“Yes, McDonald’s Can Do Better”: More Than Greed, Profitable Fast Food Companies Could Pay A Living Wage
When I was 18, I spent a year and change flipping burgers in one of those restaurants where customers eat from a tray balanced across their car windows. It was one of the three jobs I held at the time, affording a simple budget and enough left over to save up to go to college after a couple of years. I put in hard hours for my employer and it eventually worked out just fine for me. It also makes for a nice story, but one that is embarrassingly dated. The fast food industry in which I worked is not the fast food industry of America today—just ask the thousands of workers on the streets, standing up for same opportunity to get by and get ahead that built the American Dream.
For today’s fast food work force, erratic scheduling makes holding down more than one job impossible—you can’t commit to a second employer if you’re on call for the first. At the same time, low wages barely cover basic household needs, leaving millions of workers in poverty despite being employed, and making saving for the future impossible. And the 18-year-old serving your root beer float? Now she is 29, and likely to have been to college and have a family to support.
What else has changed since I was behind the counter? Oh yeah, fast food companies are making more money than ever.
In our report “A Higher Wage is Possible,” my co-author Amy Traub and I show how Wal-Mart could meet worker demands for a fair wage without passing costs onto consumers. Every year, Wal-Mart directs a portion of its profits to buying back its own public stock, consolidating ownership and increasing earnings per share. If they used that money to invest in their workforce instead, Wal-Mart could offer a raise of $5.83 per hour to all of its 825,000 low wage workers. In addition to pulling thousands of families out of poverty, Wal-Mart would see lower turnover and higher productivity and contribute to economic growth that benefits Wal-Mart, retail, and the economy overall.
Share repurchases have become an increasingly popular business strategy. Last year, McDonald’s Corp spent $2.6 billion on them. YUM! Brands Inc, which includes Taco Bell, KFC, and Pizza Hut, spent $965 million. But while the long term value of buying back shares accrue mainly to those executives whose compensation is tied to stock performance, using that money to invest in the workforce would have benefits that apply to all stakeholders—workers, customers, communities, and shareholders too.
A quick calculation shows that McDonald’s and Yum could give raises of $2 to $3 per hour to every U.S. worker at their restaurant locations using just the money they now spend buying back shares. Since the details of their corporate pay structures are not public record, that is a raise applied to even the workers already earning above the threshold of $15 demanded on the streets. If we broke out the low-wage workers, or added in the billions in additional money paid to dividends each year, that raise could go even higher—without costing customers a dime.
There are lots of good reasons why fast food employers should do better for their workforce. It’s a win-win situation for everyone with a stake in the economy—and that is everyone. Moreover, fast food can do better, by using the money now syphoned to the top to invest in their workers and grow the economy.
To people like me who made their way through jobs similar to those of the workers on the street yesterday, the cripplingly poor terms of employment in today’s fast food industry look like more than just greed. It looks like the end of opportunity and the exchange of performance on paper for the substance of the American Dream.
By: Catherine Ruetschlin, The American Prospect, December 6, 2013
“Higher Wages Are Good For Companies Too”: The Intellectual Rigors Of Low-Wage Work Are Too Frequently Dismissed
Barbara Gertz is 25 and works at a Walmart in Aurora, Colorado, stocking shelves on the overnight shift. She and her husband, a cement mason, can get by most months, but there have been days Barbara has called in sick because she can’t afford the gas to drive to work.
Higher wages would obviously benefit Barbara and her colleagues at Walmart who protested last Friday. They would also benefit fast food workers striking tomorrow in 100 cities across the country who earn, on average, $11,000 a year.
But according to Zeynep Ton, an adjunct professor at MIT Sloan School of Management, higher wages are better for companies, too.
Ton’s book, The Good Jobs Strategy: How the Smartest Companies Invest in Employees to Lower Costs and Boost Profits, comes out in January and in it, she describes how large retail companies like Mercadona, Trader Joe’s and Costco have been able to invest in workers without raising prices. “These companies think about employees not as costs to minimize but as capable human beings with the potential to generate sales and profits,” Ton recently wrote on her blog. “Doesn’t all this cost a lot? Of course it does. But that’s only part of the strategy. These companies also design and manage work in a way that makes their employees more productive and takes full advantage of a committed, motivated, and capable (that is, well-paid, well-trained, and well-treated) workforce.”
