The CSR Newsletters are a freely-available resource generated as a dynamic complement to the textbook, Strategic Corporate Social Responsibility: Sustainable Value Creation.

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Monday, November 23, 2015

Strategic CSR - McDonald's

 
 
In the run-up to Thanksgiving here in the U.S. this week,
today's and Wednesday's Newsletters will relate to the food industry.
 
 
The article in the url below contains some interesting research into the effects on prices of an increase in minimum wages in the fast-food industry:
 
"Raising wages for fast-food workers to $15 an hour would lead to a noticeable but not substantial increase in food prices."
 
Specifically:
 
"According to the Bureau of Labor Statistics, 1.54 million people working in food preparation and serving related occupations make at or below the federal minimum wage of $7.25 per hour. Raising their hourly wages to $15 -- a 107% increase -- would cause prices to rise an estimated 4.3%. That means your $3.99 Big Mac would wind up costing $4.16, and an average fast-food meal costing $7.00 would go up in price to $7.31."
 
Of course, these impacts should not be taken in isolation. Higher wages would also likely reduce turnover, which would reduce other costs, such as those associated with training and increase the efficiencies that result from the accumulation of experience and organizational knowledge:
 
"[The] study suggests that the cost to hire an hourly line position is $1,500 -- a cost that covers recruitment, selection, training and vacancy costs, which may entail overtime pay."
 
Essentially, as argued in strategic CSR, we get the companies that we deserve. If consumers are willing to pay the higher prices to ensure employees are well compensated, this research confirms that it is something that companies can do. If, however, a company raises its prices 4% to pay for wage increases and customers immediately switch to a competing brand/product, then it is silly for the firm to raise wages, since it will ultimately result in many more employees losing their jobs. As a society, what do we care more about – well-paid jobs or cheap hamburgers? Capitalism will accommodate whichever path we choose.
 
Take care
David
 
David Chandler & Bill Werther
 
Instructor Teaching and Student Study Site: http://www.sagepub.com/chandler3e/
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/
 
 
Raising fast-food hourly wages to $15 would raise prices by 4%, study finds
By Sally French
July 28, 2015
MarketWatch