The Problem with Raising Fast-Food Workers’ Wages

Robots at McDonald's

Fast food workers are requesting that minimum wage rates should roughly double to $15/hr.  Yet, what is likely to happen is that many of today’s workers will simply be replaced by machines and automated processes.

automated McDonald's ordering

Some McDonald’s restaurants are employing robots in the kitchen, while others are creating automated order-taking.  Automated order-taking, alone, can replace one worker.

There is an inherent conflict between the way workers look at wages, and the way employers  look at wages.

From the worker’s point of view, the amount of his paycheck determines his entire standard of living. Even if a worker doesn’t produce enough output to justify his salary, his family still requires the same amount of food to stay healthy.

Conversely, from an employer’s point of view, he is forced to pay wages and salaries based ONLY on the economic value of each employee’s ACTUAL work, and labor is only ONE cost of running his business. His total production costs (including labor) MUST be kept well below the amount the public is willing to pay for his product, or he will quickly go OUT of business.

Increased labor costs have always been the driver of technological change.  “No trade union, however powerfully organized, can FORCE employers to go on paying higher wages than their workers are worth to them.” (Gertrude Williams: The Economics of Everyday Life. London, 1976).

When either workers or unions demand wages that exceed the worker’s value, the employer has two choices.   He can CUT BACK the workforce (by employing fewer people, OR by going out of business); or he can FIND NEW METHODS THAT REQUIRE FEWER WORKERS (new technology, automation, new processes). This is the current situation taking place in the fast food industry in the United States.

The important thing here is that fast-food jobs are not, and have never been intended to pay a “living wage” for a family wage-earner.  The reason teachers and parents place so much emphasis on learning to read and write well is that, for those who never become proficient enough to make it through college, these are the only sorts of jobs now available.    These jobs need to be looked at as temporary jobs or unskilled jobs which will never pay high wages.

Many of those adults who are in these jobs full-time and for many years are probably the same students who didn’t do well in school (or who didn’t care to put in the effort), and those are now the only jobs they can get.  Should their wages be raised to the equivalent of a skilled carpenter, who has to be a math whiz and have years of experience?  I don’t think so.

There are many reasons why people are stuck in these low-wage jobs, but society needs to stop blaming the employers, and start holding students and workers accountable for developing their reading and writing skills, and for making responsible life decisions.  Sometimes people have bad luck, but we all need to remember that, “Good luck equals preparation (good skills) + opportunity.” –Seneca (Ancient Roman Stoic Philosopher)

–Lynne Diligent

 

 

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12 thoughts on “The Problem with Raising Fast-Food Workers’ Wages

  1. Floyd Russak MD

    Lynne,

    I’m somewhat to the left of you (which is unusual) on this issue for 3 reasons:

    First, the minimum wage (what fast food workers make in most areas of the US) has not risen to keep up with inflation. When I worked at McDonalds in 1971, I made $1.60, which was then the Federal minimum wage. Adjusted for inflation, that should be over $10/hour now. Yet the Federal minimum wage is now only $7.25. I believe raising it to $10/hour is thus only reasonable.

    Also, we have been in a recession now for seven years. During such times, minimum wage jobs are often the only jobs available. I know of skilled carpenters who have been working minimum wage jobs because no building is going on.

    Third, since so many people now depend on these minimum wage jobs to support their family, improving their spending power ultimately helps the economy.

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    Reply
    1. Lynne Diligent Post author

      Thank you, Floyd, and yes, you make very good points. But to be reasonable, other wages of skilled workers also have to rise. It’s not logical for completely unskilled workers to be making the same wages as skilled workers. I also made $1.60/hr working as a maid at the Holiday Inn in 1973.

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  2. amseghir

    Thank you Lynne.

    This is a very interesting read, indeed. You’ve raised very important points in your analysis. I agree with almost everything you mentioned here. However, I do understand the employees’ position as well. For instance, while it’s true that working at McDonald’s is NOT a real job that is supposed to pay for a family’s needs, it is also true that the economy has been crumbling since 2008 without a sign of getting better anytime soon. So to say that these jobs aren’t long term jobs is something that belongs to the past. Things have changed now!

    Thus, I understand these people’s concerns. Moreover, restaurants like McDonald’s make SO MUCH money! In clearer terms, McDonald’s makes $24 BILLION a year! Well, if this says anything, it says the people working for the company bring so much value and that they’re really well.

