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“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

December 8, 2013 Posted by | Corporations, Minimum Wage | , , , , , , , | Leave a comment

“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

December 6, 2013 Posted by | Corporations, Minimum Wage | , , , , , , , | Leave a comment

“Finally, Workers Are Fighting Back”: Low-Wage Employers Have Fought Hard to Keep Their Workers Poor

After decades of seeing their incomes shrink, those at the bottom of the economic ladder are starting to band together and fight back — and it’s one of the most important economic stories of our time.

Between 1973 and 2011, the top 10 percent of American households saw their inflation-adjusted incomes rise by almost $100,000, while the bottom 90 percent – the vast majority of us –actually saw their incomes drop by $4,425 per year, according to economists Emmanuel Saez and Thomas Piketty (XLS). During that time, pensions largely disappeared, and the costs of health care and education shot through the roof.

Today, we’re seeing those at the bottom of the economic pile — the 35 million Americans who make $10.55 per hour or less, representing more than a quarter of our workforce – starting to band together and fight back.

Low-wage workers are demanding a living wage (defined as the minimum required to cover basic necessities) and the ability to bargain collectively. Brief strikes by fast-food workers seeking $15 an hour, a campaign that’s brought together traditional labor unions with local community groups, are spreading across the country – last week, walk-outs reportedly occurred in 60 cities.

“The way that this movement has intertwined itself with community organizing has really helped it spread like wildfire,” says Greg Basta, deputy director of New York Communities for Change. “People are realizing that these low-wage jobs, at companies like McDonald’s, are doing serious damage to their community and to their local economy,” he said.

This week, Wal-mart workers and their supporters with the group Our Wal-mart are planning walk-outs in 15 cities, to protest the retail giant’s retaliation against workers who participated in last November’s Black Friday strikes.

But it’s not just companies like Wal-mart and McDonald’s paying their employees too little. According to a study by Demos, the federal government, indirectly, is the nation’s largest low-wage employer.  A coalition called Good Jobs Nation began a campaign earlier this year urging President Obama to sign an executive order requiring federal contractors to pay their employees a living wage. With the stroke of a pen, Obama could lift the living standards of two million American workers.

These campaigns are filling a gap left by Congress, which hasn’t raised the federal minimum wage fast enough to keep up with the cost of living. Poverty wages represent a type of “market failure.” Like selling widgets for less than what it costs to make them, low-wage workers are selling their labor for less than what it costs to cover the basic necessities of life, which is why taxpayers end up subsidizing the profits of low-wage employers with various public benefits. “In today’s economy, the math simply doesn’t make sense,” says Basta. “If you’re paying workers between $10,000 and $18,000 a year, it’s impossible to live in a place like New York City without receiving public assistance.”

Greg Basta explains that before the fast-food workers campaign got underway, “people who were working low-wage jobs didn’t even think about the possibility of organizing or fighting for higher wages. They bought into the mentality that they’re not worthy of fighting back. They bought into the mainstream mentality that their jobs just aren’t ‘good jobs.’ And to see the evolution of these workers from being really fearful to now saying, ‘we’re fighting because this is the right thing to do’ – that transformation I’ve seen on the ground in the past year and a half is the most moving thing I’ve ever been a part of.”

There’s no particular reason why millions of service workers should be paid poverty wages. With the exception of occupations that require rare skills or lots of education, there’s often a loose correlation between what people are paid and how much value they offer to society.

For instance, manufacturing jobs pay decent wages, but not because operating machines in a factory requires some special magic. Over 10 percent of manufacturing workers were covered by a union contract last year, compared with around seven percent of private sector workers overall. And fewer than five percent of food preparation and serving related professions belonged to a union in 2012, according to the Bureau of Labor Statistics.

Throughout American labor history, people working what society viewed as inherently crappy jobs fought hard to make them decent jobs with a modicum of human dignity.

