National protests waged by fast-food workers over the inadequacy of their pay have people wondering what it would cost for fast-food chains to increase the minimum wage. How much can fast-food chains increase their workers' salaries without jeopardizing business? And, to ask a more difficult, normative question, should they?
While the average pay for a fast food worker in the United States is $9, McDonald's employees currently earn the federal minimum wage of $7.25 per hour. On Monday, fast food employees in seven cities — New York; Detroit; St. Louis; Milwaukee; Chicago; Kansas City, Missouri; and Flint, Michigan — took to the streets, chanting, "We can't survive on $7.25," and, "Hey hey, ho ho, poverty wage has got to go." Picketers are demanding that the minimum wage be raised to $15, and the right to unionize without fear of retaliation.
According to Lawrence F. Katz, an economics professor at Harvard University, “long-term trends have not been kind to low-wage workers.” Companies are able to push wages down using new technologies and part-time employment, taking advantage of the declining power of labor unions and minimum-wage laws.
Source: the Huffington Post
Since it is difficult to conceptualize what $7.25 an hour means, let's put that number into perspective. An employee who works eight hours per day at McDonald's brings home $58 at night, before taxes. Assuming this employee has full-time employment, and even works six days per week, his or her weekly earnings come to $348, making for an annual income of just $18,096. These numbers are generous, given the fact that many of the protesting employees work only part time. The New York Times estimated that a fast food worker "typically makes just $150 to $350 a week."
According to a budget calculator from Economic Policy Institute (EPI), a leftist institution, it costs $67,153 for a one-parent, one-child household to survive in New York City. Even if that number is generous, it shows that someone who makes just over $18,000 per year would hardly be able to live adequately. If the average monthly rent in NYC is $3,000, as research firm REIS recently reported, the average McDonald's worker cannot afford rent, alone.
According to the EPI, McDonald's workers are in the bottom 20% of American earners, a group of 28 million workers who make less than $9.89 per hour.
If the minimum wage is raised to $15 per hour, the same sample employee would bring home $120 per day, $720 per week, and $37,440 per year. While $37,440 still falls short of the EPI's estimated adequate income, workers would be making double the amount they do now.
Now, compare this potential wage increase with the income of McDonald's CEO Donald Thompson, whose total compensation was $8.75 million in 2012, just under the total compensation of 500 employees.
Assuming that Thompson isn't about to give up his salary, what does McDonald's have to do to double workers' wages? The dilemma boils down to the elasticity of their products: if a Big Mac's price goes up by less than a dollar, would consumer preferences change? Perhaps they would. A number of customers would probably opt for a cheaper and similar option such as Burger King's Double Whopper. Doubling workers' wages could be drastic and would most likely require layoffs.
But McDonald's also has a loyal clientele that would not substitute their favorite burgers for a slightly cheaper option. Based on the chain's worldwide prominence, it is hard to imagine that a slight price increase would alter consumer habits in any significant way. According to Business Insider, McDonald's serves 1% of the world's population every day, and sells over 75 burgers every single second. McDonald's could raise wages slightly, to $12 or $13, and remain one of the cheapest and most popular dining options, even compared to its competitors.
"McDonald’s is so vast and lucrative that it could easily survive a major wage increase," declared Dean Baker, a codirector of the Center for Economic and Policy Research.
Not to mention that increasing the minimum wage would likely increase consumer spending. According to Heidi Shierholz, an economist at EPI, "we need greater demand for goods and services." Increasing wages would do just that, and benefit the economy at large. According to the book Fast Food Nation, McDonald's employs 700,000 domestic workers and faces a 150% turnover rate. Plus, McDonald's estimates that it has employed one in every eight working Americans. If this huge workforce was making double their current wages, they would be more inclined to pay rising menu prices.
The issue at stake in the McDonald's debate is one of human rights. No matter how hard these fast-food employees work, there simply aren't enough hours in the day for them to earn enough to live adequately. Of course, America has a capitalist economy, and the goal of every company is to drive down costs to increase revenue. But at what point does a capitalist economy begin operating according to its own mechanisms with no regard for human rights? That is why we have minimum wages, after all: the federal requirements are a safety net, and a way to align the needs of the markets with the needs of society.
McDonald's epitomizes global capitalism, as can be seen from its controversial presence around the world. But just because the capitalist giant has the ability to keep prices and wages drastically low in order to maximize its profit, should it? Fast food employees are attempting to protect their welfare and their dignity using the only resource they have: the power of protest. They are coming together to point out the injustice generated by capitalism, in the hope that their pleas are answered.
So what is the price of a Big Mac, after all? For McDonald's employees, it appears to be human dignity.