I'm guessing he's aggregating the numbers from two different data sets. The New York smokers data set with incomes <= $30,000, (which spent almost a quarter of their income on cigarettes) and the $13,000 a year and under data set who on average spent 9% of their money on the lottery.Originally Posted by Ominous Gamer
That's not going to yield an accurate or meaningful result, but I'm guessing that's what happened.
ah, i see what he was trying to do.
such silly math, combining 2 different studies, from 2 different periods, covering 2 different samples
"In a field where an overlooked bug could cost millions, you want people who will speak their minds, even if they’re sometimes obnoxious about it."
And the original takedown-Errors in McDonald's Wage Analysis
The Huffington Post | Posted: 07/29/2013 4:28 pm EDT | Updated: 07/31/2013 6:51 pm EDT
On Monday, The Huffington Post published a story entitled "Doubling McDonald's Salaries Would Cause Your Big Mac To Cost Just 68¢ More." HuffPost has since learned that the research used as the basis of the story contains significant errors that cast doubts on its claims. This story has replaced the one originally published in this space.
The story drew on data presented by Arnobio Morelix, an undergraduate student from The University Of Kansas who identified himself as a researcher for the school. In an interview, Morelix told the HuffPost that only 17.1 percent of McDonald's revenue goes toward salaries and benefits, meaning that for every dollar McDonald's earns, a little more than 17 cents goes toward the income and benefits of its employees.
However, as the Columbia Journalism Review subsequently noted, Morelix's analysis only takes into account the payroll and employee benefits of McDonald's company-operated stores while excluding franchise businesses. Prior to publication, HuffPost asked Morelix if his analysis included franchises and he said it did. He later conceded it did not. McDonald's franchises make up more than 80 percent of McDonald's restaurants worldwide. This means that a majority of the payroll and employee benefits of McDonald's workers are not included in Morelix's findings.
A typical fast-food restaurant spends 30 to 35 percent of its income on labor, according to a recent release from the Employment Policies Institute, a research organization whose work is often cited by those who argue against increasing the minimum wage. The institute estimates that small-business owners who run McDonald's franchises spend about a third of their income on wages, which would mean the price of a Big Mac would go up by $1.28 to $5.27.
A doubling of wages at McDonald's would almost certainly involve some layoffs, asserts Dean Baker, co-director of the Center for Economic and Policy Research and a HuffPost blogger. At the same time, more workers would stay in their jobs longer, Baker added.
Experts generally assume that roughly one-third of the cost of increased wages gets passed on to consumers, with much of the rest of cutting into profits, Baker said. Regardless, McDonald’s is so vast and lucrative that it could easily survive a major wage increase, Baker added.
“The idea that it’d put McDonald’s out of business, there’d be no way,” said Baker.
By the reckoning of Bonnie Riggs, a restaurant industry analyst at market information and advisory firm the NPD Group, a doubling of wages for all McDonald's workers is "not even in the realm of feasibility." With fewer and fewer Americans eating out at restaurants due to factors like the payroll tax hike and increases in gas prices, Riggs said restaurants like McDonald's are trying to discount prices as much as possible to get customers through the door. This means the company's profit margins could not withstand a labor cost increase of this magnitude, she added.
http://www.huffingtonpost.com/2013/0...n_3672006.html
A Big Mac miss by The Huffington Post
Poor reporting on a “study” by a Kansas undergrad
By Ryan ChittumFacebookTwitterEmailPrint More Sharing Services One Page
The Huffington Post reports that McDonald’s could double its workers wages by raising the price of a Big Mac by 68 cents. It went large on the Internet on Tuesday.
Unfortunately, what it originally claimed was a study by a University of Kansas researcher turns out to be something—a term paper, maybe?—given to Huffington Post by a KU undergrad. And there are serious problems with it. The correction on its provenance came too late, though: it’s all over the internets:
Since the HuffPost doesn’t bother to publish the actual “study,” which wasn’t really a study, we can’t really tell where these numbers are coming from. So let’s back into them.McDonald’s can afford to pay its workers a living wage without sacrificing any of its low menu prices, according to a new study provided to The Huffington Post by a University of Kansas student.
