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3. What if the government raised the minimum wage? How would this policy affect your firm?

If the government raised the minimum wage, that policy would have some impact on McDonald's, but probably not as much of an impact as some people would fear. McDonald's is an incredibly profitable organization and a minimum raise in wages really would not impact its financial bottom line in a significant manner. Imagine a dollar per hour increase in minimum wage and that the average McDonald's is staffed with 10 employees during prime hours; this means that the business owner must spend an additional $10 per hour. The goal is customer service within 90 seconds, so they expect to service 45 customers per hour. Keeping in mind that each person's meal would also have a minimum increase in supply costs because of the increase in minimum wage, a price increase of $.25 cents spread over the entire order would completely absorb the costs of the wage increase without impacting sales. A parent purchasing an adult meal and two kids' meals might pay an extra $.13 for the adult meal and $.06 for each kid's meal without even noticing the difference. It is doubtful that a shift this small would move the equilibrium point between quantities supplied and demanded (NetMba, 2010). Given that a minimum wage increase would also mean more available income for many of McDonald's potential customers, teenagers and the poor, I do not believe that a minimum wage increase would have a tremendous negative impact on the firm.

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