MY MCDONALD’S INDEX is the way I keep track of long-term inflation. I worked at McDonald’s in 1971 and 1972, while in high school. The menu was much simpler back then: hamburger, cheeseburger, Big Mac, fish sandwich, small and large fries, coffee, small and large soda, and shakes—one size only.
We didn’t have Quarter Pounders, chicken sandwiches, salads, lattes, mochas, frappes, smoothies, sundaes, McFlurries, super-sized drinks, meal combinations or Happy Meals. The food was not made fresh. Sandwiches were available in warming bins. Customers gave us their orders. Our job was to grab their food and drinks as quickly as possible.
Back then, our cash registers didn’t determine how much customers owed. We totaled it in our head, mentally added tax, and told the customer the amount due. We entered the total in the cash register, took their money and, without the help of a machine, calculated their change. I still remember the prices of almost every item on the entire menu.
I’ve developed two McDonald’s indexes. The first is my Big Mac index. Back then, a Big Mac was 57 cents. Today, I paid $4.73 for a Big Mac at my local McDonald’s. Over 50 years, the cost of a Big Mac has increased just over eightfold.
My second McDonald’s index is a bit more complicated. Back then, McDonald’s had an advertising slogan— “two hamburgers, fries, and a Coke . . . and change back from your dollar.” It was true.
Hamburgers then were 20 cents, small fries were 20 cents, and a small soda was 15 cents. Two hamburgers, fries and a soda came to 75 cents. Add three cents in tax for a total of 78 cents. If you paid with a dollar bill, we gave you 22 cents in change.
Today, at my local McDonald’s, two hamburgers, a small fries and a small soda come to $5.56. For this meal, prices have increased a bit more than sevenfold in 50 years.
Twice recently, I’ve had the opportunity to speak with 12th grade students. I get their attention by telling them that I’m going to give each of them $100. But there are two catches.
Before I explain the catches, I ask them to imagine that their grandparents are going to celebrate their impending graduation by taking them to McDonald’s. I ask them how much it will cost for the three of them to eat there. Most say it will cost $15 or $20.
I then give them the details of my offer. I will give them $100 in about 50 years—when their first grandchild is about to graduate from high school. The first catch: I will need to be alive in 50 years to give them the money. The second catch: Even if I am alive, $100 probably won’t be enough to buy a meal at McDonald’s for three people.
Using my McDonald’s index, I explain that if prices have increased sevenfold or eightfold over the past 50 years, we shouldn’t be surprised if prices increase another sevenfold or eightfold over the next 50 years. If it costs $15 or $20 for three people to eat at McDonald’s today, it’ll probably cost $100 to $150 for their modest celebration 50 years from now.