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As has been argued both on HN [1] and by McDonald's itself [2], fast food worker salaries can't be raised because it'll kill jobs since the money has to come fr

As has been argued both on HN [1] and by McDonald's itself [2], fast food worker salaries can't be raised because it'll kill jobs since the money has to come from somewhere and the businesses can't afford it. But from the article: >"In 2014, McDonald’s expended $3.2 billion each on buybacks and dividends, equivalent to 134% of its net income... ...to help finance the plan, McDonald’s would...take on more debt...and find $300 million to cut in general and administrative expenses." I would say it's pretty clear there that workers are being directly affected, and previous studies of minimum wage [3] have shown that public assistance (including welfare and health benefits) act as a public subsidy of low wage workers. Stock buybacks are valuable to executives whose compensation packages are largely tied to stock, and short-term stock holders. It is less clear that they provide long-term value; especially when they're financed through aggressive value extraction as these appear to be. The money does have to come from somewhere -- and in this case it appears to be at the expense of long-term investment, squeezing the franchises & workers, and by taking on new debt. [1] https://news.ycombinator.com/item?id=9459625 https://news.ycombinator.com/item?id=9459625 [2] http://thinkprogress.org/economy/2013/08/22/2509161/mcdonalds-minimum-wage-kill-jobs/ http://thinkprogress.org/economy/2013/08/22/2509161/mcdonald... [3] http://democrats.edworkforce.house.gov/sites/democrats.edworkforce.house.gov/files/documents/WalMartReport-May2013.pdf http://democrats.edworkforce.house.gov/sites/democrats.edwor...

zhte415 11y ago
I hear you. I'd love you to break up the argument so others can. I had to read it 3 times to get the core argument. No criticism or lecture, just feedback: --- McDs provide monetary return to their investors (complexities of share buy-back or dividend are tax and administration issues aside from the key issue) Executives and many investors focus on short-term goals. If they are focusing on short term goals linked to stock they are motivated to extract capital (I do not say value, your premise is that capital needs to be reinvested, and is not surplus), not build capital. Whether to extract capital via stock actions could be interestingly compared to "What if they raised capital via fixed income [bank loan, bonds] instead of stock. Would they have the same pressure? My answer would be "Hell yes, but they'd probably planned in advance that this repayment of investment was carefully done, and choosing to use stock to raise capital meant the outcome was a lot more uncertain, or they viewed stock as lush/easy pickings compared to a more sane bank loan." - Could go into that more. (Dis-)meeting of arguments (pro and against, not you and me) So you're saying an extraction of capital is an extraction of value, as there's an opportunity cost of the capital for the investors vs return on capital for the company, but the extractors of capital may have a conflict of interest for doing so. McDs management action say there isn't [a conflict of interest], because they can do it and are backed by shareholders [who may also be under a conflict of long term interest] and capital is better extracted (under short term goals) rather than re-invested. --- Reinvestment: Above minimum wage seems broadly independent of the above, and is an argument of retention of people creating value,; does retaining capital lead to improving human of capital or not? Or are there other options? Retaining capital can imply a lot of things. Releasing it means nothing viable is better than what the investors can find. But define this better. Break down the logical arguments into what they are then approach from an fact-based basis. --- I just wanted to break your argument down into pieces, sorry for being so discursive, it just seemed like lots of directions be being stabbed at, at the same time, and I like your story, it just wasn't that clear.
tim333 11y ago
> fast food worker salaries can't be raised because it'll kill jobs There are a number of separate issues here: 1) Could McDonnalds pay higher salaries? No doubt the management could though they'd probably argue their responsibility is to pay market rate and to give profits to the shareholders. 2) Should the US raise the minimum wage? Your link [2] is on whether raising the minimum wage would reduce job opportunities. Probably it would - supply and demand and all that. It's a trade off. 3) Are stock buy backs a good idea? I'd argue this is a separate issue to workers pay and is really down to what the management and shareholders think is the best use of the shareholders money.
- cgearhart 11y ago
  > ...responsibility is to pay market rate... That might be their corporate responsibility, but they also have a social responsibility in that the conduct of their business should not overly burden the public. The link I referenced was meant to point out that when minimum wage doesn't cover the cost of living, those workers end up relying on public assistance to make up the difference. > ...whether raising the minimum wage would reduce job opportunities. Probably it would... A study from 1992 on the effect of a minimum wage hike along the NJ/PA border found that there was not a significant impact from raising min wage. [1] The study has been alternately challenged and confirmed since then by other studies, but we will be getting a lot of new data from the recent increases to $15/hr in major metro areas of the US in recent months. As for "should we", it all depends on whether you think corporations or government should be responsible for providing a living wage. Many folks point out the minimum wage is primarily intended for young people, but it's not being used that way anymore. And, in fact, other places have adapted without terrible consequences. Australia, for instance, has a juvenile minimum wage around $6.60/hr (USD), which doubles for adults. > Are stock buy backs a good idea? ...down to what...is the best use of the shareholders money. The point here is that McDonalds is making mutually exclusive arguments. On the one hand, they say they don't have the money to raise wages. On the other hand, they have so much money that they can initiate stock buybacks. The status quo requires public assistance to cover the wage gap between minimum wage and living wage, so until McDonalds picks up that tab both workers and taxpayers are being affected. I have nothing against stock buybacks, but it seems hypocritical in this case given the circumstances. [1] http://www.nber.org/papers/w4509 http://www.nber.org/papers/w4509 [2] http://en.wikipedia.org/wiki/Minimum_wage_law#Australia http://en.wikipedia.org/wiki/Minimum_wage_law#Australia