Doubling the salaries and benefits of all McDonald’s employees — from workers earning the federal minimum wage of $7.25 per hour to CEO Donald Thompson, whose 2012 compensation totaled $8.75 million — would cause the price of a Big Mac to increase just 68 cents, from $3.99 to $4.67, Arnobio Morelix told HuffPost. In addition, every item on the Dollar Menu would go up by 17 cents.
First of all, 68 cents may not sound like much, but it really means that McDonald’s would have to raise its menu prices across the board by 17 percent. That ain’t peanuts.
Second, the 17 percent number is just incorrect. It’s too low. Here’s the latest McDonald’s 10-K, which gives us a glimpse at the company’s labor costs:
The only way to get the 17 percent-of-revenue labor figure is to divide payroll and benefits at company-operated restaurants by total revenues. But here’s the thing: More than 80 percent of McDonald’s restaurants are franchises, and the company makes scads of money from them in no small part because it has no direct labor expense at those stores. The HuffPost explicitly includes executive compensation in its 17 percent figure, but executive comp and the pay of folks in Chicago who run marketing and the like are housed in “selling, general & administrative expenses,” not under payroll & employee benefits at company-operated stores.
You have to divide company-operated payroll & employee benefits by company-operated sales to get an apples-to-apples measure. That gets you 25 percent. So a Big Mac would, in fact, have to go up by a full dollar, not 68 cents, in order to double wages at McDonald’s. And the Dollar Menu would have to become the Dollar Twenty-Five menu.
It’s harder to get at non-restaurant (ie headquarters) wages because McDonald’s doesn’t break out labor costs in SG&A. Assuming pay is half of the total, it would put the number at 22 percent.
And then there are the franchisees. There are 1.9 million people who work at McDonald’s restaurants, but just 440,000 of those actually work for McDonald’s Corporation. The rest work for franchisees who pay a cut of their sales to Chicago for the rights to the Golden Arches, Ronald McDonald, and standardized coronaries-on-a-plate.
Worldwide, those franchisees took in $70 billion in revenue last year, and US stores took in $31 billion of that. McDonald’s Corporation doesn’t break out similar expense numbers for its franchisees, so the best I can do is research from Janney Capital Markets. It puts labor costs for US franchises at 24 percent of sales, which gibes with McDonald’s company-owned stores. Janney estimates franchisee operating income at just 5 percent.
If Janney is right (and I’m a bit skeptical. Five percent margins seem awfully low), McDonald’s franchisees in the US pay out, very roughly, $7.4 billion in labor costs a year and make about $1.6 billion in operating profit. Doubling pay without dipping into profit would mean menu prices would have to rise 24 percent—and that’s assuming such price increases wouldn’t hurt sales, which they would.
The bottom line is: This “study” and The Huffington Post are both wrong.
Unfortunately, bad information spreads pretty fast these days. The false findings got picked up far and wide. I retweeted a Henry Blodget post at Business Insider before looking into its origins.
http://www.cjr.org/the_audit/a_big_m...e_huffingt.php
No that's entirely plausible. The whole ethos of the likes of McDonald's is "stack it high, sell it cheap". The margins are sliced as thin as possible to get it as cheap as possible - and then sell as many as possible. The point is not to make a lot per customer, its to have a lot of customers. 95% costs matches what I put up above from personal experience.If Janney is right (and I’m a bit skeptical. Five percent margins seem awfully low)
Thus the idea that its so easy to just rock the boat and absorb it shows a lack of comprehension about the market. The irony about the fast food industry is that there's "no fat" to trim in the operations.
Got to laugh at the idiocy of taking total corporate-only payroll and dividing it by corporate+royalty sales. Even without taking into account that a penny extra in sales is not a penny extra to the bottom line.
Oh, we understand that "ethos". Walmart's is the same. We also know those 'thin margins' in fast-food/food service, retail, hospitality, healthcare, and insurance have produced some of the wealthiest people in the US -- mostly among the executives and CEOs, but also shareholders. Those profit margins include Big Mac sized influence on bulk buying, practically monopolies that small fry can't get or compete for. Last time I checked, McDonald's was the largest buyer of chicken and fish in the US and Canada.
And don't forget the huge sums they pay marketing firms, financiers, attorneys, accountants -- who drool over McDonald's accounts that bump their CEOs into the million-dollar club. In exchange for 'sponsorship' they get exclusive rights in sports venues (the Olympics just one). Toy companies, soda companies, movie theaters, product-placement....real estate....it's more profit.
