I have recently discovered Reddit. Although, if I’m honest: in a virtual world of aesthetic websites and user-friendliness, it feels like rummaging around in a trash can. However, it is the place where most of the stories that go viral have their genesis (or, rather, where it’s where you first see them happening).

So occasionally, it gives me something to write about.

Today, one of the top trending news stories comes from Business Insider:

“McDonald’s Tells Employees To Consider Returning Holiday Gifts To Get Out Of Debt“

A report which is based on this video clip by lowpayisnotokay.org, where the “McResources” team managed to gain access to an internal McDonald’s help-page for employees. A webpage for which McDonald’s mostly likely hired an external copywriting team to draft some content about life and getting out of debt troubles.

In case you don’t feel like watching the clip, here’s the basic summary:

  1. McDonald’s has a webpage that offers budgeting advice to its low income employees.
  2. There is a banner at the top of that page that rotates through a series of fun facts like:
    1. “Take A Vacation! At least two vacations a year can cut heart attack risk by 50%”
      lowpayisnotokay.org response: “YOU’RE #&$*@! KIDDING ME, RIGHT??”
    2. “Sing Away Stress! Singing along to your favourite songs can reduce blood pressure”
      lowpayisnotokay.org response: “Dudes, it really says this”
    3. “Break it up! Breaking food into pieces often results in eating less and still feeling full”
      lowpayisnotokay.org response: “OH YEAH, THIS MAKES SENSE…”
    4. “Quit complaining! Stress hormone levels rise by 15% after ten minutes of complaining”
      lowpayisnotokay.org response: “Yikes, it’s no wonder people find clowns scary.”
  3. In the body of the content, there is this tip: “You may also want to consider returning some of your unopened purchases that may not seem as appealing as they did. Selling some of your unwanted possessions on eBay or Craigslist could bring in some quick cash”.
  4. lowpayisnotokay.org has conveniently left unquoted the “on a short-term basis…” precursor to that paragraph.

This is another rage-filled clip from the McResources team at lowpayisnotokay.org.

And the basic summary here:

  1. Nancy is an employee at McDonald’s.
  2. She calls the employee helpline to ask for help.
  3. The lady on the line asks her if she’s familiar with food stamps and medicaid, because she’s probably eligible for it.
  4. lowpayisnotokay.org proceeds to be outraged because how dare McDonald’s not offer Nancy a raise instead.
  5. Also, they point out that you the taxpayer are paying for those programs.

Oh, and lest I forget, here is the budget journal that McDonald’s has developed for its employees. Again, a cause for radical outrage at the audacity of expecting employees to budget at all.

Some Observations

  1. Rhetoric is not a good argument. It makes you sound like you’re ranting.
  2. Regarding the first clip:
    1. None of the banner comments were untrue. Sure, they might be insensitive (especially the one that seems to imply that McDonalds employees ought to eat less – I mean, no one likes to be called fat), but they are all scientifically-proven facts about human behaviour. All of them.
    2. And what is wrong with telling people to sell what they don’t need? Is that not the sensible thing to do?
    3. To my mind, what lowpayisnotokay.org really seems to be saying is: “No McDonalds employee should have to take control of their lives – they should just get paid enough not to lose control”
    4. Madness.
  3. Regarding the second clip:
    1. The helpline lady seemed perfectly helpful.
    2. The entitlement to federal benefits is something that Nancy would have been entitled to regardless – so why not, eh?
    3. And McDonalds is also a taxpayer. In 2012, the global compay paid $2.6 billion in taxes. Which is a lot more than what was paid by the 47% of outraged American taxpayers who paid no federal tax. So why shouldn’t McDonald’s encourage its employees to take advantage of the federal programs that it has paid for?
    4. And actually, given the deficit, it was China, Japan, OPEC and large institutional investors that paid for that federal program. So best the taxpayers just shut up.
  4. And as for the budget journal – I think it’s an excellent idea. It empowers an employee to think about what they’re spending, and learn to save a little. How is that a bad thing?

To Reiterate

Lowpayisnotokay.org seems to be entirely focused on the following:

  • McDonald’s (and other fast food companies) don’t pay enough.
  • Employees shouldn’t have to budget or get help
  • They should just get paid more.

This is the financial equivalent of complaining that humans were born without the ability to fly.

Because:

  • Wages are a function of demand and supply;
  • There is significant unemployment in the United States amongst low-skilled workers (meaning that there is an excess of labour supply);
  • So McDonald’s can always hire someone else at a lower wage (regardless of how ethical you feel that is);
  • In fact, much like the minimum wage argument (which I explained in this post: Minimum Wages: Why They Don’t Work), higher wages will just mean that the less productive employees will get fired, and the more productive employees will be asked to do more in order to keep their jobs.
  • And if they don’t, because of all those people that just got fired, there’s a whole labour market out there just waiting to replace them.

In fact, it’s exactly for this reason that federal support programs like food stamps and Medicaid exist: to help low-skilled workers achieve an effective “living wage” – the one that lowpayisnotokay.org is such a fan of.

Finally: The Math

As an aside, I went onto McDonald’s investor relations webpage, and downloaded the financial information from 2012, so we can do a little testing.

In 2012:

  • McDonald’s in the United States made sales (and earned franchising fees) of $8.8 billion.
  • Its total operating and interest expenses amounted to $5 billion.
  • Leaving $3.8 billion in profit (before tax)

So on the face of it, it looks like McDonalds could afford to pay a little more, right?

Alright, so let’s go back to lowpayisnotokay.org’s proposal. They have decided that $15 an hour is a reasonable living wage, as opposed to the $7.25 per hour that McDonald’s allegedly pays.

Some calculations:

  • McDonald’s employs 760,000 people in the United States.
  • Assuming that each person works 30 hours a week, an increase of $7.75 per hour equates to an $9.2 billion addition to operating expenses.
  • Which would make McDonald’s deeply loss-making.

So let’s do it the other way around, and say that McDonald’s were to spend all of its 2012 pre-tax profit on its 760,000 employees. What would that equate to hourly?

$3.20. Or an extra $5,000 per employee per year. Assuming that McDonalds employees only work 30 hour weeks…

Unfortunately, this “living wage” that lowpayisnotokay.org advocates is a real-world impossibility. You know what is possible, though? Doing a little budgeting, eating a little less, and generally choosing not to complain.

Sometimes, the living needs to match the wage, not the other way around.