I’m not blowing smoke here. My chops are I installed Point of Sales in McDonald’s for several years. I came in, trained the managers and the crew in operation of my equipment, laid the network and installed up to 8 POS systems, along with hanging a 19” CRT monitor from the ceiling and other modules. I had to help the managers with entering food costs and other “back office” things. It took 4-5 days to go from a FedEx container full of boxes to an operational store.
That $5.00 burger you bought? The components (bun, meat, cheese, wrapper, etc.) cost about $1.25. So there is a gross profit of $3.75. That is where the payroll, building rent, equipment maintenance and replacement, franchise fee, etc. are paid. In the end, the net profit for the owner is 15 cents.
It is an economic fact that every job has to be profitable. Every worker has to bill, or help the line workers bill the customer. If I hired you and pay you $10/hour, I need to “bill you out” for $20-25/hour. Because I have to pay “my” half of the SS/Medicare taxes, my part of the benefits package and pay for those who don’t directly bill the customer for their time.
If a job isn’t profitable, the employer must do at least one of these things:
- Pay the worker less (pay or benefits)
- Charge the customer more, or
- Eliminate/automate the job.
Cutting pay or benefits usually ends in disgruntled workers, or no workers. Charging the customer more is covered under the Law of Supply and Demand: As prices go up, sales will go down because the customer has a fixed amount of money to spend on your product. If a Sausage Biscuit is $1, I can have one every day. If it’s $3, I’m only going to have it once or twice a week.
Eliminating the job does not necessarily mean less company revenue. The job could be automated. I recently learned that in the US steel industry, there are half as many workers in that industry as there were in the 80’s. The flip side is, the amount of tons of steel produced from then to now has doubled. In other words, the steel worker of today is producing four times the amount his grandfather did.
When you consider the automating of a job, you have to consider the cost of the machine to purchase and install, the cost of running it, and the cost of servicing it when it breaks. When labor is cheap, there is no profit in mechanizing or automating jobs.
So this is what we’ve come to: Welcome to the First Ever McDonald's Where You're Served by Robots—In Texas
This is a testbed McDonald’s that is almost entirely automated. The order is taken and the food is cooked, assembled, wrapped and presented without human intervention. There are still one or two people in the store, because they have to receive the truck, store the product, then load the product into the machine and clear jams.
The workers will be skilled and technically savvy, as in being able to detect abnormalities in the operation, and correct them via unjamming or actual module replacement. The regular service contract of “Call when there’s a problem and we’ll get there when we arrive” won’t fly here. A machine like this, down for even 30 minutes will cost tremendous amounts of lost sales, customer goodwill and food spoilage. The technical person there to keep things running will have to attend the manufacturer’s training school for training and maintenance. This means those workers are going to get the $15-25/hour the Leftists clamored for. The down side is, there will only be two workers instead of 6-12.
Here is the catastrophe coming down the road:
Since the 50’s and the first “fast-food” places, this has been the first job of teenagers. They were paid minimum wage, but the biggest thing they received was the “soft skills” they would need for the rest of their working lives. Those would be:
- Showing up on time
- Showing up properly dressed
- Do what you’re told, even the stuff you hate to do
- Do what you’re told to the best of your ability
- The self-control to be polite to angry people
The kids just coming old enough to hold jobs will soon not see these jobs their career ladder is missing the first rung.
And here’s the very simple reason why: #Fight for 15. There are five types of people who work fast food:
- Teenagers living at home
- Young adults who want to become management at the store
- People who are physically/mentally handicapped and this is the best job they can do well
- Adults laid off from their career and are there for some income for their household
- And last (and least) Slackers.
It’s the slackers who have instigated this. Fast food jobs are somewhat hard, and are not difficult. Any job that can be explained in pictograms is not going to be mentally challenging. You will need to have at least some attention to detail to do the job correctly, however it is not that physically or mentally demanding compared to a technical trade.
And because it’s “that easy,” the slackers like jobs like this. They don’t have to upgrade their skillsets to be worth more. They just demand to be paid more.
I still repair equipment in fast-food places, and other “first job” companies. The managers agree universally:
These kids today don’t want to work. They want to get paid, but they’re not worth what I have to pay them.
The speed and quality of their work also costs the company money. If a manager needs a worker to (properly) complete four tasks in a shift, and the kids only get three (or less) done, that means the manager has to have more people to get the jobs done.
In the end, it’s the demand for unreasonably high pay and the lower productivity that created the market for someone to design and manufacture this machine. As long as it was cheaper for employers to pay 6-8 workers at $7-9/hour to first job teenagers than it would be to buy a “whole store” machine, the kids would have jobs. Now that the employer has to pay 50% and more to have bodies in a store, it is economically viable and reasonable to automate those jobs.