zhte415 11y ago

I hear you. I'd love you to break up the argument so others can. I had to read it 3 times to get the core argument. No criticism or lecture, just feedback: --- McDs provide monetary return to their investors (complexities of share buy-back or dividend are tax and administration issues aside from the key issue) Executives and many investors focus on short-term goals. If they are focusing on short term goals linked to stock they are motivated to extract capital (I do not say value, your premise is that capital needs to be reinvested, and is not surplus), not build capital. Whether to extract capital via stock actions could be interestingly compared to "What if they raised capital via fixed income [bank loan, bonds] instead of stock. Would they have the same pressure? My answer would be "Hell yes, but they'd probably planned in advance that this repayment of investment was carefully done, and choosing to use stock to raise capital meant the outcome was a lot more uncertain, or they viewed stock as lush/easy pickings compared to a more sane bank loan." - Could go into that more. (Dis-)meeting of arguments (pro and against, not you and me) So you're saying an extraction of capital is an extraction of value, as there's an opportunity cost of the capital for the investors vs return on capital for the company, but the extractors of capital may have a conflict of interest for doing so. McDs management action say there isn't [a conflict of interest], because they can do it and are backed by shareholders [who may also be under a conflict of long term interest] and capital is better extracted (under short term goals) rather than re-invested. --- Reinvestment: Above minimum wage seems broadly independent of the above, and is an argument of retention of people creating value,; does retaining capital lead to improving human of capital or not? Or are there other options? Retaining capital can imply a lot of things. Releasing it means nothing viable is better than what the investors can find. But define this better. Break down the logical arguments into what they are then approach from an fact-based basis. --- I just wanted to break your argument down into pieces, sorry for being so discursive, it just seemed like lots of directions be being stabbed at, at the same time, and I like your story, it just wasn't that clear.

tim333 11y ago

> fast food worker salaries can't be raised because it'll kill jobs There are a number of separate issues here: 1) Could McDonnalds pay higher salaries? No doubt the management could though they'd probably argue their responsibility is to pay market rate and to give profits to the shareholders. 2) Should the US raise the minimum wage? Your link [2] is on whether raising the minimum wage would reduce job opportunities. Probably it would - supply and demand and all that. It's a trade off. 3) Are stock buy backs a good idea? I'd argue this is a separate issue to workers pay and is really down to what the management and shareholders think is the best use of the shareholders money.

cgearhart 11y ago
> ...responsibility is to pay market rate... That might be their corporate responsibility, but they also have a social responsibility in that the conduct of their business should not overly burden the public. The link I referenced was meant to point out that when minimum wage doesn't cover the cost of living, those workers end up relying on public assistance to make up the difference. > ...whether raising the minimum wage would reduce job opportunities. Probably it would... A study from 1992 on the effect of a minimum wage hike along the NJ/PA border found that there was not a significant impact from raising min wage. [1] The study has been alternately challenged and confirmed since then by other studies, but we will be getting a lot of new data from the recent increases to $15/hr in major metro areas of the US in recent months. As for "should we", it all depends on whether you think corporations or government should be responsible for providing a living wage. Many folks point out the minimum wage is primarily intended for young people, but it's not being used that way anymore. And, in fact, other places have adapted without terrible consequences. Australia, for instance, has a juvenile minimum wage around $6.60/hr (USD), which doubles for adults. > Are stock buy backs a good idea? ...down to what...is the best use of the shareholders money. The point here is that McDonalds is making mutually exclusive arguments. On the one hand, they say they don't have the money to raise wages. On the other hand, they have so much money that they can initiate stock buybacks. The status quo requires public assistance to cover the wage gap between minimum wage and living wage, so until McDonalds picks up that tab both workers and taxpayers are being affected. I have nothing against stock buybacks, but it seems hypocritical in this case given the circumstances. [1] http://www.nber.org/papers/w4509 http://www.nber.org/papers/w4509 [2] http://en.wikipedia.org/wiki/Minimum_wage_law#Australia http://en.wikipedia.org/wiki/Minimum_wage_law#Australia