I find it very interesting that most people assume it should be the employer's responsibility to provide for the employee's wellbeing. Call me naive, but I think it should be society's responsibility. What about Hedge Funds, Technology companies, Law Firms and every other company that hires primarily 6-figure white collar employees. Should they be completely off the hook, just because their business model only requires small numbers of white collar workers? What about yuppies and millionaires who eat at nice restaurants, shop at Whole Foods and cook our own meals, instead of buying from McDonalds. Should we be immune from minimum wage increases just because we can afford to pay for the finer things in life?

Minimum wage laws are fundamentally a tax on low-margin businesses and the low-wage workers who frequent them. There's a better option available. The Earned Income Tax Credit (EITC). It can ensure that workers take home $15/hour, while also ensuring that the cost is borne by the entire society. Not just a few specific industries and the specific demographics that rely on them.

Yes, it should be society's responsibility, but until we all accept it as a group the onus remains on employers.

I haven't qualified for the Earned Income Credit in quite a few years, but I have nonetheless claimed it a number of times. I experienced none of the magical properties you seem to think it has.

The only "magical property" I claimed, is cash in your wallet, funded by taxes. I'm not sure what other magical properties you were expecting. My proposal is that instead of increasing the minimum wage, we beef up the amount of support provided by EITC

You suggested that this existing tax credit that we've all been accustomed to since the '70s was a suitable replacement for a decent wage. Completely aside from the SUBSTANTIAL increase in cost it would take to make the numbers fit, what leads you to believe that an annual tax refund is an appropriate substitute for a regular paycheck? Do you expect them all to save it all in a bank account and only spend a set weekly amount? If they were in a financially stable enough position to pull that off, they wouldn't be working at McDonald's.

He stated that it _could_ give workers $15/hour, not that it does. (It maxes out adding a little over $3/hour.)

You can get a Notice of Withholding to get the credit in your paychecks instead of at the end of the year. I don't know how well it works.

It's clearly possible in theory to get $15,000 on April 15 and $15,000 from McDonald's and live the same lifestyle as someone who makes $30,000 from paychecks. I could manage it easily, it's basic consumption smoothing. Should be able to borrow against the credit if necessary, too, since it's guaranteed.

It doesn't have to take the form of an annual tax refund. It could take the form of lower, or negative, paycheck withholdings. The hard part is making sure that people don't end up owing a bunch of money at tax time, of course, because they're not going to have it lying around.

Looks like we’re all talking about essentially UBI (Universal Basic Income) here... which I at least think is the solution to a lot of this!

There's a difference between UBI and something like EITC, in that UBI applies to all adults, whether working or not, whereas EITC is explicitly targeted at people who are employed but do not make what one would consider a "living wage" based on their situation (number of kids, etc).

Depending on the structure of the rest of the tax system and on whether the UBI phases out or not, the effective marginal tax rates can also be quite different, though this part can be massaged to make the two options look identical, I suspect.

But the core of the difference is whether employment is explicitly encouraged (EITC) or not (UBI).

> Should we be completely immune from minimum wage increases just because we can afford to pay for the finer things in life?

You aren't immune.

Minimum wage laws impact the supply chain that feeds Whole Foods and nice restaurants by increasing the cost of rural labor.

https://www.indeed.com/salaries/farm-worker-Salaries

A quick google will show you that farm workers are well below the $15/hour goal most progressives are touting.

The argument that "society should carry the cost" is based on your opinion that is in error. Society carries the cost of minimum wage increases because we all have to eat. We all have to patronize low margin businesses to some degree (even if it is indirect).

You can argue the EITC is a better "solution" than a minimum wage but if you are trying to ensure $15/hour for people paid $10/hour, you are really talking a negative income tax or UBI. At which point, you are probably better off supporting those proposals instead of pushing the EITC.

Personally, I'm not a fan of subsidizing low margin businesses that from a Capitalist perspective should probably be allowed to die if their workers can't afford to live on what they pay.