So don't kid yourself about the markets, or think McDonald's (or any other multi-billion-dollar mega-corporation) can't afford to pay an updated minimum wage to their workers.
You seem to willfully forget that while the top mucky mucks are cashing in, it would be the franchise owners that would get squeezed.
Brevior saltare cum deformibus viris est vita
You conflating diverse and sometimes irrelevant issues.Oh, we understand that "ethos". Walmart's is the same. We also know those 'thin margins' in fast-food/food service, retail, hospitality, healthcare, and insurance have produced some of the wealthiest people in the US -- mostly among the executives and CEOs, but also shareholders. Those profit margins include Big Mac sized influence on bulk buying, practically monopolies that small fry can't get or compete for. Last time I checked, McDonald's was the largest buyer of chicken and fish in the US and Canada.
And don't forget the huge sums they pay marketing firms, financiers, attorneys, accountants -- who drool over McDonald's accounts that bump their CEOs into the million-dollar club. In exchange for 'sponsorship' they get exclusive rights in sports venues (the Olympics just one). Toy companies, soda companies, movie theaters, product-placement....real estate....it's more profit.
So don't kid yourself about the markets, or think McDonald's (or any other multi-billion-dollar mega-corporation) can't afford to pay an updated minimum wage to their workers.
While some are making big cash (and why shouldn't they) most others are not. Many franchisees struggle to get along and many can and do go bankrupt - and its those who will be liable for wages.
Bulk buying food - Yes that's the point, only by getting it at cheap does the model work. Any increased costs will lead to directly higher prices which could cause massive knock on effects - you're countering your own argument by pointing that out. They're not getting along by wasting money on higher prices than they can afford.
Marketing - Again size matters. Marketing for a company like McDonald's works because a deal like sponsorship costs next-to-nothing per store but gets the same feedback regardless of volume. Wages does not.
Wages are roughly 8x the cost to a franchisee as marketing is. So all that Olympic sponsorship etc that you're so bothered by - times it by 8. Then double it
If you'd like to accept my numbers for a moment you could point out to her that a $2.75 per hour raise for all employees across the board for a retailer or business that has thousands of stores, and thus tens or hundreds of thousands of employees, comes out into the multiple hundreds of millions of dollars, and that slashing CEO and upper-corporate pay wouldn't cover this expense.
. . .
How much approx does a Big Mac cost in the USA?
I haven't eaten there in years so I wouldn't be able to offer you any more information than a Google search could. Even if you don't want to accept my numbers you could simply point out that: Dollar Amount Hourly Pay Increases x Number of Employees x Number of Hours Worked Yearly Per Employee > CEO + Corporate Pay.
. . .
$4 without fries/drink.
Hope is the denial of reality
Indeed. By a very long margin. I wanted to put it into incredibly simple numbers though. Geegee complained about corporate pay and advertising so breaking it down into simple pennies:
Simplifying it with a $4 Big Mac spend at a US franchised McDonald's:
$1.36 goes to Food&Paper
$1.04 goes to Crew Wages
$0.16 goes to Advertising
$0.16 goes to McDonald's Head Office
Corporate pay would be a fraction of the 16 cents that goes to Head Office. Nothing you can do to a fraction of 16 cents will let you double $1.04. Of course that's a simplification based on averages.
Simplifying it with a $4 Big Mac spend at a US franchised McDonald's:
$1.36 goes to Food&Paper
$0.16 goes to Crew Wages
$0.16 goes to Advertising
$1.04 goes to McDonald's Head Office
Now what can you do?
Faith is Hope (see Loki's sig for details)
If hindsight is 20-20, why is it so often ignored?
I'm curious where Rand is getting his simplified numbers from. You can order a poor mans big mac for less than what he claims goes to food and paper.
"In a field where an overlooked bug could cost millions, you want people who will speak their minds, even if they’re sometimes obnoxious about it."
McDonald's loses money for the burgers on the dollar menu.
Hope is the denial of reality
Source? I understood they changed the McDouble to keep it from being a loss leader
"In a field where an overlooked bug could cost millions, you want people who will speak their minds, even if they’re sometimes obnoxious about it."
"If the McDouble is all the customer buys, you lose money," said Richard Adams, a former franchisee who now advises the chain's restaurant operators. "Depending on what happens to beef prices, McDonald's management should be open to taking the McDouble off the Dollar Menu."
http://www.huffingtonpost.com/2013/0...n_2595696.html
Hope is the denial of reality
How many franchise owners are making US average income of $50,000/year? How many McDonald's franchisees actually go bankrupt?
