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Confirmation Bias: A McDonald’s Wage Hike

Aug 9, 2013 • Behavioral Economics, Businesses, Economic Debates, Labor • 272 Views    No Comments

After telling us that the price of a Big Mac would minimally rise if McDonald’s doubled its wages, The Huffington Post redacted its article.

The Huffington Post story that first appeared on July 29 included these paragraphs:

  • “McDonald’s can afford to pay its workers a living wage without sacrificing any of its low menu prices, according to a new study provided to The Huffington Post by a University of Kansas student.”
  • “Doubling the salaries and benefits of all McDonald’s employees — from workers earning the federal minimum wage of $7.25 per hour to CEO Donald Thompson, whose 2012 compensation totaled $8.75 million — would cause the price of a Big Mac to increase just 68 cents, from $3.99 to $4.67, Arnobio Morelix told HuffPost. In addition, every item on the Dollar Menu would go up by 17 cents.”

Seeing the article, the Columbia Journalism Review cited “poor reporting.” In their analysis, they point out that the data was provided by an undergraduate who appears not to have done authentic academic research. Furthermore, based on a McDonald’s 10K, they conclude that the 68 cents number was too low. Also though, implying that the 68 cents was a small increase was misleading because, at 17%, it was a substantial price hike. Finally, the article did not differentiate between the financials of 80% of all McDonald’s that are owned by franchisees and company run restaurants.

Before the Huffington Post corrected its mistakes, the story rippled through the internet. Forbes, ABC News, the San Francisco Chronicle, BusinessInsider, the Bay City Times, MSNBC and even “Truthdig” were among a long list of websites that condemned McDonald’s. Sadly, looking at 6 of these stories, I found that only 3 printed a correction.

The Huffington Post saga reminded me of confirmation bias. Our tendency to select and belief facts that prove what we already believe is true, confirmation bias might be the reason the facts in the original story were insufficiently checked.

Sources and resources: The McDonald’s wage story started at The Huffington Post, it spread through the internet and then was challenged by The Columbia Journalism Review. And econlife has more on confirmation bias here.

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