Friday, September 18, 2015
Why does Australia pay McDonald's workers more?
The article below pretends to be for a businesss audience but is spectacularly naive. It's a rather good example of American ethnocentrism, in fact.
Just for starters, they fail to mention that one Australian dollar these days is worth only about 72c in U.S. dollars. So A$15 converts to only $US10.80. It is true that international exchange rates often depart considerably from buying power in the countries concerned but, as it happens, PPP adjustment does not alter the US/AU ratio much. So the discussion below is based from the beginning on a false premise and could reasonably be dismissed without further ado.
Even at around $10, however, Australian workers do get more than some U.S. workers in similar jobs. Why? The easy answer is that Australia's taxes are somewhat higher than in the U.S. Bottom-range workers in the U.S. pay no income tax at all whereas the same people in Australia would usually pay some tax. So the higher salary is needed to cope with the higher tax burden
And now I come to the politically incorrect bit -- VERY incorrect, mainly because it is true. When one walks into an Australian McDonalds, one is normally served by bright and enthusiastic white teenagers. When one walks into an American McDonalds, one is often greeted by very relaxed blacks. I don't think we need any statistics to tell us that the Australian workers are more productive. So fewer of them are needed to do the job. So therefore they can be paid more. They earn it.
There is more to be said but I think I have said enough -- JR
Last week, fast-food workers around the United States yet again walked off the job to protest their low pay and demand a wage hike to $15 an hour, about double what many of them earn today. In doing so, they added another symbolic chapter to an eight-month-old campaign of one-day strikes that, so far, has yielded lots of news coverage, but not much in terms of tangible results.
So there's a certain irony that in Australia, where the minimum wage for full-time adult workers already comes out to about $14.50 an hour, McDonald's staffers were busy scoring an actual raise. On July 24, the country's Fair Work Commission approved a new labor agreement between the company and its employees guaranteeing them up to a 15 percent pay increase by 2017.
And here's the kicker: Many Australian McDonald's workers were already making more than the minimum to begin with.
The land down under is, of course, not the only high-wage country in the world where McDonald's does lucrative business. The company actually earns more revenue out of Europe than than it does from the United States. France, with its roughly $12.00 hourly minimum, has more than 1,200 locations. (Australia has about 900).
So how exactly do McDonald's and other chains manage to turn a profit abroad while paying an hourly wage their American workers can only fantasize about while picketing? Part of the answer, as you might expect, boils down to higher prices. Academic estimates have suggested that, worldwide, worker pay accounts for at least 45 percent of a Big Mac's cost. In the United States, industry analysts tend to peg the figure a bit lower—labor might make up anywhere from about a quarter of all expenses at your average franchise to about a third.* But generally speaking, in countries where pay is higher, so is the cost of two all-beef patties, as shown in the chart below by Princeton economist Orley Ashenfelter. Note Western Europe way out in the upper-right hand corner, with its high McWages and high Big Mac prices.
That said, not every extra dollar of worker compensation seems to get passed onto the consumer. Again, take Australia. According to the The Economist, Aussies have paid anywhere from 6 cents to 70 cents extra for their Big Macs compared to Americans over the past two years, a 1 percent to 17 percent premium. If you were to simply double the cost of labor at your average U.S. Mickey D's and tack it onto the price of a sandwich, you'd expect customers to be paying at least a dollar more.
Why don't they?
To start, some Australians actually make less than the adult minimum wage. The country allows lower pay for teenagers, and the labor deal McDonald's struck with its employees currently pays 16-year-olds roughly US$8 an hour, not altogether different from what they'd make in the states. In an email, Greg Bamber, a professor at Australia's Monash University who has studied labor relations in the country's fast food industry, told me that as a result, McDonald's relies heavily on young workers in Australia. It's a specific quirk of the country's wage system. But it goes to show that even in generally high-pay countries, restaurants try to save on labor where they can.
It's also possible that McDonald's keeps its prices down overseas by squeezing more productivity out of its workers. Researchers studying the impact of minimum wage increases on American fast food chains in the Deep South have found that while restaurants mostly cope by raising prices, they also respond by handing their employees more responsibility. It stands to reason that in places like Europe and Australia, managers have found ways to get more mileage out of their staff as well.
Or if not, they've at least managed to replace a few of them with computers. As Michael Schaefer, an analyst with Euromonitor International, told me, fast food franchises in Europe have been some of the earliest adopters of touchscreen kiosks that let customers order without a cashier. As always, the peril of making employees more expensive is that machines become cheaper in comparison.
Finally, McDonald's has also helped its bottom line abroad by experimenting with higher margin menu items while trying to court more affluent customers. Way back in 1993, for instance, Australia became home to the first McCafe coffee shops, which sell highly profitable espresso drinks. During the last decade, meanwhile, the company gave its European restaurants a designer make-over and began offering more localized menus meant to draw a higher spending crowd.
