McDonald’s Will Stop Lobbying Against the Minimum Wage Because They Can Automate

Last week, McDonald’s announced it will stop lobbying against efforts to increase the federal minimum wage.  Proponents of an increased minimum wage took that as a positive sign that they will have success raising the federal minimum wage from $7.25 an hour to $15.00 an hour.   McDonald’s supports a “phase-in” approach to raising the minimum wage.

Supporters of a minimum wage increase might have missed that this announcement came the same week McDonald’s announced its largest acquisition in over 20 years: a $300MM purchase of a software company that specializes in decision logic.  Instead of a pimply 16 year old asking, “Would you like fries with that,” a prompt on a kiosk or a phone will ask that question to McDonald’s customers.  McDonald’s has already begun to automate the ordering process and will use the acquisition to increase its automation push.

I doubt the timing of both announcements was a coincidence.  McDonald’s is willing to pay $15 an hour because a lot of its entry level (clerk) jobs will go away as it uses its new automation platform.  Its competitors who cannot automate will have to pay a higher wage.  A local restaurant cannot make a $300MM acquisition to automate ordering.  They will either pay the new wage or go out of business.  When labor becomes more expensive relative to capital, companies will invest more in capital if they can.  Expect more national chains to follow McDonald’s lead and continue automating.

Automation is already here.  It will continue to alter the employment landscape.  I am all for the creative destruction that is the hallmark of capitalism.  I despise crony capitalism that gives those with influence power to support initiatives that enrich themselves.  That’s what McDonald’s is doing and that is what a lot of our politicians support.  It’s a shame.

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