In the last century, the meatpacking industry provides a good case study. In 1906, Upton Sinclair’s The Jungle shocked the public when it exposed meatpacking as a dangerous, disgusting occupation that paid slave wages. Workers organized throughout the 1920s and 1930s – often facing violent retaliation – and in 1943, they formed the United Packinghouse Workers of America (UPWA), based in Chicago, where the country’s biggest livestock yards were located.

The occupation got safer. And for a few decades mid-century, it paid more or less the same as a good manufacturing job. But in the 1970s and 1980s, as corporate union-busting accelerated dramatically, meat processors moved their operations closer to cattle and swine lots as the industry shifted transport from rail to truck. Far from its original urban base, and with new high-speed cutting machines making the industry less labor-intensive, the UPWA had a harder time organizing, and the union was gradually decimated. Today meat processing is once again an industry that relies heavily on low-wage, migrant labor. According to a 2005 report by Human Rights Watch, it’s also the most dangerous manufacturing job in America.

Now, another group of low-wage workers who often toil in uncomfortable, under-regulated workplaces are fighting for some basic human dignity. Whether they succeed or fail is just as important for the middle class as it is for the working poor. Not only do rising wages at the bottom exert upward pressure on the earnings of people higher up on the ladder, but poverty and inequality also give rise to a host of social disorders that affect us all. Cheap fast-food ultimately comes with high hidden costs.

 

By: Joshua Holland, Moyers and Company, September 4, 2013

September 8, 2013 Posted by | Economic Inequality, Minimum Wage | , , , , , , , | Leave a comment

“Debunking The Myth”: Doable, Efficient, And Necessary, A Higher Minimum Wage Will Not Reduce Jobs

As fast-food workers strike across the nation, progressives must separate fact from fiction in order to secure a living minimum wage.

Fast-food workers are going on strike from New York to Seattle to demand higher wages, highlighting the never-ending controversy over the consequences of raising the minimum wage. Many news stories seem to suggest that economists have decided a higher minimum wage will cause job loss. However, with more analysis, we undercover the truth: there is no clear link between a higher minimum wage and reduced employment.

John Schmitt, a Senior Economist at the Center for Economic and Policy Research, reported in February 2013 that multiple meta-studies (studies that use statistical techniques to analyze a large number of separate studies) found that for both older and current studies alike, there is no statistical significance in the effect of an increased minimum wage. Put plainly, if the effect is not statistically significant, then there is no proven effect— increases in the minimum wage do not cause job loss.

Accordingly, a few weeks ago, over 100 economists at organizations ranging from the Center for American Progress to Boston University signed a petition in support of increasing the minimum wage. They present current research from well-established organizations such as the National Bureau of Economic Research that shows there are no negative employment effects from minimum wage increases. This includes the most comprehensive data available, based on the increasingly accurate testing that has occurred as more and more states increase minimum wage levels. Even more importantly, this recent series of studies uses cutting-edge econometric techniques to control for extraneous variables such as economic downturns and geographic effects. When economists do that, they find that minimum wage increases do not reduce employment.

Logically, this makes a lot of sense. A higher minimum wage is a win-win situation economically: Employees have more money to be consumers and are more productive, while businesses wind up reducing costs in the long run, since they won’t have to spend as much money hiring and training new workers (by analyzing data from five separate studies, economists representing the Political Economy Research Institute found that McDonald’s could easily make up for the costs of a higher minimum wage with a mere five-cent price increase on Big Macs). It’s just as Henry Ford realized—when he paid his workers more, they became part of his customer base, making his company even more profitable. Increasing the customer base and expanding customer pockets helps stimulate the entire economy, badly needed in the current recession.

So if we have no evidence linking high wages to job loss, our next question is: Are higher wages needed as a poverty reduction tool?

