An excellent article about the consequences of a $15 wage. In essence, McDonald franchises run on slim margins and a $15 dollar wage will wipe out the profits, leading franchisees to replace the labor with machines or simply use less. This will really hurt the young and unskilled workers. I agree with the assessment. McDonalds in Europe, which has high labor cost, already use kiosks to save on labor.

So will the $15 wage doom all restaurants? Not really. If the restaurant can pass on the cost to the customers and save costs in other stuff (e.g. trash may be), they would be fine. In fact, it may attract more qualified applicants and raise the quality of the restaurant overall. However, for those firms that compete on the very low end (many fast food chains), those will automate because they do not have much room to maneuver in terms of price.

So will the customers who mainly subsist on low fast food be hurt? Yes, temporarily. However, most low fast food is not good for you so the health benefits may be greater for not eating that burger. Also, I believe that other entrepreneurs will come in and serve the low fast food customer segment, hopefully with healthier dishes.

Overall, $15 wage will hurt the restaurants that do not have much pricing power and the customers who mainly rely on cheap fast foods.

Update

Wendy‘s is increasing automation with higher labor costs.

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