The Value of Fast Food Workers in Today's Automated Economy

In the current era of automation, the role of fast food workers is often questioned. Many wonder about the value these employees add to the business. This article explores the scenarios and statistics to determine whether fast food workers truly contribute to the economic value of a business, and the impact of wage constraints on these workers.

The Automated Future of Fast Food

With the advent of advanced technology, many fast food jobs are being automated. The common perception is that manual labor in fast food restaurants, such as flipping burgers and taking orders, can be done more efficiently by machines. This has led some to question the necessity of paying these workers, as they are seen as a cost rather than a source of value addition.

However, it is important to note that only certain positions in fast food operations, such as those running the machines, create value. While automated systems can streamline the process, the presence of human workers is still crucial in handling customer interactions, maintaining a warm and inviting atmosphere, and addressing unforeseen circumstances that technology might not be able to handle just yet.

Wage and Profit Analysis

Current wages and work hours can provide insights into the value created by fast food workers. For instance, an employee like myself makes 8.55 per hour and works 34 hours weekly, subject to Earned Income Credit (EIC) tax exemptions. These factors indicate that the hiring of workers is not merely an expense but also an investment in the business. The breakdown of typical expenses in a fast food restaurant, such as 30% on food and 30% on labor, along with 30–35% on overhead, paints a picture of the business model.

The Bait and Switch

The operation of fast food restaurants often relies on a principle called the "bait and switch." Employers pay workers not because they add direct value, but because the cost of not paying them is higher. The cost of burger flipping is whatever can be induced from people to work for it. While there is a correlation between cost and value, competition plays a significant role in determining these costs.

In an ideal scenario, if there were only one burger joint in the world, the value of a burger would be higher because people would be willing to pay more. However, in the real world, competition dictates the value of a burger. Therefore, wage constraints are necessary to maintain the competitive edge of the business.

Profit and Shareholder Pressures

To illustrate this, let's look at the example of Jack in the Box. According to Reuters, Jack in the Box Inc. reports an annual profit of $4,314 per employee. Assuming an average of 30 hours worked per week, this amounts to $1560 hours worked per employee per year. When we divide the annual profit by the total hours worked, we get a profit of $2.77 per man-hour.

This analysis shows that Jack in the Box cannot afford to significantly raise workers' wages. Even if the restaurant were a non-profit organization, the increase would only be a couple of dollars per hour, which is not enough to drastically improve the standard of living. As a publicly traded company, the primary goal is to maximize shareholder returns, which means any increase in wages must lead to increased revenue.

Market Forces and Business Models

Market forces are at play here. The price Jack in the Box can charge for a hamburger is influenced by what consumers are willing to pay. Similarly, the wages it can afford to pay are influenced by what employees are willing to accept. Lastly, the profit Jack in the Box must make is influenced by what shareholders expect.

While it's not always about squeezing every drop of profit, as evidenced by companies like Costco, which pays above-market wages yet sees strong stock performance, the pressures of increasing wages without increasing revenue are real. Companies must balance the need to retain their competitive edge with the demands of their shareholders.

Conclusion

In conclusion, while fast food workers do not add value directly through their labor in a technological age, they play a critical role in maintaining the business. The constraints on their wages are driven by a complex interplay of market forces, competition, and the need to satisfy shareholders. Understanding these dynamics can help provide a clearer picture of the value these workers bring to the table, both literally and figuratively.