Wholly Misleading Half Truth: What McDonald’s can Afford

According to MarketWatch, at writing (July 3rd, 2015) dividend yield is 3.54% and the market capitalization 92.18 B$. This works out to a total dividend of 3.26 B$, annually.  This is for the McDonald’s corporation, which runs about 15% of the restaurants called “McDonald’s”. Presumably, the 20 B$ figure asxumes the other 85% of restaurants are as profitable, and pay as much dividend, as those owned by the McDonald’s corporation. Also, it assumes that the profits of McDonald’s are solely from restaurants.

Considering that those restaurant franchises have to pay McDonald’s franchising and marketing fees, and often rent to the McDonald’s corporation, those are not reasonable assumptions to make.

To get better estimates, look at the income per employee of about 11 k$. Assuming this is based on full time equivalent employees, a raise of 5 $/hr for the 2087 hours of full time employment, would reduce that income to 893 $/year. In other words, it would hardly be worth it for McDonald’s to have the risks of running a business.

Strawman: Hard Work and Wealth

Leaving aside the assumption that all African women are the same (at least in these two regards), this is attacking a very convenient strawman. Nobody says that hard work guarantees wealth. Certainly not in countries where you have to pay off officials to do anything.

What conservatives say is that in a relatively free market being enterprising and working hard typically means you’d be able to gain wealth. Most of Africa doesn’t have a very free market.

h/t Layla Sumner

Bad Comparison: Laundry List of “Rights”

The problem with this list is that it ignores externalities. For example, “Don’t like alcohol? Don’t drink alcohol.” This is probably fine for most people, but there are people who become violent when they drink. Such people should probably not be allowed to drink alcohol. Cigarettes are fine for people to smoke in some places, but there are good reasons not to allow them in crowds.

Unfortunately, the question of where individual rights end and effects on others begin is not as trivial as the meme makes it seem.

h/t Ian Barrs

h/t

When you buy from a large business, you are contributing the CEO’s third vacation home. You are also contributing to the mortgage fund for Elmer Employee, who is middle class and would like to keep his job to keep paying that mortgage. Considering how many Elmers there are, vs. how many CEOs, you are probably doing a lot more of the second.

Buying from a business that strives to make you happy is a good thing. However, any business, large or small, can be in that category or out of it.

h/t David Burkhead

Unexamined Assumptions: War and Poverty

There are two assumptions hiding in this meme:

1. By properly distributing a hundred billion dollars it would be possible to eradicate poverty all over the world.
2. Said distribution would bring world peace, presumably by eradicating poverty.

The first assumption is challenged by decades of foreign aid of which a large percent went to Swiss bank accounts belonging to various kleptocrats. It might be possible to ensure foreign aid actually goes where it is supposed to, rather than to the people who own the local government, but that is not what the evidence suggests. The local government has the guns, so it can usually persuade people to pay up. Of course, even if the foreign aid did get where it needs to, poverty has other causes than shortage of money. Without dealing with the underlying cultural causes, any injection of money would be at best a short term band-aid.

The second one refuted by any war fought for ideology or between countries that aren’t desperately poor. The west front in WWI, the American-Mexican war, etc.

Affording to Consume: Wholly Misleading Half Truth

Technically speaking, this is true. An economy in which one person owns everything and nobody else owns anything won’t be a consumer-based economy. However, what has that got to do with anything? In a real economy, if consumers can’t afford to consume then vendors are not able to sell. This can lead to two consequences:

1. If the vendors can afford to sell for less and stay in business, they would do that and live with the lower profits. They might have to cut staff, pressure their suppliers to drop prices, etc.
2. If the vendors cannot afford to sell for less and stay in business, they would go out of the business.

If #2 is actually happening, we’d expect the range of goods and services available for sale to shrink. Is that happening? We could buy tablets five years ago, but there aren’t any available in the store anymore? When your factory-made shirt wears out you’d have to sew your own because they’re no longer on sale? If not, then I think we still have a consumer-based economy.

I don’t know what the meme author is trying to push, but if it is a higher minimum wage then there is another Economics 101 issue. When the cost of something goes up, demand for it goes down. This includes unskilled labor.

h/t Eric Gustafson

Paying More for More Profitability?

Guest post by Sean Gartlan:

Talk about being intellectually freakin dishonest.
McDonalds..big name chain…80 some odd percent of the stores are run by franchisees, small business entreprenuers. In and Out? Wholly Corporate owned and run. So guess what? they may think they’re comparing apples and apples…but they ain’t, But the people who create these memes won’t mention that little fact because it DESTROYS their talking point that all corporations are greedy and inherently EEEEEBIL. fools.

…

McD’s has 35 THOUSAND stores in every state in the union I do believe, and a number of other countries. In and Out. 290 stores in..5 fucking states. Apples and Oranges children. apples and oranges

Ori: A chain that optimizes to having restaurants only in the best locations can pay a higher starting wage than one that is everywhere.

Minimum Wage for Jobs that can be Automated

Technically speaking I agree with this meme, a higher minimum wage will accelerate automation. However, it ignores Moore’s Law. A job that is worth automating today at 15 $/hr would be worth automating at 5 $/hr in five years’ time. Those jobs are going away anyway.

Unexamined Assumption on Gas Prices

The underlying assumption is that Obama can manipulate gas prices. How? Does he have, for example, the willing cooperation of the oil industry whose pipeline he blocked?

h/t @Susan Fred Schmerling

And This is a Bad Thing How?

This meme has three separate claims:

1. Illegal immigrants send money home.
2. Illegal immigrants’ kids get a free education at US tax payer expense.
3. Illegal immigrants scam welfare to get free lunches, medical treatment, etc.

#3, if true, is a bad thing. However, the rest of the meme is much more misleading.

#2 assumes that the illegal immigrants don’t pay taxes. This may be true for income taxes (although if they work for a company, and that company cannot claim their wages as deductible expenses, it comes out a wash). It isn’t true for other taxes. Jose Labor might be going to my kids’ school, but he lives with his parents (Manuel and Sofia) in an apartment they rent. The apartment complex pays the property taxes on the apartment, and that is what funds Texas schools. When Sofia goes to the grocery store, she pays sales taxes that might also go to the school district.

Last, and worst, #1 may be true, but if so it means that the US got 56 billion dollars of labor for free. We don’t have to pay to create dollars. Our ability to create dollars is limited by inflation targets. If these 56 billion dollars went away and are no longer chasing goods and services in the US, that isn’t a problem.

h/t Melissa McDowell

PS

Heather Mooney brought up a good point on Facebook. This labor changes the distribution of money within the US. For example, if Manual Labor builds houses for less it might make Homer Homebuyer and Cindy Contractor richer, for example, while making Bret Builder poorer.