If Congress adopts a lower minimum wage for teenagers, McDonald's Corp. could save an estimated 31 cents a share on its labor costs, according to one analysis.
The so-called youth subminimum wage -- an idea that has been bandied about for years but which now has the support of the Reagan administration and of the chairman of the Senate Labor Committee, as well as the riper potential of a more conservative Congress -- would represent substantial savings across the board in the restaurant industry, the biggest employer of teenagers in the nation.
But among restaurants, fast-food franchises would benefit most, with McDonald's the biggest gainer, according to Victor J. Raskin, an analyst for Dean Witter Reynolds Inc.
A spokeswoman for McDonald's said the company has not done its own analysis and could not confirm or deny the 31-cents-a-share estimate. The hamburger chain's earnings per share in 1979 were $4.68.
Most proposals for a lower minimum wage for teenagers have suggested that the figure be set at 85 percent of the regular minimum wage -- scheduled to rise to $3.35 in January. McDonald's generally pays an average labor rate above minimum wage. After the increase in the minimum wage that McDonald's average rate would be an estimated $3.68; but with the adoption of a 15 percent differential it would drop to $3.42, producing an after-taxes savings of 31 cents a share in 1982, Raskin said.
Incoming Senate Labor and Human Resources Committee Chairman Orrin G. Hatch (R-Utah) has named as a priority the passage of a bill to reduce the minimum wage for teenage workers. According to a committee aide, hearings probably will begin shortly after the committee is reorganized next year. President-elect Ronald Reagan has said repeatedly that such a measure is a priority of his, as well.
On the other hand, designated director of the Office of Management and Budget, David Stockman, has suggested that the youth subminimum and other issues with a potential for raising organized labor's ire be put off until more pressing economic issues have been settled.
Whenever the issue does come up, its chances appear greatly enhanced by the conservative tide that swept the Congress. "It's an idea whose time, maybe, has come," said Kolbet Schrichte, director of government affairs for the National Restaurant Association, a group that is among the leading proponents of a youth subminimum.
When the issue last came to a vote, in 1977, the votes were close in both the House of Representatives and the Senate.
Supporters of the measure argue that it would open up entry-level jobs to youths who would be unemployable at higher prices and help break the chain of poverty in economically depressed areas such as the inner cities. Under most proposals that have been made, teenage workers advance to the regular minimum wage after six months at lower pay.
Opponents dispute that it will mean additional jobs and claim that it will take jobs away from adults.
In the past, the cheaper youth wage has been supported strongly by the U.S. Chamber of Commerce and a number of industries that employ large numbers of teenagers, such as variety stores, service stations and hamburger chains. Approximately 24 percent of all food service employes are teenagers, according to Robert Palmer, associate counsel for the NRA. Percentages of employes 19 years old or younger vary from roughly 25 percent to 40 percent among the largest chains, he said.
Savings for individual chains would vary depending on that percentage, whether they pay wages over the minimum level and other variables. Raskin looked at three other chains, including Wendy's where labor costs would be reduced by an estimated 8 cents a share after taxes in 1982 if a youth subminimum were enacted, he said.
Denny's Inc., where most of the shortorder cooks and waiters and waitresses are more than 18 years old, would recognize a minimal savings; and Church's Fried Chicken would save no money at all, as operations now stand. Church's workers are adults because the chain cuts its chicken in the store, a task that the Occupational Safety and Health Administration considers too dangerous for teenagers, according to Raskin.
When the youth subminimum last came up, McDonald's Corp. was the most visible lobbyist for the measure, covering Capitol Hill with supporters dressed in McDonald's jackets, according to AFL-CIO legislative department director Ray Dennison.
"They made no bones about it. They wanted to give everybody a break today -- mostly them," said Dennison. Dennison rejected arguments that the proposal has an ideological basis. "The real goal here is sheer profit."
Organized labor led the effort to defeat the measure and expects the same fight again this Congress.
The McDonald's spokesperson said the corporation has no position yet on the issue, in part because its officials are waiting to see a report by a federal task force on the minimum wage. "We think it's premature to say that we have a position now without that data," she said.
Food franchises pumped approximately $400,000 into congressional races during recent elections with much of the money targeted on Senate and House Agriculture and Labor committees and the House Interstate and Foreign Commerce Committee, where legislation dealing with the rights of franchisees versus franchisors has been an issue.
Food franchise political action committees (PACs) put approximately $21,800 into races involving members of the House Education and Labor Committee, with more than half targeted on races involving four of the eight members of the labor standards subcommittee. McDonald's contributions were made to candidates chosen by a steering committee, which considered a number of things and not just a candidate's position on a single issue, according to the corporation.
The largest restaurant industry contributions to any House candidate went to Claudine Schneider (R-R.I.), who defeated subcommittee Chairman Edward Beard (D-R.I.). Restaurant industry PACs gave Schneider about $5,400.
Among food franchise political action committees, Steak & Ale Restaurants of America Inc. Employee's Political Action Committee and McDonald's Corp. Political Action Committee were the most prominent, with contributions of $109,252 and $100,150, respectively. The substantial contributions were higher than those made by PACs from such corporations as Exxon and Ford, although not nearly as much as spent by organizations such as the American Medical Association and the AFL-CIO.
When Congress takes up the issue of the youth subminimum, it will have in hand a study by the Minimum Wage Study Commission, a group appointed by the secretaries of Labor, Commerce, Agriculture and Health and Human Services. The commission was scheduled to complete its work in May but has speeded up its schedule for sending reports to Capitol Hill. By waiting until May, the commission would have taken a chance that Congress might have acted without the benefit of its work, said Chairman James G. O'Hara.
Hatch has proposed an even larger differential than 15 percent -- 25 percent. That, and using tax credits rather than lower wages to encourage hiring teenagers, are expected to be among the proposals considered along with an 85 percent youth subminimum.