Going Big or Going Broke?

golden arches

It was Saturday morning, and lunch for my wife, four kids, and me was the issue. The answer was McDonald’s. Fast, cheap and reasonably good (I liked the fries). Six burgers, six orders of fries, please, for which I gave the counter boy $1.50 and I’m back home in a flash.

The year was 1966. Minimum wage for part time workers was 0.70/hour and the kid at the counter was sixteen. The min wage today is a shade under 8 bucks and, unless I’m going big, I can replicate that lunch order for  $14.62, which is about right, given the fifty year interval.

But the “counter boy” is not a boy anymore. He/she is an adult trying to support a family, and $7.60/hour forces the worker to rely on food stamps, Medicaid, and God knows what other kind of assistance to get through the month.

Workers in the fast food industry are demonstrating for $15/hour, which would go a long way towards providing them a living wage. I’m all for it. Trouble is, the industry prices its product against a lot less in labor costs. Double wages and now it’s thirty bucks for the plainest lunch on the planet. That’s going to be a hard sell.

Any increase in labor costs plays havoc with already razor thin margins in that industry. The business model was never about giving families a middle class income. Today’s fast food worker was the factory worker of the past, forced down the line to work in one of the few jobs available to semi-skilled workers anymore.

Income inequality is not just about excessive compensation for corporate executives. The workplace for great swaths of the job market has been permanently altered. Much higher productivity is required for incomes to rise meaningfully. This is not likely to happen, given that indicators of economic activity are rolling over. Seeing this, few companies are putting capital to work for growth, preferring instead to buy back their own stock and pay out dividends.

The traditional sources of growth, new industries and game changing new technologies, are not on the immediate horizon. You won’t hear this from the Fed, but unemployment and underemployment will be around for a long time. The direction in both the economy and the capital markets is down, sure to worsen the situation for millions of families.

So, it becomes a social issue. Much is already being done, both privately and by government. Over 900 families with working heads of household in our county are receiving food every week from the privately funded local food pantry. Government programs are also available.

In my view, it is folly to be talking about cutting back on programs now. The conversation needs to be about expanding these services.

Unless you like the idea of people starving.

Cheers,

Rod

 

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