So if you aren’t a fan of subsidizing low margin businesses - like the mom and pop shops - are you also not willing to allow public pensions to invest in VC funds that subsidize money losing tech companies?

I think it’s kind of rich that the same people who are probably working for money losing companies backed by VCs think that small low margin businesses owners don’t deserve to make a living.

You're right that the "trickle down" effects of minimum wage laws will impact everyone in society to some extent. But it seems like a fairly obvious conclusion that people eating at McDonalds and shopping at Walmart, will be impacted more than someone who only buys premium organic food and spends the majority of his income on other luxuries.

> you are really talking a negative income tax or UBI. At which point, you are probably better off supporting those proposals instead of pushing the EITC.

I do support UBI too but it seems like an extreme stretch to say that is easier to sell than EITC. Especially when you consider that EITC already exists today as a federal law, and UBI does not.

https://en.wikipedia.org/wiki/Earned_income_tax_credit

> Personally, I'm not a fan of subsidizing low margin businesses that from a Capitalist perspective should probably be allowed to die if their workers can't afford to live on what they pay.

Allowing McDonalds to hire workers at wages set by supply-and-demand, is the very opposite of a subsidy. Killing off profitable low-margin businesses, will by definition, lower the nation's GDP and tax base. Everyone, especially the workers like the one featured in the article, will be far better off in a world where profitable low-margin businesses aren't killed off by government regulation. It's far more effective to tax McDonalds, as well as every other profitable company, in order to fund the safety net that every citizen deserves.

> I do support UBI too but it seems like an extreme stretch to say that is easier to sell than EITC. Especially when you consider that EITC already exists today as a federal law, and UBI does not.

To do what the person I'm replying to wants, it would be on the scale of UBI/negative income tax. Otherwise, its not the equivalent to $15/hour when they are being paid $10/hour.

I'm baffled that no one has suggested that an individual is responsible for himself. Corporate health insurance, for instance, started due to wage & price controls. This shielded consumers from direct price increases. Instead of increasing wages, employers silently absorbed most of the costs, as evinced by the data [0] [1] [2].

Consumers almost certainly have more elastic purchasing preferences for insurance as a group, as they are much more granular. Insurance companies love negotiating with companies, because fewer, larger customers with greater inertia and specially-negotiated deals enable greater price discrimination than a mass-market product compared directly to others. This has further enabled the rise in prices.

I firmly believe that the individual is better-equipped to make his own decisions than any central planner or procurement department. We've messed things up enough with centralization; it's time to shift back to letting consumers make their own choices. Rather than taking even more choice by further centralizing from an oligopoly to a government monopoly, give people a chance to make their own decisions. I picked health insurance as it is a particularly hot topic, but this reasoning applies to many other areas.

[0]: https://fm-static.cnbc.com/awsmedia/chart/2019/8/19/image%20...

[1]: https://www.insurancejournal.com/news/national/2018/10/08/50...

[2]: https://www.insurancejournal.com/app/uploads/2018/10/2018-eh...

> I find it very interesting that most people assume it should be the employer's responsibility to provide for the employee's wellbeing. Call me naive, but I think it should be society's responsibility.

You're right, but then we have the employer class generally lobbying against society actually providing these things.

Corporations are a part and a result of our society. The government should not be in the business of subsidizing companies who aren't profitable enough to pay a living wage, it should just mandate a living wage and companies who aren't able to meet it go out of business. 'Creative destruction' and all that.

How many YC funded companies have ever been profitable? VC backed tech companies “aren’t profitable enough” to pay a living wage.

Small businesses outside of the tech sector don’t have the access to capital that tech bro’s have.

I don't think access to capital is a mitigating factor. It doesn't really matter why you can't pay a wage that a worker can live on. If you can't do it you should go out of business.

So now people who are trying to make a living with a small business don’t deserve to be in business but tech bro’s who can convince people to invest billions in companies that will probably never be profitable should stay in business?

Especially since we know that most venture funding goes to people who “pattern match” with Zuckerburg not the people who are running small businesses.

Yeah that’s going to make the poor better off while people in tech shake their finger at them - or in other words let them eat cake!

