McDonald’s, April 4th, 10 a.m. It’s the morning lull here. The moms delivered the kids to school hours ago. The people who use the drive-up window on their way to work are long gone. In fact, I’m almost alone, except for the crew that works here.
Earlier this morning McDonald’s announced that it was going to add 50,000 jobs. That’s a 7 percent increase in the number of people already working at its 14,000 U.S. restaurants. The hiring event, online and at its restaurants, is scheduled for April 19th.
Two years ago I celebrated the deposit of my first Social Security benefit at a McDonald’s in Santa Fe. Today, it’s a McDonald’s in Dripping Springs, Texas. Back then I noted that McDonald’s shares had only fallen 5 percent since the market peak in 2007. During the same period, the S&P 500 had plunged 46 percent. Today MCD shares go for about $76, a healthy increase of 37 percent. More important, while the S&P 500 has gone nowhere over the last 5 years, McDonald’s is up about 120 percent. That’s an appreciation of about 14 percent a year, compounded— enough to make you remember the ‘good-old-days’ before 401(k) plans became 201(k) plans.
So I’m happy for McDonald’s and all its shareholders.
It’s the country I’m worried about.
Let me explain why.
The job increase press release says that McDonald’s and its franchisees will spend an additional $518 million on wages and salaries for the new employees. That’s a nice number until you divide it by 50,000 workers and come up with an average paycheckof $10,360. The same figures also imply that the new workers will be paying $68.9 million in employment taxes when the 5.65 percent employee tax is added to the 7.65 percent employer tax this year, a bit more when the tax goes back to its full rate in 2012. Of the amount paid in, about $15 million will go to Medicare. That leaves $53.9 million for Social Security benefits.
The Social Security website tells us that the average benefit check for retireesis $1,174 a month, or $14,088 a year. Do the math and you find that it will take 50,000 new jobs at McDonald’s to support 3,826 average retirees. That works out to 13 workers to support one retiree. Since a typical McDonald’s has a crew of about 50 workers, it also means that one new McDonald’s will generate employment taxes to support nearly 4 retirees. It also means the entire expansion, as heroically large as that 7 percent is, will pay the benefits for fewer than 4,000 new retirees.
Millions more to retire soon
According to the most recent Social Security Trustees report, the number of Americans who are 65 and older is expected to increase by about 1,280,000 in each of the next 5 years. That’s about 3,500 a day. So the McDonald’s expansion will cover a tad over a single day of retiree growth. And the average retiree benefit, at $14,088 a year, will be 36 percent more than the $10,360 average paycheck of those 50,000 new hires, very few of whom will have any form of medical insurance.
According to the Congressional Budget Office, Social Security payments this year will exceed program revenue by $130 billion. It would be $45 billion without the 2 percent employment tax “holiday.” Yes, that’s billion with a “b.” The shortfall is about equal to the benefits that would be received by 9.2 million retirees.
Fortunately, McDonald’s isn’t the only job source in America
Of course, McDonald’s isn’t the only source of jobs and employment taxes in America. It’s just one of the fastest growing. With an average wageof about $39,000 a year, a typical new job in the U.S. would contribute about $4,836 to Social Security— if the full tax were being collected. That, in turn, means that we need nearly 27 million new jobs to cover the $130 billion shortfall this year.
That’s twice as many people as the 13.6 million people who are currently unemployed.
These figures are napkin doodlings fueled by McDonald’s coffee. Actual results may, as they say, differ. And the official figures will, no doubt, be subject to revision and political spin. But if you have followed the numbers this long, you’re probably getting nervous. You don’t need precise arithmetic to see the big picture.
Some would call it a Can’t-Get-There-From-Here problem.
Photo by Kaboompics .com from Pexels
(c) A. M. Universal, 20011
On the web:
McDonald’s takes aim at “McJob” with U.S. hiring spree http://news.yahoo.com/s/nm/20110404/bs_nm/us_mcdonalds
A Meditation on McDonald’s (02/22/2009) http://assetbuilder.com/blogs/scott_burns/archive/print/2009/02/20/a-meditation-on-mcdonalds.aspx
Maximum Social Security benefit http://www.ssa.gov/OACT/COLA/examplemax.html
Social Security full retirement age by year of birth http://www.socialsecurity.gov/retire2/agereduction.htm
Median and Average Wages in U.S. http://www.ssa.gov/oact/cola/central.html
Wages at McDonald’s http://www.payscale.com/research/US/Employer=McDonald’s_Corp/Hourly_Rate
Monthly benefits for the average retired worker and other information http://www.ssa.gov/pubs/10024.html
Factcheck.org on Social Security red ink (02/25/2011) http://factcheck.org/2011/02/democrats-deny-social-securitys-red-ink/
January 29, 2006: Fine Tuning the Social Security Benefits Decision