The McJob index

See one McDonalds, you've seen them all, and that's useful to economists

The Economist's famous Big Mac Index now has a sister: the McJob index.

The idea behind both is that the fast-food chain, which operates in hundreds of countries world-wide, deliberately tries to provide one of the most consistent experiences for customers of any company. You can't compare a restaurant in london with a dim-sum stand in Hong-Kong, but you can compare McDonalds' in both to each other.

With the Big Mac Index, that takes the form of looking at the price of Big Macs – one of the items guaranteed to be on every menu worldwide – and comparing across nations. The most recent examination found that the price of Big Macs in Switzerland was over 60 per cent higher, in dollar terms, than it was in the US, which implies that the Swiss franc was heavily overvalued.

Via Tim Taylor comes news that Orley Ashenfelter, an American economist, decided to hunt around (warning: .doc link) for a similar comparator at the other end of the chain; not produce, but labour. And again, McDonalds provides the answer. Work in one, and you're likely doing the same job you would be in any other branch around the world:

There is a reason that McDonald’s products are similar. These restaurants operate with a standardized protocol for employee work. Food ingredients are delivered to the restaurants and stored in coolers and freezers. The ingredients and food preparation system are specifically designed to differ very little from place to place. Although the skills necessary to handle contracts with suppliers or to manage and select employees may differ among restaurants, the basic food preparation work in each restaurant is highly standardized. Operations are monitored using the 600-page Operations and Training Manual, which covers every aspect of food preparation and includes precise time tables as well as color photographs. . . As a result of the standardization of both the product and the workers’ tasks, international comparisons of wages of McDonald’s crew members are free of interpretation problems stemming from differences in skill content or compensating wage differentials.

Ordinarily, the results would be much the same as the Big Mac Index, and tell us more about the relative strengths of countries currencies than anything else. But Ashenfelter also compares those wages to the cost of a Big Mac in the same country, to work out how many Big Macs Per Hour the "crew members" (that's the official terminology, apparently, of the Good Ship McDonalds) earn. That should tell us about the relative value of low skilled labour in the various countries examined. Here are his results:

What's really interesting about the figures is how well they map onto the overall productivity of the countries. There's an almost 1:1 ratio between the average output per hour in the country and the wage paid:

Note that this compares nationwide output per hour, not the output per hour of the actual McDonalds employees. That metric wouldn't vary much at all, since all the workers are trained the same way and using the same tools. Which makes this a fantastic demonstration of the fact that it's the market, not the company, which sets the wages. Places with low productivity have low wages, which McDonalds takes advantage of. Just because they then train their employees into high productivity workers, doesn't mean they'll start paying them the more.

A flooded McDonalds in Bangkok. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Getty
Show Hide image

How Theresa May laid a trap for herself on the immigration target

When Home Secretary, she insisted on keeping foreign students in the figures – causing a headache for herself today.

When Home Secretary, Theresa May insisted that foreign students should continue to be counted in the overall immigration figures. Some cabinet colleagues, including then Business Secretary Vince Cable and Chancellor George Osborne wanted to reverse this. It was economically illiterate. Current ministers, like the Foreign Secretary Boris Johnson, Chancellor Philip Hammond and Home Secretary Amber Rudd, also want foreign students exempted from the total.

David Cameron’s government aimed to cut immigration figures – including overseas students in that aim meant trying to limit one of the UK’s crucial financial resources. They are worth £25bn to the UK economy, and their fees make up 14 per cent of total university income. And the impact is not just financial – welcoming foreign students is diplomatically and culturally key to Britain’s reputation and its relationship with the rest of the world too. Even more important now Brexit is on its way.

But they stayed in the figures – a situation that, along with counterproductive visa restrictions also introduced by May’s old department, put a lot of foreign students off studying here. For example, there has been a 44 per cent decrease in the number of Indian students coming to Britain to study in the last five years.

Now May’s stubbornness on the migration figures appears to have caught up with her. The Times has revealed that the Prime Minister is ready to “soften her longstanding opposition to taking foreign students out of immigration totals”. It reports that she will offer to change the way the numbers are calculated.

Why the u-turn? No 10 says the concession is to ensure the Higher and Research Bill, key university legislation, can pass due to a Lords amendment urging the government not to count students as “long-term migrants” for “public policy purposes”.

But it will also be a factor in May’s manifesto pledge (and continuation of Cameron’s promise) to cut immigration to the “tens of thousands”. Until today, ministers had been unclear about whether this would be in the manifesto.

Now her u-turn on student figures is being seized upon by opposition parties as “massaging” the migration figures to meet her target. An accusation for which May only has herself, and her steadfast politicising of immigration, to blame.

Anoosh Chakelian is senior writer at the New Statesman.

0800 7318496