If low margin companies don’t deserve to be in business then why do money losing companies deserve to be in business? What if we made it against the law for public pensions to invest in VC funds or made it illegal for companies that don’t show that they can be profitable to be listed on the public market?

This is whataboutism. Believing that businesses who can’t afford to pay their staff a living wage shouldn’t exist doesn’t entail any position on the issue of unprofitable tech companies.

Why not? Left to their own devices they couldn’t afford to pay their employees anything.

The mom and pop shop can’t get millions of dollars thrown at them because they “pattern match” what a successful founder “looks like” without a business plan. They actually have to be profitable.

Suppose that this was fixed, and tech companies had to be profitable to stay in business, like mom and pop shops. Would that do anything to improve the circumstances of the McDonald’s worker described in this article?

Would it do the worker or the franchise owner (who on average makes between $65K and $150K a year) any good if the company was out of business?

What if capital wasn’t chasing after money losing startups where the VC partners take 20% management fees no matter how badly the fund performs - much of that money coming from public pensions?

Low margin businesses fundamentally operate by exploiting low paid workers. What's wrong with making the playing field even by taxing them? The prices of food will go up, but that's okay. We do it here in Australia and nobody is crying over having to pay 12 AUD for McDonald's vs 9 AUD in the US.

> What's wrong with making the playing field even by taxing them?

This turns the low paid workers into unemployed workers.

I'm fascinated that people honestly think it's better that people make $0/h than $10/h while "exploited".

Yes according to classical economics it'd result in a decrease in demand. But the reality is that these shops need the workers regardless. Moreover with a minimum wage people have more disposable income to spend at these shops, which can sometimes create more jobs than the increased salary destroyed.

Most studies that have been done on minimum wage found no correlation to unemployment rate. The economics you learned in high school can rarely be applied perfectly to reality. There are plenty of countries with minimum wages with no significantly different unemployment rates in the service industries.

Pretty much all changes in minimum wages are small.

This makes it very hard to measure the effect with any precision. You have to remember that wages are not 100% of the compensation for employees. So if MW increases from $10 to $10:50, fringe benefits may be cut from $2 to $1:50, and you end up with no measurable effect.

> But the reality is that these shops need the workers regardless.

If their expenses become higher than their earnings, the shops will close. Maybe that at least is an economic fact we can agree on?

Then why not implement it that way? Make the minimum wage small and bump it up a bit ahead of inflation every year. If things go south (this hasn't happened in any other country that has done it) it can always be reversed.

For what it's worth, here in Australia there's only around 10% less McDonald's stores per capita to the US, despite a $20 minimum wage. All these workers can afford to eat and live in some of the most expensive cities in the world and the country isn't collapsing under unemployment.

You might miss my point. I'm saying MW does hurt low skilled workers quite a lot, but adjusting it for inflation every few years doesn't make it worse.

If I was emperor, abolishing MW would be my first and most obvious reform to help the poor.

> All these workers can afford to eat and live...

But the problem is the people who can't get work because on MW!

>I'm saying MW does hurt low skilled workers quite a lot

Citation needed. In fact, I did a quick Google search and found out that several US cities/states have increased minimum wage this year and they've seen NO significant job losses. In fact, in some cases these states have seen more growth in low-income jobs than states with lower minimum wages.

Minimum wage takes money out of the pockets of the rich and puts it in the pockets of the poor. Half the time the rich people would have spent this money on luxury goods instead of spending this money on everyday things anyway. As such, in many cases you end up seeing increases (or at least no impact) in the numbers of low wage jobs because of the increase in demand of the products of said workers.

> If their expenses become higher than their earnings, the shops will close. Maybe that at least is an economic fact we can agree on?

Or they could raise their prices. That’s what normally happens in my experience when a small business faces an unavoidable and significant increase in one of its input costs.

