This week the internet was abuzz with information out of the University of Kansas which was originally reported by the Huffington Post, regarding raising wages for McDonald’s Corporation (NYSE:MCD) workers and the subsequent effect on menu prices. We too reported the study, citing Huffington Post’s contact with a graduate student working on the research.
Since the internet burst into flames with hatred for corporations and empathy for minimum wage sandwich makers everywhere, HuffPo realized the source was not that credible and the math not too sound and quickly published a correction. According to the Columbia Journalism Review, the study wasn’t a study at all, but possibly a term paper written by a mere mortal undergraduate student. An excerpt from their mea culpa:
However, as the Columbia Journalism Review subsequently noted, Morelix’s analysis only takes into account the payroll and employee benefits of McDonald’s company-operated stores while excluding franchise businesses. Prior to publication, HuffPost asked Morelix if his analysis included franchises and he said it did. He later conceded it did not. McDonald’s franchises make up more than 80 percent of McDonald’s restaurants worldwide. This means that a majority of the payroll and employee benefits of McDonald’s workers are not included in Morelix’s findings.
A typical fast-food restaurant spends 30 to 35 percent of its income on labor, according to a recent release from the Employment Policies Institute, a research organization whose work is often cited by those who argue against increasing the minimum wage. The institute estimates that small-business owners who run McDonald’s franchises spend about a third of their income on wages, which would mean the price of a Big Mac would go up by $1.28 to $5.27.