NEW YORK — American fast-food workers often earn about $7.25 an hour to make the $3 chicken sandwiches and 99-cent tacos that generate billions of dollars in profit each year for McDonald’s and other chains.
Thousands of the nation’s many millions of fast-food workers and their supporters have been staging protests across the country in the past year to call attention to the struggles of living on or close to the federal minimum wage. The push raises the question of whether the economics of the fast-food industry allow room for a boost in pay for its workers.
The industry is built on a business model that keeps costs — including those for labor — low so companies can make money while satisfying America’s love of cheap, fast food. And no group along the food chain, from the customers to the companies, wants to foot the bill for higher wages for workers.
Customers want a deal when they order burgers and fries. But those cheap eats squeeze franchise store owners who say they already survive on slim margins. And the corporations have to grow profits to keep shareholders happy.
“There’s no room in the fast-food business model for substantially higher pay levels without raising prices for food,” says Richard Adams, a former McDonald’s franchisee who now runs a fast-food consulting business.
Caught in that triangle are the workers. The median hourly wage for a fast-food cook last year was $9, up from about $7 a decade ago, according to the Bureau of Labor Statistics. But many workers make the federal minimum wage, which was last raised in 2009. At $7.25 an hour, that’s about $15,000 a year, assuming a 40-hour workweek. It’s well less than half of the median salary of an American worker.
The protests come as President Barack Obama has called for an increase of the federal minimum wage to $9 an hour, with some members of Congress and economists calling for a hike as well. And the fast-food workers movement is getting financial support as well as training from organizers of the Service Employees International Union, which represents more than 2 million workers.
Workers protesting in cities including New York, Chicago and Detroit, are pushing for $15 an hour, which would mean wages of $31,000 a year. But the figure is seen as more of a rallying point and many say they’d be happy with even a few bucks more.
“Anything to make it more reasonable,” says Jamal Harris, 21, who earns $7.40 an hour working at three different fast-food restaurants around Detroit — a Burger King, a Long John Silver’s and a Checkers — because he’s never sure how many hours he’ll get at any one job.
Low wages and a lack of benefits for workers aren’t anything new in the fast-food industry, of course. It’s why “McJob” has been a pejorative term for so long. What’s changing now is that such jobs are playing a bigger role in the U.S. economy, bringing the fast-food protests closer to home for many.
Nearly 70 percent of the jobs gained since the recession ended have been in low-paying industries such as fast-food or retail. That’s even though half of the jobs lost during the Great Recession were in industries that pay between $38,000 and $68,000 a year.
Currently, the median annual wage for all U.S. full-time wage and salary workers is about $40,350, according to the Bureau of Labor Statistics. That’s based on weekly earnings of $776.
The tilt toward low-wage jobs is what makes it so critical for fast-food and retail jobs to provide better pay, says Robert Reich, an advocate for workers who served as Labor Secretary in the Clinton administration. “It’s impossible for the economy to run on all four cylinders unless consumers have enough purchasing power to keep the economy going,” he said.
Still, raising wages for fast-food jobs means figuring out where the money would come from.
More than 90 percent of McDonald’s and Burger King locations in the U.S. are owned by franchisees who say they have to worry about making rent, buying supplies, paying workers and shelling out royalties and fees to their parent company for use of their name and brand. Franchisees say they have to do this while trying to eke out a profit on the super-cheap menu items that customers expect.
Kathryn Slater-Carter, who owns two McDonald’s in California, said that what franchisees can pay workers depends “on what money you’ve got left after all (the company’s) interference.”
Slater-Carter said that in addition to emphasizing low prices, the company has been putting more costs onto franchisees for things such as software licenses and service contracts for restaurant equipment.
Prices for food ingredients are volatile and insurance and other costs are rising, too, meaning labor is one of the few costs franchisees can control. It’s why franchisees often keep hourly wages as low as possible or try to avoid paying overtime, some franchisees and union organizers say.
Many labor groups point to the profits of the fast-food companies — and the pay packages of their CEOs — when trying to assign blame for low wages for workers.
Last year, the five big publicly traded fast-food companies together earned 16 cents in profit for every dollar of revenue. That’s 73 percent better than the average big U.S. company, according to FactSet research firm. McDonald’s, the world’s biggest burger chain, for example, reported a profit of $5.5 billion last year on $27.6 billion in sales. CEO Don Thompson got a pay package worth $13.8 million.
Still, publicly traded companies are under pressure from shareholders and creditors to maintain or improve profits.
In emailed statements, McDonald’s and Burger King both said they don’t determine wages for workers, noting that the vast majority of restaurants are run by franchisees. McDonald’s also noted that it is “in the business of providing affordable, high quality food.” The company said that raising entry-level wages would mean higher overall costs, which could result in higher prices on menus.
Labor organizers dismiss the idea that companies can’t influence worker pay.
THE CUSTOMERS AND WORKERS
If franchisees and companies can’t, or won’t, pay more, that leaves the people who buy fast food. “This all comes back to the consumer,” says Adams, the former McDonald’s franchisee turned consultant.
Although many Americans say they support higher wages for workers, the reality is that people flock to the cheapest meals.
If prices went up noticeably at McDonald’s, for example, 23-year-old Eugene Santos said he would probably find someplace else to eat.
Workers themselves also share the blame.
The weak job market tilts the power in favor of employers, who can easily find replacements who are willing to work for low pay. That means the ability to keep up demonstrations that capture public attention is critical.
Yet organizing workers has been notoriously difficult in the fast-food industry, given the high turnover rates and ranks of younger workers who see the jobs as temporary gigs.