McDonald’s wages are rising fastest in Russia, and other facts about fast food pay

For the past several days, hundreds of workers have been picketing Wendy's, KFC, McDonald's and other fast food joints around the country to protest rock-bottom pay, demanding a raise to about double the minimum wage of $7.25 per hour. As TIME points out, it's a last-ditch strategy for a sector that has no other leverage, with plenty of unemployed people willing to work for less and no labor union to bargain for their rights. But what's actually going on with the wages that fast food restaurants pay? A few things to know:


(Bureau of Labor Statistics)

1. The highest concentration of fast food workers is not where they're paid the best. According to the Bureau of Labor Statistics, there are the most fast food workers per 1,000 jobs in metro areas of North Carolina, Georgia, Texas, Indiana and Tennessee -- where mean wages are also among the lowest.

2. Fast food wages have risen -- just not as fast as everything else. The mean hourly wage of a food-preparation and serving worker went from $7.13 per hour in 2001 to $9 per hour in 2012. But that's not as quickly as for employees generally: Between 2001 and 2012, wages for the whole workforce rose 35 percent, while the restaurant worker wages rose only 26 percent.

3. Overseas, fast food wages are rising faster relative to the food they sell. One of the more novel studies of fast food wages comes from Princeton's Orley Ashenfelter, who published a National Bureau of Economic Research paper comparing the real wages of McDonald's workers with the price of a Big Mac. By his calculations, U.S. McDonald's employees could buy the most Big Macs per hour of work of any region, but that ratio declined between 2007 and 2011 -- while the ratio in Russia, China and Eastern Europe increased.

Distribution of starting wage rates in New Jersey and Pennsylvania before and after a raise in New Jersey's minimum wage (Card and Krueger)
Distribution of starting wage rates in New Jersey and Pennsylvania before and after a raise in New Jersey's minimum wage (Card and Krueger)

4. Small increases in the minimum wage probably won't lead to a drop in employment. The most seminal research on the effect of higher minimum wages on employment in the fast food industry comes from David Card and Alan Krueger's (yes, that Alan Krueger) study of New Jersey and Pennsylvania before and after New Jersey raised its minimum wage from $4.25 to $5.05 per hour in 1992, while Pennsylvania's stayed the same at $4.25. They found no evidence for decreased employment or store openings in New Jersey on account of the increase, nor did restaurants appear to reduce employee benefits, such as free meals and training.

There's been some countervailing evidence since that study, and my colleague Dylan Matthews outlined why a hike to $15 would put us in totally uncharted territory. But there are plenty of economists who think that raising the minimum wage to $10.50 -- which is less than what it was in real terms in 1968 -- wouldn't negatively impact employment, either.

5. Increasing the minimum wage will probably raise your restaurant bill. While fast food restaurants didn't shed workers after a minimum-wage increase, Krueger and Card found that prices increased for standard items. Similarly, in 2007, researchers at the Federal Reserve Bank of Chicago found that restaurants raised prices in response to federal minimum-wage hikes in the 1990s -- and fast food restaurants, where workers are paid the least, raised prices the most.

6. Other than raw materials, labor is the single biggest cost driver for restaurants. "Limited Service" restaurants -- which include fast-casual as well as fast food outlets -- spend about 30 percent of their total sales on wages and benefits, according to a 2010 industry survey. The National Restaurant Association calculates that only 5 percent of the industry's employees actually make the minimum wage, and of those, three-quarters are part time and seven in 10 are under the age of 25.

7. McDonald's, the world's biggest fast-food company, is worried about wage increases. Its 2013 annual report to the SEC blamed decreased profit margins on higher labor costs, and enumerated the following risk factors:

The impact of campaigns by labor organizations and activists or the use of social media and other mobile communications and applications to promote adverse perceptions of our operations or those of our suppliers, or to promote or threaten boycotts or other actions involving us or our suppliers;

The impact of events such as boycotts or protests, labor strikes and supply chain interruptions (including due to lack of supply or price increases) that can adversely affect us or the vendors, franchisees and others that are also part of the McDonald's System and whose performance has a material impact on our results;

The impact on our margins of labor costs and the long-term trend toward higher wages and social expenses in both mature and developing markets;

The increasing costs and other effects of compliance with U.S. and overseas regulations affecting our workforce and labor practices, including regulations relating to wage and hour practices, workplace conditions, healthcare, immigration, retirement and other employee benefits and unlawful workplace discrimination;

 

Lydia DePillis is a reporter focusing on labor, business, and housing. She previously worked at The New Republic and the Washington City Paper. She's from Seattle.
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