Anyone buying a franchise for a million dollars has financing and collateral requirements to avoid that. If a franchisee is losing money, they have access to corporate HQ business advice. If a restaurant has routine customer complaints, or doesn't pass corporate quality control, they can lose licensing contracts and rights to the franchise and trademark name.
The issues about minimum wage are diverse, but not irrelevant. Mega corporations like McDonald's can fiddle with prices, sizes, and menus during recessions. They can lobby for accounting laws and corporate tax breaks to pump their profits. There's no way to sustain that model if they (and other service sectors) don't pay better wages. They need people earning enough money to spend on their convenient consumable crap, not more workers applying for public assistance.
That's the irony of the McBudget. If everyone followed their budget plan, a good chunk of restaurants and fast food joints would go out of business, taking jobs with them. That's the twisted irony, and pathetic state of our labor market.
There is no way to sustain the model? They seem to be sustaining it quite well...
And you really need to stop making the absurd fallacy that a store's workers and its customers are one and the same. Pray tell, what portion of McDonald's revenues do you think come from its workers (who get heavily discounted/free food as things stand)? Unless you actually think the store receives a significant portion of its revenues from its workers, I would like to know how you think increasing the buying power of those workers is going to lead to higher revenue. You might want to look up "collective action problem". I should also note that if fast food wages were to double, it would lead to both higher food prices and lower fast food employment. I don't quite see how that would help McDonald's over the long run. But continue the good fight against sanity.
Hope is the denial of reality
I believe she's referring to the system as a whole aka US society with that remark.
"One day, we shall die. All the other days, we shall live."
Yep. Most of our job "growth" has been in service sectors that pay minimum wages. Agriculture, food services, retail, hospitality. Healthcare jobs are growing at the lower income tiers (home care assistants, health aides, nursing assistants, etc.) Child Care, Elder Care, and Day Care workers can find a job...but at minimum wages. Even construction/building job "growth" has been in mostly low-paying manual labor positions.
That's not a sustainable model for economic growth in advanced nations.
I don't see the imminent collapse of American society. Do you?
Hope is the denial of reality
The numbers are from averages. From Googling the figures, US McDonald's franchises run on 30% Food Cost and 26% Labour Cost on average. Which matches my personal expectations from experience. That is before rent, utilities etc which are quite pricy too. My numbers were 30% and 26% of the $4 spend. Advertising and Royalty Fees are I believe 4% so those are 4% of those figures. That's fairly standard for that industry.
Exactly! I said all along that in this business model the margins are tight.You can order a poor mans big mac for less than what he claims goes to food and paper.
Of course it also varies from item to item as not all are the same as the averages. Some are far more expensive than 30% while some are far less - eg draft soda is incredibly cheap.
I wouldn't want to hazard a guess. Do you know or are you just making crass assumptions?How many franchise owners are making US average income of $50,000/year? How many McDonald's franchisees actually go bankrupt?
And when calculating average income its worth bearing in mind that any franchisee could just as easily not invest and create dozens of jobs and instead just put their savings in bonds and make interest from that at far less risk and headache.
Bullshit! I'm not even going to ask for a source on that as I know you're making that up, but feel free to provide one.Anyone buying a franchise for a million dollars has financing and collateral requirements to avoid that.
How do you think people raise the funds to get a franchise? They put in their life savings, remortgage their house etc and then put that in as a deposit to get the rest of the bank financing. Its a serious risk they're taking that can leave them penniless and homeless if it goes wrong.
McDonald's don't want independently wealthy people who don't care to become franchisees, they want franchisees who will devote heart and soul into managing the business well as its their sole livelihood.
No the issues that are irrelevant are all the spin you throw out that has nothing to do with affordability. How many unskilled workers do you personally pay $15 an hour to? Are you running a business putting your own money where your mouth is?The issues about minimum wage are diverse, but not irrelevant. Mega corporations like McDonald's can fiddle with prices, sizes, and menus during recessions. They can lobby for accounting laws and corporate tax breaks to pump their profits. There's no way to sustain that model if they (and other service sectors) don't pay better wages. They need people earning enough money to spend on their convenient consumable crap, not more workers applying for public assistance.
