Wednesday, July 30, 2014

Why some restaurants pay much more than the minimum wage

Some cities and states are raising the minimum wage to $10 an hour or more.  McDonalds workers in big cities are threatening to go on strike for $15/hour.  Judging only from the headlines, one would think the restaurant industry, especially fast food chains, is dominated by low wage jobs.

This recent NYT piece shows otherwise.  Chains such as Shake Shack and In-N-Out Burger pay over $10 an hour simply because their owners think that is the right business decision.  Higher wages allow managers to hire from a more talented applicant pool.  They also reduce turnover and encourage longer term investments in training.  In some cases the personal values of ownership also play a role in wage setting.

The tougher question is why does In-N-Out pay relatively well and other chains stick to near the minimum wage.  After all the core business at McDonald's and In-N-Out is the same and the prices are comparable.  One possible difference is that more skill or training may be needed at In-N-Out where everything is made fresh.

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