You Get What You Pay For

Interesting conversation recently. It began with the subject of the fast food workers who were striking to earn $15 an hour. It continued with a discussion of how the middle class in the United States has been hollowed out, with meaningful, well-paying jobs going overseas as consumers search for the least-expensive items without regards to the impacts of those purchasing decisions.

McDonaldsFrom there, we talked about the high cost of Starbucks coffee versus the coffee at McDonald’s. I pointed out that, while there may be many reasons to explain the price difference between Starbucks and McDonald’s, one main reason has to be that Starbuck’s provides a relatively generous set of benefits to front-line employees, compared with McDonald’s. Kind of illustrates the point about the impacts of our purchasing decisions.

starbucks-barista-620xaA gross oversimplification, of course, but if we choose to buy from companies that poorly compensate their employees, we are sending a message. If we choose to buy from companies that treat employees better, we are sending another message.

 

10 thoughts on “You Get What You Pay For

  1. The problem with the McDonald/Starbucks comparison is that they’re two vastly different companies with very different customers. Here’s a good (and humorous) video about the economics involved.

    Low skilled jobs shouldn’t pay a living wage. I worked a minimum wage job on my first job. I acquired more skills, got better education, and so on… The people I worked with weren’t “lifers.” They were on their own path.

    • Thanks for your thoughtful comments. Agreed with your point about low-skilled jobs not necessarily having to pay a minimum wage. As a former general manager of movie theatres (where we staffed with entry-level employees), I understand the impact of increasing the minimum wage and how that most directly impacts the people earning the lowest wages.

      As for the point about McD and Starbucks being vastly different companies, I’ll disagree. This whole topic arose when I and my parents were talking about the McCafe branding concept and how McD is trying to tap into Starbuck’s market. Within that market, the comparison can be made more directly between the two companies and the question of why Starbuck’s prices are higher can be answered, in part, by the higher wages and benefits they provide employees.

      • Starbucks can charge higher prices because their average customer is upper-middle class and college-educated. The average McDonalds’ customer is poorer.

  2. Interesting subject. I didn’t know that Starbucks was relatively generous. In general, you have a good point that people’s desire for the cheapest product (middle class included) affects them in the long term.

  3. Very true. I already see problems with Obama care hitting the work places although I have very little information on what this medical coverage will really be.
    When Walmart moved in to this small town, a lot of the very expensive downtown boutiques went out of business. A lot of people blamed Walmart but the truth is that people shop where they can afford to shop and Walmart is affordable.
    I think we will see a lot of changes coming sooner than any of us want them, whether good or bad.

    • To one extent, people shop where they can afford. To another extent, they choose places that are cheaper (i.e. more affordable) in order to save money but not because they can’t afford somewhere else. Don’t know if I can articulate it well, but a lot of people seem to buy more things of a lower quality and cheaper price, things they often don’t need, instead of buying fewer things that they do need but paying a “fairer” price for them.

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