No. I've lived personally on a very similar budget to the one listed in this thread. When I looked at it, it looked quite reasonable and familiar to me. The companies that'd go bust are the loansharks like Wonga.com etcThat's the irony of the McBudget. If everyone followed their budget plan, a good chunk of restaurants and fast food joints would go out of business, taking jobs with them. That's the twisted irony, and pathetic state of our labor market.
Clearly hyperbolic don't you agree?
Just think about what you're proposing for a moment OK?
You've got - according to you - a situation where most of your job opportunities are coming from the sorts of companies that pay minimum wages ... then you want to double those wages and destroy the main source of job growth the economy has!? What!?
If you do that then what exactly do you think will happen next? Will high value jobs magically appear? Do you plant some beanstalks and wish your troubles away? Or do you end up like Spain and Greece with an average adult unemployment rate of of 25% and youth unemployment of more than 50%?
http://www.bbc.co.uk/news/business-22727373
Are you seriously thinking that by destroying what you think the main source of job growth is you'll manage to avoid the fate of other nations to do that which is simply penury and destitution for millions of unemployed? Smart move there! The "sustainable" model of economic growth entails NOT destroying the main source of that growth. Once you've made youth unemployment 62.5% like Greece what do you plan to do next?
What the what... in the US?
"One day, we shall die. All the other days, we shall live."
I dunno man...
"One day, we shall die. All the other days, we shall live."
I've lived the last five years on a salary of ~$18k a year, which is $6k lower than what is mentioned in the McDonald's budget. I've managed to increase my savings during that time period...
Hope is the denial of reality
Sure, but you're a joyless, empty husk of a person. Also I believe you do not have children to care for.
In the future, the Berlin wall will be a mile high, and made of steel. You too will be made to crawl, to lick children's blood from jackboots. There will be no creativity, only productivity. Instead of love there will be fear and distrust, instead of surrender there will be submission. Contact will be replaced with isolation, and joy with shame. Hope will cease to exist as a concept. The Earth will be covered with steel and concrete. There will be an electronic policeman in every head. Your children will be born in chains, live only to serve, and die in anguish and ignorance.
The universe we observe has precisely the properties we should expect if there is, at bottom, no design, no purpose, no evil, no good, nothing but blind, pitiless indifference.
I'm open to the possibility that the so-called McDonald's budget, odd as it is, may be enough to live on, provided you live in the right area, lead the right life etc. I think it's helpful for young people to learn the ways in which they can make their finances work a little better. However you should bear in mind that the budget presupposes either a dual-income household or a single person working two full-time jobs at minimum wage. For a dual income household, ie. one with 2 people, the numbers are right on the verge of not working out, especially if you include the missing items or or make sure the costs are accurate (eg. healthcare).
For a single person the numbers might work out but that presupposes 1. that the person can actually get and keep that many hours at two jobs whose schedules are compatible (difficult for many minimum-wage workers who keep getting their hours cut and are still expected to work on short notice or no notice at all) and 2. that the person survives for any length of time. Finally these numbers get fucked by the addition of even one child or even one mishap such as sickness, an accident etc.
Now, I don't know about your situation and what your expenses are, but when you compare your personal budget to the McBudget it might help to keep in mind that your life may be different from the lives of a person who works minimum wage for a long time even without bad habits entering the picture.
"One day, we shall die. All the other days, we shall live."
The entire point of the financial slut-shaming argument is to pose as a paragon of reason, and implicitly accuse the poor and struggling of moral failings in particular. If Loki can enjoy living as he does, so should others, because he just knows better. A job is a gift given to someone, and they ought to appreciate it, instead of a job being someone buying your time, effort and know-how.
In the future, the Berlin wall will be a mile high, and made of steel. You too will be made to crawl, to lick children's blood from jackboots. There will be no creativity, only productivity. Instead of love there will be fear and distrust, instead of surrender there will be submission. Contact will be replaced with isolation, and joy with shame. Hope will cease to exist as a concept. The Earth will be covered with steel and concrete. There will be an electronic policeman in every head. Your children will be born in chains, live only to serve, and die in anguish and ignorance.
The universe we observe has precisely the properties we should expect if there is, at bottom, no design, no purpose, no evil, no good, nothing but blind, pitiless indifference.
Whoa... is that a Nessie I see?
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