When challenged on their low wages and lack of benefits, fast-food chains tend to depict their workers as teenagers saving for college, for whom the hourly receipts are a step toward a better future rather than a way to make ends meet now. Apparently, all those smiling kids wear their brightly colored smocks and golf visors with the same pride as Marines donning their colors, and are just as happy to serve. But those workers, if they exist, are a distinct minority.
They should meet Hope Shaw, the 38-year-old single mother of three who is assistant manager at Dunkin’ Donuts on Boston Street. She, too, likes to serve. But her life is one of unrequited toil. She lives paycheck to paycheck. Her heating gas was shut off last winter for failure to pay; the electric bill for her Dorchester apartment is consistently three months overdue. She’s gone without health insurance for more than a year. “My rent is $1,100 a month,” she says. “Every month I feel like I’m choosing between paying that or putting food on the table.”
Yet, six days a week, Shaw leaves her home before 4 a.m. to work a nine-hour shift overseeing the sale of donuts, bagels, and flat-bread sandwiches, while coping with customers who expect their coffee to be prepared exactly as they please and only sometimes drop a penny in the tip can. She’s been promoted twice in the five years she’s worked at the store, and her hourly pay has gone from $8 to $10. She made slightly less than $24,000 last year.
Despite working full-time, she and her family remain submerged beneath the poverty rate for Boston residents. Shaw’s predicament is common among her fast-food colleagues. Nationally, the median wage for front-line fast-food workers is $8.94 per hour, according to an analysis by the advocacy group National Employment Law Project.
Among those workers, about 70 percent are over age 20. And of that 70 percent, a third have attended college. Most employees are depending on those jobs to support themselves and their families. “We can’t make it out here,” Shaw says.
Restaurant CEO pay was 788 times higher than employee earnings last year
Fast-food workers in Boston and across the country have been striking since last summer for higher pay. They’re demanding that national fast-food chains enter into collective bargaining for a minimum wage of $15 per hour, more than twice the federal minimum wage, and paid sick leave. They make a compelling case.
Right now, it’s public assistance that is making up the difference. Half of fast-food workers’ families rely on government aid at a cost of $7 billion per year to American taxpayers, according to recent research done at the University of California at Berkeley and the University of Illinois at Urbana-Champaign. This aid amounts to a massive public subsidy to multibillion-dollar private corporations.
McDonald’s alone costs taxpayers an estimated $1.2 billion each year. One employee last fall recorded a staff member on the company’s “McResource” line urging the full-time worker to sign up for food stamps, Medicaid, and welfare. The hotline, which was recently shut down, routinely helped employees and their families enroll in state and local assistance programs.
Social safety nets exist for a reason. But enabling profitable companies to keep workers on at poverty wages is a poor use of scarce government resources. Little in the McDonald’s financial statements indicates it can’t afford to pay employees more. In 2012, net income topped $5 billion, and the company paid out another $5.5 billion in dividends and stock buybacks. CEO Donald Thompson earned a salary of nearly $14 million — or about $7,000 per hour. In fact, industry-wide research by the Economic Policy Institute finds that restaurant CEO pay was 788 times higher than average employee earnings last year — a stark example of the way executives can reward themselves for keeping the wages of others low.
The simplest solution is to raise the minimum wage. The Massachusetts Senate has voted to increase the minimum wage from $8 an hour to $11 by 2016, and the House is currently negotiating its own bill. Because the value of the minimum wage hasn’t kept pace with inflation, a full-time minimum wage worker now makes the equivalent of $5,400 a year less than in 1968, according to the Massachusetts Budget and Policy Center. Not surprisingly, nearly 80 percent of the public supports minimum wage increases.
But the national food chains haven’t offered good evidence for why they shouldn’t start workers’ wages at $15 per hour instead. McDonald’s frequently cites the fact that it already offers “competitive pay,” suggesting that anything more would put it at a competitive disadvantage. But if the top 10 chains entered collective bargaining and agreed to $15, that argument goes away.
Then there is the counterexample of In-N-Out Burger, a West Coast regional chain that’s become a cult favorite. In-N-Out takes pride in paying starting employees $10.50 an hour, and within a few months most are making at least $2 more. The company offers benefits including vision, medical, and dental for part- and full-time associates. Assistant managers can make up to $70,000 annually; managers as much as $120,000. And In-N-Out’s 280 locations brought in $651 million in sales in 2012, which is more than twice the per-store average at Dunkin’ Donuts’ 7,360 US locations.
Burger King executives prefer to blame low wages on the franchise model, in which outlets are separately owned and managed, even though Burger King maintains tight control of the product line, restaurant design, amenities, and pricing. It has said it “doesn’t make hiring, firing, or employment-related decisions for our franchisees.” Indeed, the company that enforces tight specifications for everything from the weight of the Whopper to the amount of oil in the French fries makes absolutely no provision for minimum wages or conditions of employment. Requiring its franchisees to pay a living wage through its franchise contract isn’t anywhere on the radar screen.
It’s a telling omission. Franchise owners, worried about higher labor costs, could demand lower corporate fees in return. The tradeoff could lower corporate profits. So workers and customers are paying the price instead.
Would the price of fast food soar with a higher minimum wage? It’s not likely. Economists at UC Berkeley have estimated a $15 wage would cost consumers about 10 percent more. (Americans spent, on average, about $2,620 on eating out in 2011, according to the National Restaurant Association.) A separate 2006 study suggests menu prices would rise about 17 percent with a $15 minimum wage, according to the Employment Policies Institute.
Breaking down the McDonald’s 2012 annual report provides a little more clarity. At company-run stores, profit margins are above 10 percent, but payroll and employee benefits add up to about 25 percent of sales at these locations. That means, if compensation were to double and no other expenses lowered to offset that rise, prices would have to increase by about 25 percent, or $1 more per Big Mac, to make up the difference. Industry associations insist that any higher prices would drive away customers and result in fewer jobs. Some diners might indeed go elsewhere or eat at home. But most fast-food customers are less price-sensitive; those motivated mostly by convenience wouldn’t cross state lines or turn to the Internet to save $1 on a fast-food lunch. Meanwhile, restaurants could count on lower training and recruitment costs as turnover — now close to 100 percent per year for fast-food chains — is reduced.
In return, the extra $5 per hour would transform the lives of hard workers like Shaw and their kids . “I could stop worrying about our monthly bills today and start planning for the future,” she said.
Correction: A previous version of this story misstated the results of a survey on education levels of fast-food workers over age 20. One third have attended college.