Instapundit points out a Forbes article (warning, annoying adblock resistance) this morning indicating that “Thanks To ‘Fight For $15’ Minimum Wage, McDonald’s Unveils Job-Replacing Self-Service Kiosks Nationwide”.
Which you kinda have to take with a grain of salt, if you read this article in Fortune from just over a year ago that kind of laughs it off as a stunt, saying that 70% of McDonalds’ business is done at the drive-through, where the kiosk is useless.
So the truth is somewhere in the middle, it seems.
Fortune says that “Implementing these kiosks is expected to cost franchisees between $120,000 and $160,000. Quite an expense considering its limited advantage.”
Well, first of all, I certainly hope a McDonald’s restaurant can afford a one-time cost at that level, because if it can’t, it’s nearly out of business anyway. But let’s think about the cost of an employee to McDonald’s. I don’t eat there, so I don’t know or care if they’re open 24/7 or not, but let’s assume a 24 hour restaurant that needs a cashier all 24 of those hours.* At $15 an hour, you’re talking $360/day in wages. But that doesn’t count the employer’s part of FICA, or insurance, or uniforms, or unemployment/workman’s compensation, vacation, sick time,** etc., etc., ad nauseum. So let’s just double that, because we probably won’t be very far off. $720/day to keep a cash register manned (well, and do whatever else a fast-food cashier does, which can be quite a lot).
That’s $262,800 per year. For someone (or more likely, several someones, because a) these aren’t full-time jobs and b) we’re talking three shifts/day) making $15/hour.
So if a restaurant eliminates ONE employee (or really three employees, because you’re eliminating that employee across three shifts, but I digress) because of the kiosks, they’ve already paid for the system to be installed. And moreover, the system doesn’t require a paycheck, or any of the other employer expenses noted above. Sure, it may fail and require a techie to fix it, or replace a part, or whatever, and sure, there are going to be ongoing maintenance and support expenses. But they’re probably a fraction of what the employees they’re replacing would cost at $15/hour (or in fairness, closer to $30/hour as we’ve shown above).
It seems to me that even if only 30% of the business is being done at the counter, the savings involved in eliminating one cashier position (and remember, that may be three or more actual employees) still outweighs the cost of the new equipment. If you run three positions during peak hours, and the kiosks allow you to cut that back to two or even one, you’re still saving money, and you will continue to save money assuming the usual five-year amortization of the equipment.
The alternative, of course, would be for employees to understand that their entry-level jobs are simply not worth $15/hour. It’s always nice to dream, but the fact is, most dreams are pretty much just fantasy. Unfortunately I suspect restaurants are already heading down the slippery robot slope that grocery and other big-box stores like Home Depot have already been driving down for the past decade.***
Businessmen will say, “It’s just business.” And they’re right. They want to stay in business, and they will cut costs wherever they have to in order to do that.
As a result, current liberal arts students should be on notice that their post-college jobs (the ones where they ask “do you want fries with that?”) are probably in jeopardy. They may want to consider a different major. Or maybe welding school.
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* If it makes you happy, I know that White Castle and Steak n Shake are both open 24/7, so feel free to slot them in instead of McDonald’s.
** Vacation and sick time are either going to double cost for the worker’s shift (because of having to slot someone else in to cover) or drop efficiency because the restaurant will be short-handed. So there is definitely a cost over and above regular payroll for that sort of time.
*** Kroger, for instance, has self-checkout kiosks, and they have them for a reason: They’re unionized, and unionized cashiers are expensive. So they put up (at least in our local Kroger) six kiosks and assign one cashier to oversee them. Makes perfect sense to me.