McDonald's Big Mac Study is a Prime Example of What Happens When Bad Ideas Go Viral
Last Monday, Huff Post published an article claiming that McDonald's could double their employees' wages, if it and only raised Big Mac prices by 68 cents. PolicyMic published Alessandro van den Brink's sympathetic overview of the story the next day.
The Huff Post story was full of inaccuracies and ended up being a case study in how not to do journalism. The argument relied on a study that was strangely absent from the story. It was referenced but not linked to, written by an undergrad business student, and not really a study at all. The 68 cent price increase, representing a 17% change, is an incorrect number that fails to take into account that most McDonald's locations are franchises not owned by the company. A closer analysis shows that that doubling employee wages would increase all the locations' labor costs by roughly $7.4 billion. To cover those costs, they would have to increase prices by 25%, which could mean Big Macs would be a dollar more. Another reflection from 24/7WallSt found doubling labor costs would cost the company $8.13 billion.
The assumption that raising the price of a good valued for its cheapness would not lower the amount consumed is ridiculous. At a 17% change, it's ridiculous, and at 25%, it's ridiculous. If McDonald's could raise price this much without profit decreasing, those evil fat cats would. Raising their prices would make them maybe not profitable enough to exist and would prevent their poorest customers from purchasing cheap meals, something that should concern those concerned with the poor.
There's a sick arrogance to stories like this. Proponents of the referenced study can think they have wisely found a novel way to help poor McDonald's workers, without considering that many spending their entire day jobs thinking about the same issues. That what advocates propose doesn't exist, does not make it a great new idea. The effect is the reader sees a story like this, can get pissed off at the boogieman corporation hurting their workers and click "share" on Facebook, when the reality is not so simple.
Online journalism, contrary to some claims, is awesome. But it's absurd that serious outlets should publish such sensationalist stories to appeal to reader's desire to uncritically hate. Let's be better than that.