With so much fuss over McDonald’s workers’ pay in the U.S. and their apparent inability to survive on their income, how is it possible that the hamburger chain can operate nearly 900 locations in Australia where the minimum wage is $15 per hour? Well there isn’t any magic involved and the solutions probably wouldn’t translate well to America. So, striking fast food workers please do not get overly excited.
As expected, the higher labor costs in Australia and some other countries translate intohigher menu prices and lower profits. While in the U.S. labor costs are 25-30% of total revenue, it’s estimated that that number globally is closer to 45%. The chart below shows Big Mac prices around the world relative to wages. Also in Australia in particular, there is a slight wrinkle in the minimum wage laws that fast food restaurants take advantage of. Workers down under younger than 16 are only required to be paid $8 per hour and McDonald’s Corporation (NYSE:MCD) does their best to staff as many of these young, cheap folks as possible.