. Google tells us that 10.6% of the fast food giant’s expenses go to wages. Since after profit, 72% of their total money is money they have coming in ends up going out, that means about 7.3% of the total pie (an apple one, of course) goes to the employees. And that includes everyone from managers on down. Their usual starting wage in states with the $7.25 minimum is $8, and many floor staff make more than that. As you can see, even if the minimum wage was doubled overnight, it would still only increase the cost of your Big Mac by 7%, or about 28 cents. And that would be if all their workers were making minimum, which clearly isn’t the case.
So that $15 hamburger… don’t worry about it. In a worst case scenario your four buck Big Mac might become a $4.25 one. In places like Texas or Alabama. In California, the added cost would be far less since they already pay their people far more. But on the positive side, the Congressional Budgetary Office say some 17 million Americans would benefit from such an increase. That might be underselling it, because if 17 million low wage earners suddenly get substantially more pay, they’re going to go out and put it back into the economy. They’re not notoriously big on stashing extra bucks in bonds or 20 year term deposits. It will have a side effect of generating a lot more business for retailers and realtors, and create ripple effects from there. Stores selling more means more work for truckers, more warehouses being built, more warehouse workers being hired on, to spend more in stores…and so on and so on.
I’m not sure I actually would advocate a quick jump to $15 an hour, but a substantial increase is necessary. Perhaps to $10 right away, $12 next year, $14 the year after. It’s not only the kind thing to do, it’s the economically sensible thing. That’s my two cents worth… even if it means I might indeed need to pay about two cents more for every takeout coffee I get down the road.