Wednesday, May 18, 2016

Bonddad Wednesday Linkfest: Minimum Wage Edition

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When the burger chain reported an increase in comparable sales for the third straight quarter late last month, CEO Steve Easterbrook said that the positive growth was in part linked to better employee benefits and higher wages.

Easterbrook said lower employee turnover and higher customer satisfaction were linked to employee compensation package improvements.

"The improvements we made to our compensation and benefits package to employees in U.S.-company operated restaurants, along with expanding [the tuition assistance program] Archways to Opportunity ... have resulted in lower crew turnover and higher customer satisfaction scores," Easterbrook said in a call to Wall Street analysts, Fortune Reported.

It is here in which the empirical research has been largely consistent, as summarized by economists Dale Belman and Paul Wolfson in a recent prize-winning summary of the reams of analysis of minimum wage increases:

[Moderate] increases in the minimum wage raise the hourly wage and earnings of workers in the lower part of the wage distribution and have very modest or no effects on employment, hours, and other labor market outcomes. The minimum wage can then, as originally intended, be used to improve the conditions of those working in the least remunerative sectors of the labor market. While not a full solution to the issues of low-wage work, it is a useful instrument of policy that has low social costs and clear benefits.

Here’s how Alan Krueger, an economist whose path-breaking work on minimum wages has deeply influenced economists and policy makers, put it in a recent piece:

When I started studying the minimum wage 25 years ago, like most economists at that time I expected that the wage floor reduced employment for some groups of workers. But research that I and others have conducted convinced me that if the minimum wage is set at a moderate level it does not necessarily reduce employment. While some employers cut jobs in response to a minimum-wage increase, others find that a higher wage floor enables them to fill their vacancies and reduce turnover, which raises employment, even though it eats into their profits. The net effect of all this, as has been found in most studies of the minimum wage over the last quarter-century, is that when it is set at a moderate level, the minimum wage has little or no effect on employment.

Alan goes on to point out that “…a $15-an-hour national minimum wage would put us in uncharted waters, and risk undesirable and unintended consequences.”

Wendy’s (WEN) said that self-service ordering kiosks will be made available across its 6,000-plus restaurants in the second half of the year as minimum wage hikes and a tight labor market push up wages.

It will be up to franchisees whether to deploy the labor-saving technology, but Wendy’s President Todd Penegor did note that some franchise locations have been raising prices to offset wage hikes.

McDonald’s (MCD) has been testing self-service kiosks. But Wendy’s, which has been vocal about embracing labor-saving technology, is launching the biggest potential expansion.

Wendy’s Penegor said company-operated stores, only about 10% of the total, are seeing wage inflation of 5% to 6%, driven both by the minimum wage and some by the need to offer a competitive wage “to access good labor.”