Here’s one of Ton’s favorite examples of why the so-called Good Jobs Strategy works: During the recession, both Walmart and Mercadona, Spain’s largest supermarket chain, had to cut costs and did so by reducing the variety of products they carried. Walmart customers were annoyed when their local store stopped carrying their favorite brand of potato chip, or toilet paper or T-shirt. Sales dropped; Walmart’s chief merchandising officer had to leave the company. At Mercadona, customers were unfazed if an item they wanted was out of stock because workers, who as a matter of company policy are trained in every department, were able to recommend a replacement. Sales figures increased, even after Mercadona reduced its prices by 10 percent. Workers would let management know if there was a particular product that too many customers seemed to miss. “They could do this because they are empowered, cross-trained and have the time to engage the customer,” Ton writes. By comparison, Barbara told me that “there’s just a total lack of respect” for associates at Walmart. She mentioned a friend who politely pointed out an inventory problem to her supervisor and was fired the next day for the very mistake she tried to correct.
Ton’s argument is that workers who are paid fairly and treated respectfully are more productive and more innovative, across industries and on all salary levels, at Google or at Walmart. “Low-cost retail work is not trivial and how you perform that work makes a big difference for the company’s bottom line,” Ton has written. Retail work requires intuition and charm, quick decision-making, a good memory. As Mike Rose, an education professor at UCLA, has eloquently written the intellectual rigors of low-wage work are too frequently dismissed.
Ton’s Good Jobs Strategy also applies to fast food industry. In-N-Out Burger, the cultishly beloved West Coast hamburger chain, is a good example. The starting wage is $10.50 per hour, significantly higher than at McDonald’s. They have the lowest turnover rate in the fast-food industry. Like Mercadona and Trader Joe’s, In-N-Out keeps overhead low by limiting their offerings, by doing just a few things—hamburgers, cheeseburgers, milkshakes—really, really well.
With more than half of fast food workers on public assistance, costing taxpayers an estimated $7 billion a year, the demands of Thursday’s strike is in the public’s best interest as well. On Tuesday, the Washington, DC, Council voted to increase the minimum wage to $11.50 per hour and to extend paid sick leave to tipped workers, having found, despite theories to the contrary, that such a policy does not discourage new businesses from opening or cause preexisting businesses to relocate. President Obama recently endorsed raising the federal minimum wage to $10.10 an hour.
If political pressure and public protest don’t cause McDonald’s and Walmart to increase worker pay, perhaps pure profit-driven thinking will. After all, what if Barbara had to call in sick on one of the busiest days of the year?
By: Jessica Weisberg, The Nation, December 4, 2013
“Worshiping The Almighty Dollar”: Will The Supreme Court Endow Corporations With A Soul, Too?
Private businesses are trying to block Obamacare on religious grounds? What do companies worship besides, perhaps, the almighty dollar?
That’s the question at the heart of two conflicting rulings from lower courts that the Supreme Court has decided to take up in its second constitutional showdown over President Barack Obama’s Affordable Care Act.
Since the law also known as Obamacare was passed, dozens of Christian employers have challenged its birth-control mandate that requires employers to provide health insurance coverage for FDA-approved contraception.
Abortion rights opponents believe some of the allowed contraceptive methods block fertilized eggs from implanting in a woman’s uterus. That’s disputed by other research findings that the methods in question actually work before fertilization occurs.
To placate such objections, the Obama administration has changed the requirement to allow explicitly religious organizations and some other nonprofits to opt out of paying for insurance directly, passing the costs on to their insurance provider instead.
But that doesn’t apply to the big for-profit corporations at issue in the two cases that the Supreme Court has agreed to hear.
In one of them, the 10th Circuit Court upheld the argument of Oklahoma City-based Hobby Lobby Stores Inc., a chain of 500 arts-and-crafts stores with 13,000 full-time employees, that the mandate would violate the rights of owners David and Barbara Green under the Religious Freedom Restoration Act of 1993. That law says that a “person” can seek to opt out of a law under some circumstances if obeying it would “substantially burden” the exercise of his or her religion.
But is a corporation a “person?” Yes, says the 10th Circuit, under the Citizens United decision, which holds that corporations have the same First Amendment rights as individual people to spend money as a form of speech in political campaigns.
Not so, says the 3rd Circuit Court of Appeals, in the second of the two decisions the justices will review. In rejecting the arguments of Conestoga Wood Specialties, a Pennsylvania manufacturer of wooden cabinets owned by a Mennonite family, the appeals court wrote that corporations “do not pray, worship, observe sacraments or take other religiously motivated actions separate and apart from the intention and direction of their individual actors.”
That sounds right to me. Even if the corporations qualified as “persons” under the 1993 law, which I am sure would surprise many of those who voted for it, the law cites a “substantial burden” on the exercise of religion.
If any “burden” is imposed on the employers in these cases, it hardly can be called “substantial” any more than the burden government routinely imposes on taxpayers to fund overseas wars or domestic social programs to which they personally object.
But if the high court grants corporations a religious license to pick and choose whichever government rules they want to follow or taxes they want to pay, a substantial burden would be imposed on the ability of the health care law to work — which would be just fine with some of its critics.