Its not that simple, higher wages also mean that people spends more, that could actually be significant in places like McDonald's

I'm fascinated that people honestly think that increasing the minimum wage will result in a large amount of job loss. Here's a thread from last month on a story about why this isn't true. A comment from jjoonathan links to an interesting study about how jobs negatively affected by minimum wage increases are disproportionately reported on when compared to jobs benefited by minimum wage increases.

https://news.ycombinator.com/item?id=21630679

Low margin businesses are also franchise owners and mom and pop shops. Who do you think is hurt the most if prices go up on fast food and at Walmart?

You think the countries with minimum wages don't have these mom and pop shops? Hint: I live in such a country, and they're doing just fine. The prices are higher across the board, including the prices they sell their products for. The margin shifts, it doesn't disappear.

I bet your country also has universal healthcare and a better safety net.

Sure, and there's nothing stopping your country from doing the same. I mean healthcare is basically irrelevant since minimum wage workers can't afford to look after health conditions regardless of whether or not they have a job. Regardless, there's no observed correlation between minimum wage and unemployment if that's what you're getting at.

Well, the unemployment rate in most European countries is twice that of the US....

What about all the many years before 2014 that the US unemployment rate was significantly more than almost all of the European countries? Did the lack of minimum wage help in 2010 when the unemployment rate was 10%?

Also, that's a flat out lie. Greece, Spain, and Italy are pulling up the average with their huge unemployment rates, and the vast majority of unemployment rates besides that are almost the same as the US and in some cases lower.

Every country in the EU has a higher rate than the EU.

https://www.statista.com/statistics/268830/unemployment-rate...

I'm assuming you mean than the US. The Netherlands, Hungary, Poland, Malta, Germany and Czech Republic aren't in the EU? Last time I checked they were.

Germany and the Netherlands have some of the highest minimum wages in the world, and yet they have unemployment rates that are lower than the US.

Moreover, your claim was that most of the countries have twice the unemployment rate of the US. Your very own source shows that only 5 of the 28 nations have double or more, and less than half have an unemployment rate 50% greater than the US. Are you going to admit to your lie or are you going to change the story?

> Minimum wage laws are fundamentally a tax on low-margin businesses

"For the fiscal year 2017, McDonalds reported earnings of US$5.2 billion"

Why are you making this sound like a bad thing? What's with the EITC drum-beating in this thread?

You realize there is a difference between revenue and profit?

https://www.prnewswire.com/news-releases/mcdonalds-reports-f...

Their net income was less than $700 million and it’s not corporate McDonalds that pays the employees in the stores - it’s the franchise owners.

Franchise owners make less than $70K a year per store.

https://work.chron.com/average-income-fast-food-franchise-ow...

McDonalds franchise owners make 3x that. The average is dragged down by low rent chains like Subway or Wendy’s

Keep in mind that the owners make that after leasing the building from McDonalds. It’s a turnkey business and there are many, many people who have gotten pretty rich on operating these places.

From the cited article. So after investing $1-$3 million dollars, a McDonalds franchise owner makes about the same as a software engineer in a major US city and the software engineer didn’t have to spend $1 to $3 million and has a lot less risk.

Most franchise owners aren’t “starting a business” they are “buying a job”.

But a 2013 report from Franchise Business Review dug down into the numbers and came up with a net profit of $66,000 per franchise. McDonald's did much better with an average of around $150,000 per restaurant. But when you consider that a McDonald's franchise costs more than $1 million and can easily run more than $2 million, even McDonald's doesn't generate excellent average returns on investment. The fast-food franchise business is tough, and success doesn't come easy.

Remember with a global system, average doesn’t mean major city. It’s apples and oranges to compare to a SWE.

With Chick-Fil-A, operators just get one store. They are buying a job. McDonalds franchisees usually own multiple stores and have different business interests.

And wouldn’t a McDonalds store in the middle of nowhere also make less money than a major city? But even at $150K net income, there isn’t much room to raise salaries.

McDonalds is the place where you can get something like a cheeseburger for a dollar without getting food poisoning. McDonalds was a high quality product at one time.

There’s no regulatory environment that prevents exploitation of the workforce, so doing so is the low risk choice. The company chose a low quality bar and competitive pressure forces them to mercilessly attack cost.

