Billions of Americans and people worldwide have been “lovin’ it” at McDonald’s for decades. Some of its 440,000 workers won’t love the pink slips they will likely receive soon as McDonald’s is set to start automating some of its services.
Carrie has blogged on how the company’s lower profits combined with protests for minimum wage hikes are moving McDonald’s towards more automation, which already may be more apparent in Europe where Carrie lives. But I’d like to go into a bit more detail about what is happening in the U.S.
McDonald’s just released more bad earnings this week, a reported 30 percent quarterly profit decline, marking its worst performance in years. Apparently, Americans –especially young people- are more interested in fresh, customizable food like rising chain Chipotle or hip hamburger joints, than McDonald’s.
Increased labor costs are also a driver that's eating away at McDonald’s earnings. Rising labor costs due to minimum wage hikes affect the razor thin margins that franchises earn. The company has tried to make service faster by adding new staff even while restaurant traffic has declined.
McDonald’s is facing what many resultant industry companies will continue to face as cities and states consider spiking their minimum wage rates in response to the Administration, liberals, and union-backed activists who don’t appreciate the affects of minimum wage hikes on business.
The Wall Street Journal explains:
Unions have made McDonald’s a particular target of their campaign for a $15 an hour minimum wage and have even protested at corporate headquarters in Oak Brook, Ill. The pressure was enough to cause CEO Don Thompson this summer to capitulate and endorse President Obama’s call to raise the federal minimum to $10.10 an hour from $7.25. Many states have already enacted wage floors above the federal minimum.
The McDonald’s earnings report on Tuesday gave a hint at how the fast-food chain really plans to respond to its wage and profit pressure—automate…
By the third quarter of next year, McDonald’s plans to introduce new technology in some markets “to make it easier for customers to order and pay for food digitally and to give people the ability to customize their orders,” reports the Journal. Mr. Thompson, the CEO, said Tuesday that customers “want to personalize their meals” and “to enjoy eating in a contemporary, inviting atmosphere. And they want choices in how they order, choices in what they order and how they’re served.”
That is no doubt true, but it’s also a convenient way for Mr. Thompson to justify a reduction in the chain’s global workforce. It’s also a way to send a message to franchisees about the best way to reduce their costs amid slow sales growth.
As WSJ rightly notes, minimum wage jobs are a starting point especially for young people who have no or low skills, but it’s not meant to be what people raise families on. Nor, do most people stay at their starting salaries. Across all industries, about two-thirds of minimum-wage workers who stay employed get a raise in the first year. That’s a statistic that protestors don’t chant, but we do hear stories of people who are raising their families on minimum wage. Perhaps a better question is why is an individual not able to secure a raise or pursue the skills she/he needs to progress?
Minimum wage is a discussion that will continue to rear its head as politicians hold it out to secure support and votes – in some case from the very same people who will be harmed when they see new machines moved in and their jobs moved out.
Protest organizers would better serve their friends’ careers and lifetime earning potentials by encouraging them to gain the skills to move up and out of minimum wage jobs rather than fight for a few more dollars in their paychecks now and a pink slip later.