Friday, May 9, 2014

 

Economics:Fast Food Worker Strike Goes Global Next Week in Search of Higher Minimum Wage

On May 15th, fast food workers on six continents will participate in a strike to push for a simple, but big demand: a minimum wage of $15 an hour.

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Joe Ben Johnson III holds a sign outside McDonald's in Los Angeles, California, December 5, 2013.
The strike was announced outside a Midtown Manhattan McDonald's by Fast Food Forward, an organization which represents fast food employees in the United States. Protests will be held outside McDonald's, Burger King, KFC and other major chains. It could be one of the largest strikes in history.

Though President Obama has not addressed this fast food strike directly, he has called for an increase of minimum wage in the past. Most recently, Obama proposed increasing the federal minimum wage to $10.10 from $7.25. The Congressional Budget Office found that while increasing minimum wage would lift 900,000 Americans above the poverty line, it could also cost the American economy 500,000 jobs, if employers balk at the higher salaries.

McDonald's spokeswoman Heidi Barker Sa Shekhem said the brand is considering the effect of a minimum wage increase because 80 percent of their restaurants are independently owned and operated by small business owners:  "This is an important discussion that needs to take into account the highly competitive nature of the industries that employ minimum wage workers, as well as consumers and the thousands of small businesses which own and operate the vast majority of McDonald's restaurants." The minimum wage debate is set to be the headlining topic of the annual McDonald's shareholders meeting on May 22nd.

The actual effects of a minimum wage increase on company revenues are a matter of debated. While an exact calculation was not available, former financial analyst and CEO of Business Insider Henry Blodget, estimates that McDonald's would add roughly three-to-four billion dollars to their annual expenses by doubling all wages for restaurant employees (not corporate management.) While that is certainly a big number, McDonald's annual revenue is around $27 billion.

Using Blodget's logic, The Wire estimated the impact of Obama's proposed increase on McDonald's expenses. A doubling in minimum wage would bring workers to $14.50 an hour, while Obama has proposed $10.10. This is a 40 percent increase, which could add roughly $1 billion to McDonald's annual expenses. McDonald's could try to reduce payroll costs by cutting their labor force, though removing too many workers could impact sales if it begins to affect customer service and productivity.

If the strike succeeds in bringing a $15 minimum wage to the United States, McDonald's, other fast food giants and their shareholders will have some serious number crunching to do — as will policy makers looking to make up for the potential loss of half a million jobs.
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