McDonald's Pays Minimum Wage Because That's What Its Employees Are Worth

This week, fast food workers walked off the job at McDonald's, KFC, and other restaurants in New York, Chicago, and other major cities. Their demands were twofold: higher wages, and the right to unionize. Their major demand was for McDonald's to significantly increase wages, from under $9/hour to $15/hour so that they could have what they consider a living wage.

This was spurred on by a few incidents, and media coverage began a couple of weeks ago when a proposed budget created by McDonald's for minimum-wage workers found its way into the hands of liberal commentators.

Increasing the McDonald's wage to $15 an hour would do absolutely nothing to improve the lives of the people currently working there, and would probably make them all worse off. If McDonald's increased the wage to $15 an hour, workers who currently make more than current McDonald's employees but less than $15 an hour would flock to apply for the new higher-paying job. With people whose employers currently see them as worth $12, $13, or even $14 an hour seeking to work for McDonald's, the current McDonald's employees would have little chance of hanging on to their jobs.

Wages, in other words, approximately equal the value an employee adds to a firm. If an employee is capable of adding more value to a firm than McDonald's pays, then they will be able to find a job with another company. If McDonald's decides to double its wages, it will find that higher quality employees are willing to work for them. Some restaurants and stores have this business model: They pay higher wages and attract higher quality employees, which translates to a better experience for the customer. The customer then pays for this better experience. Think Target or Chipotle versus Walmart or McDonald's. The only way for the people currently working at McDonalds to receive higher wages for a sustained period of time is to add more value to their firm.