It’s a truth so many don’t want to see and it is entirely understandable why they don’t want to see it. Raising the minimum wage far above the natural wage rate for a minimum wage job will create job losses. Jobs will be cut. Hours will be cut. Positions will be automated. Some businesses will just close down.
Basically the unskilled worker is stuck. On the one hand the (minimum) wage he or she is getting may not be enough to pay the bills. But if the minimum wage is raised then there may be no jobs to help pay any of the bills. It is a very difficult position.
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.
Recouping those costs isn’t as simple as raising prices. If it were easy to add big price increases to a meal, it would have already been done without a wage hike to trigger it. In the real world, our industry customers are notoriously sensitive to price increases. (If you’re a McDonald’s regular, there’s a reason you gravitate towards an extra-value meal or the dollar menu.) Instead, franchisees can absorb the cost with a change that customers don’t mind: The substitution of a self-service computer kiosk for a a full-service employee.