Your Big Mac would cost shockingly little extra if McDonalds workers were paid $15/hour, by @DavidOAtkins

Your Big Mac would cost shockingly little extra if McDonalds workers were paid $15/hour

by David Atkins

Update: it appears that the information in the original source may have been erroneous. Apologies for taking the numbers at face value, as the story had appeared in HuffPo, Business Insider and other places.

A business student crunches the numbers on what a Big Mac would cost if McDonalds workers were actually paid a living wage of $15 an hour. The answer? Not that much more:

Arnobio Morelix, a student at the University of Kansas School of Business, found himself asking the same question, so he did some financial modeling based on McDonald’s annual reports and data sets submitted to investors.

Morelix’s take: If McDonald’s workers were paid the $15 they’re demanding, the cost of a Big Mac would go up 68 cents, from its current price of $3.99 to $4.67.

A Big Mac meal would cost $6.66 rather than $5.69, and the chain’s famous Dollar Menu would go for $1.17.

“Some folks online are complaining they will not pay $2 for their Dollar Menu, but the truth is that even if McDonald’s doubled salaries the price hike would not be 100%,” Morelix said. “I will be happy to pay 17 cents more for my Dollar Menu so that fast food workers can have a living wage, and I believe people deserve to know that price hikes would not be as high as it is often portrayed.”
It's not just a moral question. The economic drag and potential inflation of slightly raising the cost of unhealthy fast food would be dramatically overshadowed by the stimulative economic effect of doubling the salaries of every fast food worker in America. It would also have the salutory effect of putting healthy foods on a somewhat more level playing field, which would increase public health and reduce costs in myriad ways.

But that's not all. Morelix' numbers assume that McDonalds takes the same profit as it did before, and assumes wage increases for every worker all the way up to and including the CEO:

Morelix said that his number crunching assumes profits and other expenses are kept at the same absolute number. His calculations are based on increases in salaries and benefits for every McDonald’s worker, from minimum wage line cooks paid $7.25 an hour to CEO Donald Thompson, who made $8.75 million in 2012.
The assumption that profits must be kept at the same level is a critical one that underpins most Republican arguments about economic regulation. They inherently assume that profits must and will be kept at prior levels, such that any added costs due to regulation or wage increases are passed along to the consumer. That simply isn't a valid argument. There is a price point consumers will refuse to pay for substandard sandwiches--and it's probably below $4.67. Even with all workers paid at least $15/hour, it would probably be a competitive advantage for Burger King to offer a Whopper at under $4.50, which in turn would force McDonald's to keep pace. The huge corporations that make up the fast food industry would likely be forced to take slightly less obscene profits, the only drawback to which would be less money in the hands of the very few shareholders who own over 80% of the stocks. Whatever economic drag that might have at the top of the economic ladder would be offset a hundredfold by the increase in consumer demand capacity from the workers at the bottom of the ladder.

Meanwhile, those who would be significantly impacted in their wallets by a 50-70 cent increase in the cost of a hamburger today would be far less impacted by it tomorrow, if the national minimum wage were set to $15.

In short, it would be a win-win for just about everyone--everyone, that is, except for the fat cats at the very top of the chain.