A May 15 fast food workers strike is demanding a $15 minimum wage at McDonald’s, Burger King, Wendy’s, and other popular fast food venues. But is this demand even reasonable?
In a related report by The Inquisitr, the CBO says the $10.10 minimum wage could cause one million Americans to be laid off from their jobs. Japan, Germany, Brazil, Belgium and even New Zealand will be involved in a massive walk-out for this fast food workers strike. The worldwide protest is meant to be a one-day event to demonstrate the outrage over these underpaid workers and appears to be primarily aimed at McDonald’s. The company has already been discussing the possibility of raising their “living wage” in response to criticism, although they’ve also suggested eating less and spending less.
Kendall Fells, organizing director of Fast Food Forward, claims that McDonald’s wages force people to live in poverty:
“Workers in the fast food industry are living in poverty. The average wage for fast food workers in the U.S. is just over $9 an hour, which is equivalent to about $19,000 a year. That’s below the official poverty line of $19,790 for a family of three.”
The only reason McDonald’s could afford a $15 minimum wage is precisely because of their popularity. Their sales volume is so much higher compared to other fast food and retail chains, which means worker’s salaries are a relatively low percentage of overall sales income. Other companies might not realistically be able to afford such a large increase without largely affecting prices, or forcing massive layoffs, which would make the increase in the minimum wage self-defeating. The only other option is to raise prices, with studies from last year claiming the Big Mac would increase by 68 cents and cheaper items would go up by 17 cents each. But those studies assumed a $4.67 Big Mac price would allow the $15 minimum wage, and as of January, the average price is already at $4.62, up from $3.99.
McDonald’s has also suffered a drop in popularity over the last year, making the $15 minimum wage harder to pull off. Last year, McDonald’s, which owns about 20 percent of its 35,000 restaurants globally, paid out $4.82 billion in salaries and benefits, totaling 25.5 percent of the revenue brought in by the stores it operates. As a comparison, the 2012 McDonald’s annual report showed that only 17.1 percent went to salaries and benefits. Still, the 2014 first quarter revenues were $6.7 billion, which puts them somewhere around $27 billion in gross income for the year if profits continue their rebound. If we were to assume their operating costs almost doubled, this would take their roughly $5.5 billion net income and reduce it to less than $1 billion, leaving the company still profitable.
But would the $15 minimum wage even be a fair wage based upon economic data? An analysis by economist John Schmitt at the Center for Economic and Policy Research shows that, if the minimum wage is indexed to the official Consumer Price Index (CPI-U), then the Federal minimum wage should be $10.52 an hour. If you use the current methodology (CPI-U-RS) for calculating inflation, then the Federal minimum wage should be $9.22. So, yes, unfortunately for the fast food workers strike, a $15 minimum wage is a bit too high on a national level. Depending on where you live, a $15 minimum wage would also mean that fast food workers would make as much as some entry-level engineers and nurses with degrees.
What do you think would be a fair minimum wage for fast food workers on a national scale?