Fast Food Wage Wars

The news cycle recently has been littered with stories on the domestic front regarding the labor strife within the major fast food chains. The news today featured footage of workers protesting peacefully in front of a Burger King restaurant.

 

The central issue here is wages, and this labor turbulence follows a spirited, and at times, heated national debate over the raise in the minimum wage. The political spectrum and the general public are largely divided over the issue, and in my home state of New Jersey, the public referendum on the last ballot dealt with the minimum wage. The people in New Jersey overwhelmingly voted to raise the minimum wage, though in a state with a high standard of living, it still may not be enough to help some workers.

 

Some politicians believe that the raise in the minimum wage is going to slow or halt part time job growth. Some business leaders share this view as well, and have made the new minimum wage standards the scapegoat for a sputtering economy.

 

Fast Food Wage War

 

The wage issues in the fast food industry impact all the major industry players: McDonald’s, Burger King, Wendy’s, and KFC/Yum Brands. The workers in this case are looking primarily for the following:

 

  • Wage increase to $15.00 per hour
  • Ability to unionize

 

These two goals may seem reasonable to some people, but the reality here is that both objectives are problematic, and will probably be difficult to achieve.

 

In most states that voted for a minimum wage increase, the wage went from $7.25 or $7.40 per hour to around $10.00 per hour. These workers are seeking an additional $5.00 per hour increase. That is going to be met with resistance by the respective corporations they are employed by in the coming weeks.

 

The second issue is the ability to unionize, some people do not realize that the ability of Wal-Mart to be so competitive on pricing for the products they carry is because the corporation does not allow unionized labor of any kind.

 

This allows Wal-Mart to be very competitive in all products but particularly in the grocery segment because their competition: the national/ regional grocery store chains have unionized labor forces. The unionized work forces do not allow the grocery stores to stay open as late as Wal-Mart. In addition, the unions involved creates a wage threshold for these grocery store chains where they cannot compete on price with Wal-Mart and remain profitable.

 

In fairness to Wal-Mart, they maintain that while not allowing unionized workers, they pay a good wage and provide their employees with great opportunities to grow within the company.

 

The same profitability scenario with fast food is not a reliable comparison because the profit margins within fast food and the entire business model is completely different.

 

I am also unsure of the potential impact unionized workers could have on the fast food business or if it would impact the ability for the respective corporation to continue providing low cost products such as a “dollar menu” or “value menu” with the same margins for profitability. I have read that it is a price sensitive business, though I am not sure what that actually means in terms of dollar figures.

 

The restaurant and fast food industry groups are pushing back with great force regarding the idea of a raise to $15.00 per hour. Their rationale is again that the fast food industry is price sensitive and cost sensitive and that the $15.00 figure is too steep for them to meet at this point.

 

 

Wage Theft

 

There are currently three different states involved with cases in their respective judicial systems involving McDonald’s and allegations of wage theft by their employees.

 

The workers here claim that the fast food giant has deprived them of wages through a variety of ways. The company has not formally responded to the allegations.

 

The workers are using these lawsuits as further leverage for the increase in wages they seek as well as the ability to unionize.

 

The cost to McDonald’s is numerous unhappy employees which disrupts company morale on the restaurant level, and bad publicity which could hurt their sales.

 

Outlook

 

In my view, nobody should have to try to survive on $7.25 an hour or even $10.00 per hour. This issue is not going away without a resolution that is concrete to improve conditions for these workers in some way.

 

I also reject the notion by some politicians that the raise in the minimum wage has negatively impacted job growth. It is a very sad state of affairs in our world if multi-billion dollar corporations are going to haggle with people over a few dollars more per hour.

 

The situation here comes down to multi-billion dollar companies that want to keep more of their profits and not pay their workers on the ground level. It is greed driven activity, and it sends a very negative message by these corporations to the general public, which for a fast food company is also their target customer base.

 

I have read accounts of protesting workers today throughout this country who were told by their manager that they would no longer be on the schedule to work if they participated in the protests.

 

In fair balance, reports have stated that McDonald’s is looking into some of the wage theft claims more closely and is going to take action on franchise owners who may have violated certain policies.

 

In the end, these people work very hard on the restaurant level to provide customer service or cook our fast food. Many of these workers have families or dependents. All of them deserve to be paid a fair wage for the work that they do each day.

 

 

(background information and statistics courtesy of USA Today, The Washington Post, CNN.com, and CBS News.com)