Currently, the 2013 federal poverty guidelines stipulate $23,550 for a family of four as poverty level. A $7.25 minimum wage currently nets the protesting fast-food workers $15,080 a year if the workers are lucky enough to work 40 hours a week. In a typical household with two parents and two children, parents who make $7.25 an hour earn far below the living wage of $13.55, according to an MIT wage calculator. The numbers become even starker when you separate out true living expenses: food, medical care, housing, transportation, and other needed expenses add up to a required $37,540 annual income before taxes, which is notably different from the poverty guidelines that the U.S. Department of Health & Human Services set. Even if the two parents worked 40 hours a week for 52 weeks, they would only earn $30,160 in total, significantly below the resources they need to live. Moreover, these estimates are only for a typical nuclear family. The struggle that single-income families, large families, or families living in high-cost cities go through is exponentially higher.

The buying power of the minimum wage has steadily been waning due to the effects of inflation for the past 40 years. When prices increase, a worker’s paycheck buys less and less. To put it in perspective, we look to another brief by John Schmitt: If minimum wage had continued to match productivity growth, it would have been $21.72 per hour in 2012. If we only adjust for the cost of living, a minimum wage pegged to inflation would be $10.52.

A huge bulk of evidence makes the case that increasing the minimum wage is a doable, efficient, and necessary change for the economy. This change needs to happen now. We as Americans have a moral obligation to make sure that other Americans who are working hard to support themselves and their families are able to make a living.

 

By: Emily Chong, The National Memo, August 8, 2013

August 9, 2013 Posted by | Jobs, Minimum Wage | , , , , , , , | Leave a comment

“It’s Not Just About Burger Flippers”: A Preview And A Parable, McDonald’s And The Fate Of The Middle Class

In recent weeks fast-food workers have staged dramatic one-day strikes in cities across the country, demanding a $15 starting wage, instead of about $8 on average at places like McDonald’s. The strikes have prompted much debate about fast food and the cost of a Big Mac. But this moment isn’t just about burger-flippers—it’s about the realization that the American middle class has been hollowed out to the point of decimation. Today, one in four jobs is low-wage, and at current pace it will be one in two jobs by 2024—which means that what fast-food companies pay people today will affect us all.

Companies like McDonald’s may protest that their margins are too thin, their workforces too transient to justify a $15 minimum wage. Yet in other countries the company pays exactly that wage and manages to make profits while charging only a few cents more for burgers. In this sense, fast-food workers are like water drops on a hot griddle: once they’re vaporized, everyone else is about to get cooked. And as these strikers are now showing, more and more low-wage workers in America, even ones that aren’t unionized, are tired of being vaporized.

A $15 minimum wage is the key building block to “middle-out economics” (a concept I’ve helped shape, along with my co-author Nick Hanauer). Middle-out economics, as opposed to trickle-down, says that the best job creator is a healthy middle class with the purchasing power to generate and sustain demand. It says – as Henry Ford figured out a long time ago – that workers aren’t costs to be cut; they are customers to be cultivated. Investing in that middle class makes more sense than expanding tax breaks for the wealthy.

A middle-out policy agenda includes a more progressive tax system, but also focuses on high-skill education and fostering more entrepreneurs. And it crosses left-right lines: after all, the rock-bottom wages of a “free enterprise” like Wal-Mart leads to more “big government” spending on food stamps and Medicaid. A $15 minimum wage would take tens of millions off the dole and turn them into more robust consumers and less dependent citizens.

The fast-food strikes have framed the issue and are a sign of a reorganization of labor itself. Because traditional unions now cover only a tiny slice of the private workforce, new forms of organized, joint action are emerging to pressure employers for a better deal, such as coalitions of domestic workers in various states, or advocacy centers for oft-abused guest workers.

Too many American think that the plight of the low-wage worker has nothing to do with them. In fact it is both a preview and a parable. The fate of the middle class rests, in part, on whether more Americans learn to see the fate of fry cooks as their own.

 

By: Eric Liu, Time Magazine, August 7, 2013

August 8, 2013 Posted by | Jobs | , , , , , , , | 2 Comments

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