The push for a $15 federal minimum wage could cause fast-food chains to raise prices or slash jobs by turning to automation instead, a former McDonald’s CEO said.
McDonald’s last month announced it was raising minimum pay at corporate-owned stores across the US amid the current labor shortage, and said that it was expected average hourly wages across the US to reach $15 by 2024.
Former McDonald’s CEO Ed Rensi told Fox Business that the chain would either lift prices, or turn to automation software – and ultimately cut jobs.
Read more: McDonald’s franchisees blame hiring challenges on unemployment benefits and say an ‘inflationary time bomb’ will force them to hike Big Mac prices
Rensi said that unions were “going to force the cost of labor up, which means it’s going to force management to find alternatives, which means they’re going to lose jobs.”
“Technology is always cheaper than people,” he added.
McDonald’s announced last week that it was testing voice recognition software in 10 of its Chicago drive-thrus so it could automate orders. The fast-food chains plans to roll out the software, which is around 85% accurate, at other restaurants in the future, but current CEO Chris Kempczinski warned that this would be a slow process.
Other chains are also automating their drive-thrus and dining rooms. Burger King is adding conveyor belts that deliver orders to customers’ cars, while Panera Bread is switching to digital menu boards for both drive-thru and dine-in orders.
Fast food could get more expensive
Price hikes are already hitting the hospitality industry in response to the labor shortage and supply chain problems, and McDonald’s franchisees told Insider that it could cause them to increase Big Mac prices.
Rensi warned that even higher prices could come if restaurants raised wages.
“You got a choice, you go broke by raising prices or you go broke by losing money because you can’t raise prices,” he told Fox Business.
Kura Sushi, The Cheesecake Factory, and Texas Roadhouse have all lifted prices in the past to match wage increases, while Chipotle said that a 10% increase in wages would force it to increase menu prices by 2% to 3%.