Since the 1970’s, wages have been stagnant in the United States, and on the cusp of 2022, millions of Americans find themselves working jobs that pay so little that they need to rely on government assistance just to survive.
When confronted with this reality, corporations and conservatives are quick to defend such starvation wages, citing various claims that wage raises would make companies unprofitable, or lead to bankruptcy.
Don’t fall for it. These frivolous claims are easily debunked when we look at the data.
According to Fortune Magazine, McDonald’s has 200,000 employees. For simplicity, let’s assume all 200,000 employees are Crew Members, think the people making and serving your food. According to Glassdoor.com, the average salary of a Crew Member in 2021 is $24,284 a year. Assuming the average McDonalds crew member works 40 hours a week 52 weeks a year, a salary of $24,284 gives us a wage of $11.68 an hour.
How much would it cost to raise wages to $15 an hour? Fortune reports that in 2020 McDonald’s made about $6 billion in profit, a profit margin of 28.6%. An increase of $3.32 an hour x 40 hours per week x 52 weeks per year x 200,000 employees equals an additional expense of roughly $1.4 billion.
Subtracting the new expenses from profits, McDonald’s could raise the average wage at their locations by 28.4% to $15 an hour and still have a profit of over four and a half billion. In fact, average wages could be raised as high as $26.15 an hour and the company would still break even, and since the data on salaries is from 2021, whereas company revenue data is from 2020, the potential salaries could be even higher.
(On another note, if we were to cut the $10,800,000 compensation of McDonald’s CEO Chris Kempczinski by 90%, all 200,000 employees could take an extra 48 bucks home every year. I kid, of course; Mr. Kempczinski works very hard for that money, and he deserves every cent of it; and there is no way he could survive on a starvation salary of $1,080,000 a year.)
These calculations do not include the increased productivity from raising wages or potential decreased costs from hiring fewer workers and needing fewer hours, let alone the benefits to society from increased consumer spending and worker happiness.
In addition to raising compensation, companies can also benefit the consumer by cutting costs. Take the example of Apple: according to MacRumors, Apple Inc. sold 46.9 million IPhones in the Fourth Quarter of 2018 (July 1st to September 30th) and generated $10.7 billion in profits.
IPhones are not known to be cheap: the latest model, the IPhone 13, can cost up to $1,600! However, Apple could have slashed the price of every IPhone model by $100 and still made over 6 billion dollars in profit in the Fourth Quarter of 2018. Every IPhone model could have enjoyed a $228 price cut and Apple still would not have seen a penny in losses; and considering Apple has seen even wider profit margins since 2018, lower costs for the IPhone remain tangible.
As with the increase in wages, these calculations do not take into account the increase in revenue from increased purchases of IPhones due to lower prices.
“But!” I hear you say. “How will companies be able to save and expand? And how can they continue to increase their stock value?”
First of all, increases in wages will not necessarily impact a company’s ability to hold reserves; in the case of McDonald’s, had wages been raised to $15 an hour across the board, McDonald’s would have still generated enough profit in 2020 to cover more than the recommended 3 months of expenses. And it is important to remember that profits do not always translate into reserves, but get turned into kickbacks to management such as increased compensation or stock buybacks.
As for expansion, what better way to undercut the competition than to offer wages substantially higher or prices substantially lower than the competition? These methods are not only good for workers practically, but are in a strange way helpful to management, as such actions will increase market share. And again, wage increases or price cuts can still allow for large profits to be used for capital investment.
Finally, I can’t deny that lower profits can hurt stock value, but the PR benefits of raising wages or making goods more accessible can significantly boost investment. According to a study done by Aflac, 61% of professional investors view investment in socially responsible companies as less risky.
With that, I think I can safely conclude that this talking point has been thoroughly, and completely, debunked. I will conclude by discussing just how difficult it was for me to actually compile this essay. I am not exaggerating when I say that the financial figures herein took me hours to find.
Good luck trying to find the salary expenses for one of these companies. The only things you’ll find is spooky language straight out of an Accounting textbook like “Cost of Goods Sold” and “SG&A Expenses”.
Why can’t such simple information as the expenses paid for salaries be widely available and easily understood for the average consumer? The answer is obvious: because these companies don’t want us to know just how much we’re being swindled. They wish to continue keeping us in a shroud of darkness, all so that they can continue to exploit workers and consumers alike in the hopes of squeezing yet another drop of water from a dry rag.
Let what I wrote here anger you. Let it raise your perception of yourself in this world. Let it inspire you to dig deeper. And let it empower you to fight for your rights; for the truth, that we deserve more, that our sweat is what makes the world run, will not be hidden; and this truth shall set us free.
Photo courtesy of Fortune Magazine.