McDonald's is losing its low-income customers. Economists call it a symptom of the stark wealth divide

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In the early 2000s, after a severe slump, McDonald’s orchestrated a major turnaround, with the introduction of its Dollar Menu.The menu, where all items cost $1, illustrated just how important it was to market to low-income consumers — who value getting the most bang for their buck.Coming at a time of flagging growth, tumbling stock and the company’s first report of a quarterly loss, the Dollar Menu reversed the fast food giant’s bad fortune.

It paved the way for three years of sales growth at stores open at least a year and ballooned revenue by 33%, news outlets reported at the time.But no longer.Prices have risen so high at the iconic fast food chain that traffic from one of its core customer bases, low-income households, has dropped by double digits, McDonald’s chief executive Christopher Kempczinski told investors last week.

Meanwhile, traffic from higher-earners increased by nearly as much, he said.The struggle of the Golden Arches — long synonymous with cheap food for the masses — reflects a larger trend upending the consumer economy and making “affordability” a hot policy topic.McDonald’s executives say the higher costs of restaurant essentials, such as beef and salaries, have pushed food prices up and driven away lower-income customers who are already being squeezed by the rising cost of groceries, clothes, rent and child care.With prices for everything rising, consumer companies concerned about the pressures on low-income Americans include food, automotive and airline businesses, among others, said analyst Adam Josephson.

“The list goes on and on,” he said.“Happy Meals at McDonald’s are prohibitively expensive for some people, because there’s been so much inflation,” Josephson said.Josephson and other economists say the shrinking traffic of low-income consumers is emblematic of a larger trend of Americans diverging in their spending, wi...