The impact of such a decision would reach far beyond Obamacare. That’s why the Supreme Court has drawn boundaries around the First Amendment’s “free exercise of religion” clause since its ruling in the 1878 test case of the bigamy conviction of George Reynolds, the personal secretary to Mormon leader Brigham Young.
Reynolds contended that his bigamy conviction violated his First Amendment rights as a member of the Church of Jesus Christ of Latter-Day Saints, which would not renounce bigamy until 1890. He lost, mainly because of legal reasoning drawn partly from a letter by Thomas Jefferson in which he drew a sharp distinction between religious belief and religiously motivated actions.
Because belief “lies solely between man and his God,” Jefferson wrote, “the legislative powers of the government reach actions only, and not opinions.” In that spirit, the Supreme Court’ wrote, “Suppose one believed that human sacrifices were a necessary part of religious worship, would it be seriously contended that the civil government under which he lived could not interfere to prevent a sacrifice?”
One hopes not. Government should not intrude on religious faith, but for the sake of the common good, it occasionally must intervene in acts that are motivated by religious belief.
By: Clarence Page, The National Memo, December 2, 2013
“Throwing Their Own Under The Bus”: CEO’s With Massive Retirement Fortunes Push Social Security Cuts
With budget negotiations on the horizon, a buzz is building around Social Security, from Elizabeth Warren and other Democrats calling for an expansion of benefits to The Washington Post arguing that seniors must be sacrificed for the good of the “poor young.”
Two of the biggest players in the debate are largely behind the scenes: Business Roundtable and Fix the Debt, corporate lobbies that use deficit fear-mongering to sell benefit cuts. These groups are made up of CEOs of America’s largest corporations—people with retirement accounts that are more than 1,000 times as large as those of the average Social Security beneficiary.
Each of the 200 executives of Business Roundtable has retirement savings averaging $14.5 million, according to a new report from the Institute for Policy Studies and the Center for Effective Government. That’s compared to the $12,000 that the median US worker near retirement age has managed to put away. Once Business Roundtable CEOs start drawing Social Security themselves, they’ll be cashing a monthly check that is sixty-eight times larger than an ordinary retiree’s, ensuring that they’ll never bear the burden of the cuts they’re advocating.
“I find it hypocritical to see CEOs sitting on massive retirement fortunes of their own saying that the solution to the country’s fiscal challenge is to put an even greater burden on retirees, many of whom already struggling,” said Sarah Anderson, director of the Global Economy Project at IPS and one of the report’s authors.
One of those CEOs is David Cote, the vice-chair of Business Roundtable and a member of the steering committee for Fix the Debt. After eleven years at Honeywell where he’s now the chief executive, his retirement assets are worth $134.5 million. That means that as a retiree he’ll draw a monthly pension of nearly $800,000.
Cote is a deficit hawk, and claims to be worried about the long-term stability of Social Security. A member of the Bowles-Simpson commission and President Obama’s debt committee, Cote has called for $3 to $4 trillion in spending cuts over the next decade, “especially when it comes to entitlements.”
To make some of those reductions via cuts to Social Security, Business Roundtable has proposed raising the retirement age to 70, restricting benefit growth and changing the way inflation is calculated in a way that amounts to a benefit cut for seniors. (Read George Zornick on why this change, called Chained CPI, is a bad deal.) At the same time, Business Roundtable and Fix the Debt are calling for more corporate tax breaks.
“If Congress approves of proposals like ones that Business Roundtable are pushing, we could see severe cuts that could mean the difference between any kind of dignified retirement and absolute poverty,” Anderson said. Two-thirds of retired Americans rely on Social Security for the majority of their income, and more than 40 percent would be in poverty without those benefits.
These CEOs aren’t just trying to short the average American retiree; they’re throwing their own under the bus. While raising alarm about the federal debt, Business Roundtable CEOs have run up massive deficits in their employees’ pension funds. According to the report, ten companies led by members of Business Roundtable have shortfalls in their employee pension funds of between $4.9 and $22.6 billion. The largest of those belongs to General Electric, run by Business Roundtable and Fix the Debt member Jeffrey Immelt, the prospective beneficiary of a $59.3 million retirement fund.
GE stopped offering traditional pension plans for new employees in 2011, forcing workers to switch to 401(k) plans. Many other companies have shifted the burden of retirement savings to their employees in this way in recent years, and that’s been a significant driver of the retirement crisis. Just 18 percent of workers can expect traditional pensions today, compared with 38 percent in 1985. Instead of getting a fixed check, retirees are at the mercy of the market—making the assurance of Social Security benefits even more essential. But Business Roundtable continues to put the responsibility for the retirement crisis on retirees themselves. “[T]rue retirement security will be achieved only if Americans save more,” reads the group’s 2013 CEO Growth Agenda.
