McDonald’s moves to automate orders to reduce worker costs

Posted by on October 23, 2014
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If there’s a silver lining for McDonald’s in Tuesday’s dreadful earnings report, it is that perhaps union activists will begin to understand that the fast-food chain cannot solve the problems of the Obama economy. The world’s largest restaurant company reported a 30% decline in quarterly profits on a 5% drop in revenues. Problems under the golden arches were global—sales were weak in China, Europe and the United States.

So even one of the world’s most ubiquitous consumer brands cannot print money at its pleasure. This may be news to liberal pressure groups that have lately been demanding that government order the chain known for cheap food to somehow pay higher wages.

Unions have made McDonald’s a particular target of their campaign for a $15 an hour minimum wage and have even protested at corporate headquarters in Oak Brook, Ill. The pressure was enough to cause CEO Don Thompson this summer to capitulate and endorse President Obama’s call to raise the federal minimum to $10.10 an hour from $7.25. Many states have already enacted wage floors above the federal minimum.

If higher wages force higher prices on the menu, will union-backed activist groups agree to compensate McDonald’s franchisees for futures sales declines? We’re guessing not. So we’ll offer the chain some free consulting and suggest that with sales slipping lately, higher prices probably aren’t the way to draw more customers. Alternatively, McDonald’s could cut its beef costs by changing its popular burger to a fifth-of-a-pounder and hope nobody notices.

The McDonald’s earnings report on Tuesday gave a hint at how the fast-food chain really plans to respond to its wage and profit pressure—automate. As many contributors to these pages have warned, forcing businesses to pay people out of proportion to the profits they generate will provide those businesses with a greater incentive to replace employees with machines.

Read more at the Wall Street Journal.


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