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Race to the bottom

Monday, Jan 31, 2005

I’ve seen plenty of arguments pro and con about the impact of a single state increasing its minimum wage (as Illinois did). It’s not clear from the evidence that it has a huge impact.

But new technologies appear to be allowing corporations to change the dynamic.

The McDonald’s restaurant in Hermiston, Oregon is outsourcing customers drive-thru meals to North Dakota.

The restaurant on Highway 395 has outsourced one of the most important jobs at the drive-through window — order taking.

When a customer drives through, they’ll be patched through to Grand Forks, North Dakota to place the order. Why? Because the minimum wage in North Dakota is five-dollars and 15 cents, compared to Oregon’s seven-dollars and 25 cents.

I wonder when McDonald’s finally outsources this task overseas at a buck an hour.

- Posted by Rich Miller        

  1. - Anonymous - Monday, Jan 31, 05 @ 8:12 pm:

    The McDonalds in Cape Girardeau did the same thing for awhile. They quit becasue too many orders were getting screwed up by the remote location with the counter people in Cape were getting yelled at by customers.

  2. - Drew Hibbard - Monday, Jan 31, 05 @ 10:47 pm:

    This move on McDonald’s part really doesn’t make sense to me.

    At most all the McDonald’s I’ve been to, the person who is taking your order is also the person that fills it, or does other responsibilities. This seems like it would just serve to add a position on the corporate side, and in turn result in extra employees they don’t really need, regardless of how much they’re actually being paid.

  3. - Greg - Tuesday, Feb 1, 05 @ 10:33 am:

    NPR did a story on outsourcing to go orders. I imagine there have been integration problems as one poster noted, but the system works. The order takers like it better because they don’t have to be around the food AND THEY MAKE MORE because their secondary purpose is to upsell the customer on supersizes (eek!) and deserts, etc.

    It does take some time to adjust, but as in a lot of chain restaurants today, the order is entered into a computer terminal (the register) and is then printed off or delivered to a monitor in the kitchen. With telecom advances, it makes sense to outsource this kind of thing. An order taker can easily handle more than one location which cuts down on labor. They, themselves, can earn more money because of their upselling.

    Finally, with regard to the minimum wage. This Federal Reserve study sheds some light on the relationship between minimum wages laws and unemployment.

  4. - earnest - Tuesday, Feb 1, 05 @ 11:13 am:

    Academic studies have found no difference in employment after the minimum wage was changed on a state-by-state basis. For instance, Princeton economists looked at the Philadelphia area after NJ raised its minimum wage. They found no difference in hiring trends at fast food restaurants in the Pennsylvania and New Jersey suburbs.

    For pop culture confirmation of this trend, consider that Harold and Kumar did not have to drive to Pennsylvania for White Castle - they were able to get it right there in Jersey.

    But the anecdotal evidence offered by the last poster is significant — the idea that the order-takers like it, because they make more money by encouraging people to up-order. That pretty much puts the lie to the idea that this is driven by the minimum wage issue. They’re not paying people the North Dakota minimum wage - they’re paying them more. This is an experiment mostly driven by the question of whether you can do it efficiently this way and whether you can more effectively train people in a central location to up-sell.

    An order-taker at a typical McDonald’s drive through is either doing other things or it’s a very busy drive through. The $2/hour is not a significant component of costs on a busy drive through, which would do about $500 of business in an hour, and at a lightly used drive-through, you need the efficiencies gained from having this person do other things.

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