Wednesday, December 11, 2013

The Value of Things

Democrats in the state Legislature have introduced a bill to increase the minimum wage in Wisconsin.  While recent union-backed (and staffed) protests against fast food outlets have demanded a $15 an hour wage, the proposal here is for a more modest increase of 35-cents--to $7.60 an hour.

Those who have proposed this increase aren't really that happy with it--Senator Nikya Harris is on record as saying as much--but they see it a way to score some cheap political points heading into an election year.  "Remember that 35-cent raise we got you?  Vote for us and we'll try to get you more!"  The hope is that a national Democratic effort to hike the wage to $10.10 an hour will somehow gain traction and make this state bill a moot point.

The one factor that seems to always be overlooked in talking about major hikes in the minimum wage is the value of the work actually being done--and the product that is being produced.  You know why pro athletes are paid tens of millions of dollars a year?  Because major TV networks sell a lot of advertising during sports broadcasts--and people pay a lot of good money to sit in stadiums and watch said players show off their skills.  It's also why Gary Anderson makes three times as much as the top administrators at UW Madison--80-thousand people pay to watch him work every Saturday.  At McDonald's, we are talking about the value of being able to put a hamburger patty on a bun and cover it with cheese and ketchup.

So what value do we place on the work done at Mickey D's.  The Big Mac Extra Value Meal is about $6.  The minimum wage increase proposed by state Democrats would push that up to maybe $6.25.  Is that still a price at which I would buy?  More than likely.  But the $10.10 wage being tossed around in Congress would make it nearly impossible to keep the Value Meal price around six bucks--and would more than likely cause it to go up to $9.  Is a Big Mac, fries and sweetened ice tea worth that much to me?  Only if I was starving--and there were no other options.  And the $15 the union protesters were calling for?  A $12 Big Mac?  Get outta here.

Now, McDonald's wouldn't necessarily have to hike the price at the same percentage at the wage increase.  We have two restaurants within a couple of miles of each other here on the westside of Oshkosh.  What if McDonald's could offer me that same Big Mac Meal for about the same price--but at only one of those locations?  Would I be willing to wait a little bit longer in the drive-thru because the customers who used the other site are now all using just a single restaurant?  I probably would.  And believe me, Mickey D's has people in charge of determining if other people would feel the same way and wouldn't think twice about closing up shop over at the gas station.

Now corporation haters would say that McDonald's and all of the Yum! Brands restaturants and WalMart wouldn't have to raise any prices to provide a $10 or $15 minimum wage because all of that added expense could come out of their "obscene" profits.  But this is where we get into another discussion about value.  As a savvy investor for retirement, I own stock in McDonald's, Yum! Brands and the Super Evil Empire--and when they make money, I make money--through dividends and higher share prices.  And the more money they make, the sooner I can worry about a tee time in 75 degree sunny weather in Florida this week--instead of worrying about whether my Jeep is going to start in the -9 weather in the morning.

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