    As a consequence of this unhealthy economy, there are now people with very high degrees (PhD holders included) who work in jobs that are below their levels. These include working at McDonalds, Starbucks, or in parking lots! The scary thought that’s roaming around nowadays is that going college doesn’t really make a difference. Everyone will be happy if they could get a job at McDonald’s.

    Another point that might get one to wonder is the huge pay raises that the CEOs of McDonald’s and Starbucks get every year. According to the Wall Street Journal website, McDonald’s CEO received a 69% salary raise! (these people’s salaries are already astronomical without any raises!) Similarly, Starbucks CEO got a 24% boost in his 2014 package! That’s ridiculous! How are these companies going to convince their employees that they can’t give them pay raises while their CEOs and other big shots receive millions and millions every year? It’s like when they tell us that that they can’t raise our salaries while our minister’s get raises all the time! That’s just outrageous. If times are bad, then people at the top should be the first to get salary cuts. Not the other way around.

    http://www.nytimes.com/aponline/2015/01/23/business/ap-us-starbucks-executive-compensation.html?_r=0

    http://whenyouputitthatway.com/phd-graduates-working-as-janitors/

    http://www.dailykos.com/story/2012/05/16/1092058/–You-could-just-work-at-McDonald-s

    http://www.theatlantic.com/photo/2012/06/not-where-they-hoped-theyd-be/100320/

    Liked by 1 person

    Reply
    1. Lynne Diligent Post author

      Actually, the great majority of McDonald’s restaurants are owned by small business people who have invested their life’s savings. They sell their name, products, and methods to the franchisees (owners of each business). You can’t look at McDonald’s like it is some huge multi-national faceless corporation. Each is owned as a small business, and run individually, by individual owners as small businesses.

      Yes, I do understand the plight of unemployed people, and cannot argue that there are just not enough jobs available for educated people. But that is NOT the fault of the small business owners who own each fast food restaurant, and the model just doesn’t work if they were to double wages. Maybe a 20% raise is reasonable. For people stuck in these jobs, they need to try to find other jobs, and stop blaming the business owners.

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  3. Lynne Diligent Post author

    Dolly Triviz, U.K. (from LinkedIn): “I agree, most of these jobs were never intended to be the main source of income for the people working in them, rather, they were looked at as part time jobs, to bridge the time between, for example, when a student is going to college and cannot work a full time job, needs some extra money, until the time he/she graduates and has the skills for a career. I think raising the wages on these jobs only discourages these workers from seeking higher education or other means to improve their jobs/life skills and move onto a higher paying (career) position.”

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  4. Lynne Diligent Post author

    Daniel Ucize (from LinkedIn): “Well the minimum wage is always a problem in every country. And working in a st food chain or not, everyone should be able to live a financially comfortable life not worrying if they get evicted, able to pay water bills, the car tax, their kid’s college fees and so on. And in my opinion, it should be part of CSR that a company provides sufficient economic capital in return for human capital for all employees. In Ireland, a new study shows that the minimum wage should be 11.50 (Euro) per hour for people to have a decent standard of living. Yet, some officials wanted to reduce the current 8.65 to a lower level…..”

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  5. Lynne Diligent Post author

    Tom Mueller (from LinkedIn): “The increased use of technology to reduce labor costs is inevitable and it makes sense to reduce labor costs in a manufacturing sector, but is a mixed-bag for service providers. Yes, it reduces labor costs but it also places more demands on the customer, which could drive customers away.”

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  6. Lynne Diligent Post author

    Joe Jensen (from LinkedIn): “I love the comment from Jeffrey Summers about the economic illiterate, who with some leadership and maybe the right opportunity at a fast food restaurant may become one of those people he talks about in #2 & #3 in his core values statement on his corporate website. If you think about your employees as the economic illiterate, the stupid will drive you crazy.”

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  7. Lynne Diligent Post author

    J.J. (from emailed comment): “Excellent, Lynne. And you stuck to your guns in the replies. The bleeding hearts crowd have little idea of reality. We presently suffer from an output gap. This is primarily caused by investment in technology which has so dramatically increased a worker’s productivity that we require far fewer of them. As you point out, raising the minimum wage here will drive this trend deeper into the fast foods industry and sending the resulting unemployed into lawn raking business. To learn more, Google the economist Paul Winghart.

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