Back of the napkin math. If we assume that a McDonalds is open 16 hours a day and they have an average of 4 people every hour.

16 hours x 4 people x 7 days x 52 weeks Equals about 2400 hours a year.

How much could they raise the hourly rate of their employees and raise prices before the demand went down and still be profitable if they are only making $150K now? At what point does it not make sense to invest $1 - $3 million a year to make meager returns?

That is McDonald's problem.

They may need to look at the business and franchise model. They have a fubar business with hundreds of SKUs. 5 Guys is able to make money on a freshly cooked burger, higher standards for quality and higher cost. Make a "McDonald's Classic" concept that cooks real food at higher prices.

Again, McDonald's makes a business decision to have a system that encourages franchisees to utilize labor at the lowest cost possible because it is the lowest risk decision for them. For the larger company, the profitability struggles of the operators aren't a world-ending problem -- they own the real estate assets, and get to be an exclusive supplier and pull their percentage of gross sales first.

From my POV, I don't care a whit about McDonald's -- as a human it's awful that people are treated the way that they are, and as a taxpayer it's awful that society as a whole gets to pick up the pieces when hard working people fail and end up dependent on social services for survival. If McDonald's business can't deliver, that's their problem. The demand for food isn't going anywhere and a competitor will fill the void.

So the people working for minimum wage would be better off if they didn’t have a job at all? If all of McDonalds employees all of the sudden were out of work - taxpayers would pay more.

What’s the percentage of people that work at McDonalds are working there as a primary income?

Isn’t kind of hypocritical that you criticize McDonald’s profitable business model but you’re okay with all of the startups - including ones that are backed by YC who are losing millions of dollars but are able to access capital?

Five Guys also costs a lot more. The people who eat at McDonalds every day couldn’t afford Five Guys.

And if the magical competitor becomes available, are they going to be able to sell food as cheaply as McDonalds?

I didn't criticize the business model. I said that I'm opposed to exploiting workers, and that addressing that problem is more important to me than preserving McDonald's present business model.

If their business model is not compatible with humane treatment and fair compensation of workers, why should we subsidize it? If the quality of McDonald's food is such that a small marginal cost increase will destroy the business, is it a good business?

Competition in the fast food space is intense, and market forces will drive prices. Perhaps the people who cannot afford a hamburger at Five Guys would be able to do so if paid a decent wage.

The only reason that money losing startups “business model” works is because they don’t have to worry about silly things like profits. They are also being subsidized by VCs who are being subsidized in part by public pensions.

Maybe if we didn’t give special treatment to VCs Capital gains, many of the tech bro’s would also be out of a job. If we want to stop subsidizing bad business models let’s start with not allowing public pensions and tax free endowments the ability to invest in VC.

Just a reminder that revenue != profit. McDonald's net income for 2017 was US$698.7 million [EDIT] which is only 13% the number cited in the above post.

Don't be misled by people unintentionally (we hope) citing revenue numbers to bolster their case.

The level of control employers exert on society essentially equivocates the two.

At least the hospital could provide health care at a discount?

Wack that a hospital doesn't insure health insurance... bet it's a non profit at that.

Criminal.

Hopefully Trump's new federal policy of requiring hospital groups to disclose prices will help answer these questions and put pressure on that industry.

Hopefully it will be enacted in 2021 as planned. My money is on Hospitals making it a constitutional issue and dragging it out for a decade though.

"Hospitals could be fined $300 a day by the Centers for Medicare and Medicaid Services if they don’t comply with the new disclosure rule, officials said."

https://www.cnbc.com/2019/11/15/trump-releases-rule-requirin...

The stick is not big enough.

Clearly it is. The hospitals are suing the government to prevent the rule.

A massive amount is about to be spent on lawyers, so clearly they see this as a huge threat.

[0] - https://www.insurancejournal.com/news/national/2019/12/04/55...

Of course - the fine can be increased or changed if they don't challenge it. Doesn't mean it's enough now.

Is that per non-disclosure event?