So if President Obama waved a magic wand tomorrow and raised the minimum wage to $10 or $15, does this all mean that U.S. fast food chains would be able to cope? "Were that to happen overnight, it would be a hugely traumatic process," Schaefer told me. After all, virtually every fast food franchise in the country would have to rethink its business model as their profits evaporated. But as the international market shows, the models are out there. It would certainly mean more expensive burgers. It would almost definitely mean fewer workers, as restaurants found ways to streamline their staffs, either through better management or technology. And it might mean fewer chains catering to the bottom of the market.
Australia shows us what parliamentary democracy looks like
Comment from Canada
That was quick. Tony Abbott had been the domineering Prime Minister of Australia for barely two years before he was dumped on Monday.
But it wasn’t the electorate that sent him packing. Nor was it a leadership convention. Mr. Abbott was removed by his own MPs. Regime change took barely five hours.
There’s a lesson here for Canadians. Prime ministers and party leaders are supposed to rise out of Parliament, not rule over it. The primacy they claim for themselves is granted by their parliamentary colleagues and should be easier to withdraw. In Australia, all it took was a 54-44 vote against Mr. Abbott by his fellow Liberal MPs and he was history, replaced by Malcolm Turnbull.
Mr. Abbott lost the confidence of his caucus, as the country’s resource-based economy faltered and support for his government ebbed in the polls. His combative style and tendency to forgo collective decision-making in favour of idiosyncratic “captain’s picks” further alienated his colleagues. Last February he faced down a rebellion in the ranks, promising to consult more with MPs and reduce the influence of his chief of staff. The remake was unsuccessful, triggering Monday’s leadership ballot.
In Australia, such challenges are built into the system – the country has had four changes in prime-ministerial leadership in the past five years. Canberra’s members of Parliament have that power, and they’re not afraid to use it. In Canada, in contrast, while it is easy for a leader to get rid of bothersome MPs, it’s nearly impossible for MPs to collectively remove and replace their leader.
Critics of the Australian approach say that it undermines grassroots democracy and concedes too much authority to MPs. But that misses how parliamentary democracy is supposed to work. Over time, Canada has centralized power in the party and the prime minister, leaving democratically elected members of Parliament – and voters elect MPs, not PMs or even parties – almost irrelevant. The system is upside-down.
Canada could soon look more like Australia, thanks to Conservative MP Michael Chong’s recently adopted Reform Act. When the next Parliament is formed, each caucus will be given the choice to reclaim some of its lost authority by triggering a leadership review. The balance between MPs and party leaders has to be restored.
Racism claims rock Australia's Bachelorette
The Bachelorette Australia star Sam Frost has slapped down claims the show is racist, saying she believes race was never a factor in deciding the show's all-white cast.
Network Ten caused an outcry after releasing an image of the 14 contestants who had been picked "after a nationwide search involving thousands of men" to compete for Frost's heart on the dating show.
The image immediately prompted criticism over the show's lack of cultural diversity, given the wide search for contestants.
"I don't think they [the producers] even thought about it," Frost said on the Kyle and Jackie O show. "I don't think it was a thing until the media made it a thing."
Last year's season of The Bachelor Australia was similarly accused, with Ten proving the show's diversity by releasing a number of the contestants' ancestral history.
But Sandilands believed the controversy was just a coincidence, and said when it comes to race today's younger generations are colourblind.
"I think a lot of young people don't think like that. They don't think 'Oh we better have a black, we better have a brown'," he said.
"We just think people are people and whoever is on the show is on the show."
Frost agreed: "I think even if you had a black person on there they would think, 'Oh, token' so you can't win."
In 2012, producers of the US version of The Bachelor, the American Broadcasting Company (ABC), were unsuccessfully sued by two African American men claiming their exclusion from the show was racial discrimination.
The ABC successfully argued that not casting non-white contestants was protected under the First Amendment as a form of creative expression, although they denied ever having done so.
New Zealand will be happy if Australia's China free trade deal fails
New Zealand already does good business with China. If Australia got savvy, it might pose serious competion to NZ products
New Zealand’s prime minister will be “quite happy” if Australia fails to seal its controversial free trade deal with China.
The new government under Malcolm Turnbull has fast-tracked legislation for the agreement, trying to pressure Labor – which has concerns it will cost Australian jobs – to lock in the deal.
But New Zealand’s John Key told the Australian Financial Review that his country’s trade deal with China had been 11 times greater than the most optimistic estimates and it would be in New Zealand’s competitive interests if Australia’s failed.
“I’m a massive proponent of free trade, and the benefits of our FTA have been 11 times greater than the most optimistic estimates,” he said.
“The numbers speak for themselves. Having negotiated an agreement that is high quality, you’d like to grab it with both hands. New Zealand will be quite happy if you don’t.”
Labor said the government was starting to play a “political game” with the China deal, after introducing legislation on Wednesday.
A vote can’t be held until after a parliamentary committee hands down its report on the details in mid-October.
“Yet they wanted to say ‘oh look we’re upping the ante, we’re putting pressure on’, when they know no one else can speak on the bill [yet],” opposition frontbencher Tony Burke told Sky News