$18 Big Macs: The Price of Falling Inequality?

The debate arose when Doug Henwood, a left-leaning newsletter writer and journalist, lamented the high prices he paid for a three-person McDonalds lunch on social media in late December.

After being attacked by progressives on the platform, Henwood reiterated his point by insisting that all he meant was that his very high-priced fast-food bill was representative of inflated food prices.

They argued that wage increases have caused employers’ payrolls to grow, which translates to higher-priced products. It seemed to them that Henwood was no longer towing their ideological line–he was in effect decrying the wins of the working class.

On the other hand, they support minimum wage hikes for those corporations’ employees that will undoubtedly cause the company to raise their prices across the board to cover the new wages.

Also, Henwood felt he had probably been price-gouged, seeing as he’d bought the meal at a highway rest stop, where restaurants and gas stations often use the limited availability of food and gas to their advantage. 

The above images were posted to X by FT Data journalist Sam Learner. He posted them with a tweet reading, “This was at a rest stop, but these McDonald’s prices are nuts right???”

The USDA calculated food prices increased 9.9 percent in that year. People eating at home experienced an 11.4 percent increase in their food expenses. For people who ate out at restaurants like McDonald’s they saw a 7.7 percent increase in prices.

Starbucks has also begun skillfully increasing prices through subtler means. They kept their price increases so minimal that hardly anyone noticed. However, they made drink modifications cost significantly more. This move was very smart, since it reduces perceived price increase, yet achieves real revenue growth since so many of their customers use specific modifications.

The Legislative Analyst’s Office found that inflation is slowing down in recent months which may give businesses some respite. However, prices have still increased by 19 percent in the overall economy since 2020.

In his first year, he initiated the American Rescue Plan Act which gave checks to every US adult, helping many Americans pay their bills. The same year he was able to pass an infrastructure bill worth over $1 trillion which put people back to work and improved public transit. Unfortunately, his efforts weren’t able to stem inflation effectively.

There is a tendency in voter’s minds to assign blame to whoever is in charge of the country at the time, regardless of whatever efforts they have put in to help the situation. In 2021, The New York Post reported that 80% of Americans blamed Biden for inflated prices.

To reduce income inequality, the cost of labor must rise, at least for some time period. But what happens is that the middle-class often experience labor cost increases as an encumbrance. Ideally, society could manage and offset the related price hikes through public policy, but that is often difficult to carry out fully.

But these trends might not be completely related. It’s very unlikely that the general consumer is going to care all that much about lowered income inequality, since it’s a fairly abstract concept. Who has the time or energy to contemplate this when it’s hard enough to buy the groceries your family needs to survive?

As labor demands have increased, low-wage workers have been able to negotiate for better compensation or simply up and leave valueless jobs. This has resulted in more expensive and less available services that are labor-intensive. For example, child care has become more difficult to secure as workers in the field have moved on to better occupations, and fast food has gone through the roof as employees have secured higher wages.

Rises in working class wages are probably a huge driver of increased productivity for businesses. If labor is extremely cheap, companies have no incentive to develop labor-saving processes or technologies. When payroll goes up, however, companies are almost forced into such innovation.

However, over time, businesses like McDonalds will likely achieve sufficient increases in productivity due to the continued pressure of labor costs. When they do, their products will become more affordable again.

In 2024, California will raise the minimum wage of fast food workers from $16 an hour to $20 an hour. A $4 increase may not sound like but it will provide a huge benefit for struggling workers. The wage increase will only apply to fast-food chains that have 60 or more locations in the United States.

In response to wage hikes, restaurants often choose to cut worker hours to compensate for the increased payroll cost. These companies may also choose to fire workers and stick the workers they keep with an increased workload.

As technology improves every year, the threat of workers being replaced by robots becomes more dangerous. For its part, McDonald’s has already developed a fully automated restaurant that only requires minimal human maintenance and interaction. The economy may not survive a massive shift from human labor to cheaper automated labor.

Potential fast-food workers are driven away from their jobs because of the low pay and lack of respect from employers. Many workers who left during the height of the pandemic have yet to return in large enough numbers to sustain the industry.

While boycotts can often be a passing fad on social media, there is a point where customers have had enough. A successful boycott is won in inches, and McDonald’s may be forced to reevaluate its pricing strategy if its competitors can provide a more affordable product.

The BBC reported that McDonald’s feels it is suffering from a misinformation campaign and is gearing up to deal with boycotts from political groups. Reuters reported in January that McDonald’s Malaysia plans to sue an Israel boycott in the country that has cost them substantial profits.

The Double Big Mac received excited buzz from users of social media, even though it is only being brought back for a limited amount of time. The item was last available for purchase in 2020, making it nearly four years since fans have had a chance to taste it.

Therefore, the middle class does not need to see the current $18 Big Mac combo as a symbol of the U.S. economy’s dire straits. Instead, it might just be the peak of a mountain we cannot yet see over. On the other side may lie the fertile fields of a less unequal, more productive society.