McDonald's, the global fast-food chain, has reported a significant increase in profits since the onset of the pandemic. According to financial data, the company's profits have risen by over 31% from $11.18 billion in December 2019 to $14.69 billion in March. This surge in profits contradicts the recent narrative of McDonald's being a victim of inflation and losing customers due to rising prices. NPR, in its coverage, failed to mention the company's profits and instead portrayed McDonald's as a casualty of inflation [37ac51cd].
The rise in profits can be attributed to McDonald's ability to take advantage of high demand and supply chain shortages, allowing the company to increase profit margins. Despite concerns over inflation and rising food prices, McDonald's has managed to maintain its profitability and even expand its customer base. The introduction of the $5 'Meal Deal' has been particularly successful, attracting bargain-hungry customers and resetting the chain's perception for value and affordability. As a result, McDonald's shares rose more than 3% on the news of its increased profits.
While McDonald's has experienced success in the face of inflation, the overall food prices in the US have climbed approximately 24% since the onset of the pandemic. This has contributed to the pinch consumers are feeling and has led to a decline in sales for the fast-food giant. Customers are becoming more 'discriminating' after years of price increases, and the average cost of a Big Mac Meal in the US has risen 27% since 2019 to $9.29, outpacing inflation. This decline in sales aligns with the trend of consumers seeking relief from high costs and the phenomenon of 'shrinkflation', where companies reduce the size of their products while maintaining the same price. The controversy over shrinking products has led to President Joe Biden expressing his concern and the creation of a taskforce to address the issue. The White House has launched a campaign on pricing and supports a bill that would give more policing power to the Federal Trade Commission and state attorneys general. Frito-Lay, the company that makes popular chips like Lay's and Doritos, did not respond to questions about adding more chips to each bag. The unlikely ally of the Cookie Monster, who has been vocal about his frustration with shrinkflation on social media, also joins President Biden in the fight against shrinking products [e662781e].
Despite the overall decline in sales, McDonald's has managed to navigate the challenges posed by inflation and maintain its profitability. The company's success with the $5 value meal demonstrates its ability to adapt to changing consumer preferences and offer affordable options in the face of rising food prices. However, McDonald's still faces an uphill battle as consumers continue to pull back due to the economy and higher cost of living. Competitive conditions in the fast-food industry are returning to pre-pandemic levels, leading to more normal profit margins for McDonald's [37ac51cd].
A new study conducted by Orley Ashenfelter of Princeton University and Stepan Jurajda of Prague's Center for Economic Research and Graduate Education sheds light on the US economy by examining the pay in McDonald's restaurants. The study surveys the pay in McDonald's restaurants every year since 2016 and focuses on the average pay for entry-level 'crew members' in the fast-food sector. In 2023, the average pay for these workers was a little over $13 an hour, compared to around $34 among all private-sector employees. The study highlights the disparity in wages between low-paid workers and the rest of the private sector. Ernie Tedeschi of Yale Law School has also found a similar trend using a Low Wage Index. However, it is challenging to determine if the numbers truly reflect pay for the same work or if they are influenced by differences in tasks or skills [8fcc405d].
The study's findings add to the ongoing discussion about income inequality and the challenges faced by low-paid workers in the US economy. While McDonald's has seen its profits rise, the study reveals that many of its employees are earning significantly lower wages compared to the average private-sector worker. This raises questions about the fairness of wages in the fast-food sector and the broader labor market. As the US economy continues to recover from the pandemic, addressing income inequality and ensuring fair wages for all workers will be crucial for sustainable and inclusive growth [8fcc405d].
Researchers have found that pay for burger flippers in the US has been modest over the last decade, with a spike in pay during the year of COVID followed by a decline in real wages. However, it is interesting to note that Idaho offers the third-highest pay for flipping burgers in America, despite having the same minimum wage as Mississippi. Signs in McDonald's and Carl's Jr. in Idaho often offer pay at nearly $20.00 an hour. The article suggests that this is due to the law of supply and demand, rather than government artificially inflating wages [7c5cdc28].