Saving more is an increasingly unworkable solution for the millions of workers whose wages and benefits are being undercut by some of the same CEOs directing them to do so. As the report lays out, many of the most effective ways to strengthen Social Security involve asking more of executives, not employees. Eliminating the cap on wages subject to Social Security taxes (currently set at $113,700) would eliminate 95 percent of the projected shortfall for seventy-five years, according to the Congressional Research Service. That’s three times the deficit reduction achieved by raising the retirement age to 70. Subjecting stock-based compensation to Social Security taxes would raise billions more.
Don’t expect to hear about those proposals from Business Roundtable, however. “I do think that it is a real weakness of these corporate lobby groups, that they’re making the public face of the agenda to cut Social Security these CEOs that are sitting on massive nest eggs of their own,” said Anderson. “It undercuts their credibility and influence in these debates, and I’m hoping it will make it difficult to achieve the cuts they’re proposing.”
By: Zoe Carpenter, The Nation, November 19, 2013
“Corporations Aren’t People”: If Given The Freedoms Of “People”, Corporations Should Be Subjected To Obligations And Restrictions Too
If you thought this “corporations are people” business was getting out of hand, brace yourself. On Tuesday, the Supreme Court accepted two cases that will determine whether a corporation can deny contraceptive coverage to its female employees because of its religious beliefs.
The cases concern two of the most politically charged issues of recent years: who is exempted from the requirements of the Affordable Care Act, and whether application of the First Amendment’s free speech protections to corporations, established by the court’s 2010 decision in Citizens United, means that the First Amendment’s protections of religious beliefs must also be extended to corporations.
The Affordable Care Act requires employers to offer health insurance that covers contraception for their female employees. Churches and religious institutions are exempt from that mandate. But Hobby Lobby, a privately owned corporation that employs 13,000 people of all faiths — and, presumably, some of no faith — in its 500 craft stores says that requiring it to pay for contraception violates its religious beliefs — that is, the beliefs of its owners, the Green family.
In a brief submitted to a federal court, the Greens said that some forms of contraception — diaphragms, sponges, some versions of the pill — were fine by them, but others that prevented embryos from implanting in the womb were not. The U.S. Court of Appeals for the 10th Circuit upheld the Greens’ position in June in a decision explicitly based on “the First Amendment logic of Citizens United.” Judge Timothy Tymkovich wrote: “We see no reason the Supreme Court would recognize constitutional protection for a corporation’s political expression but not its religious expression.”
Tymkovich’s assessment of how the five right-wing justices on the Supreme Court may rule could prove correct — but what a mess such a ruling would create! For one thing, the Green family’s acceptance of some forms of contraception and rejection of others, while no doubt sincere, suggests that they, like many people of faith, adhere to a somewhat personalized religion. The line they draw is not, for instance, the same line that the Catholic Church draws.
Individual believers and non-believers draw their own lines on all kinds of moral issues every day. That’s human nature. They are free to say that their lines adhere to or are close to specific religious doctrines. But to extend the exemptions that churches receive to secular, for-profit corporations that claim to be following religious doctrine, but may in fact be nipping it here and tucking it there, would open the door to a range of idiosyncratic management practices inflicted on employees. For that matter, some religions have doctrines that, followed faithfully, could result in bizarre and discriminatory management practices.
The Supreme Court has not frequently ruled that religious belief creates an exemption from following the law. On the contrary, in a 1990 majority opinion, Justice Antonin Scalia wrote that Native Americans fired for smoking peyote as part of a religious ceremony had no right to reinstatement. It “would be courting anarchy,” Scalia wrote in Employment Division v. Smith, to allow them to violate the law just because they were “religious objectors” to it. “An individual’s religious beliefs,” he continued, cannot “excuse him from compliance with an otherwise valid law.”
It will be interesting to see whether Scalia still believes that now that he’s being confronted with a case where the religious beliefs in question may be closer to his own.
The other issue all this raises: Where does this corporations-are-people business start and stop? Under the law, corporations and humans have long had different standards of responsibility. If corporations are treated as people, so that they are free to spend money in election campaigns and to invoke their religious beliefs to deny a kind of health coverage to their workers, are they to be treated as people in other regards? Corporations are legal entities whose owners are not personally liable for the company’s debts, whereas actual people are liable for their own. Both people and corporations can discharge their debts through bankruptcy, but there are several kinds of bankruptcy, and the conditions placed on people are generally far more onerous than those placed on corporations. If corporations are people, why aren’t they subject to the same bankruptcy laws that people are? Why aren’t the owners liable for corporate debts as people are for their own?
If corporations are going to be given the freedoms that people enjoy, they should be subjected to people’s obligations and restrictions too. I’m not sure how many corporations would think that’s such a good deal.
By: Harol Meyerson, Opinion Writer, The Washington Post, November 26, 2013
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