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Last Thursday, thousands of fast food workers in sixty cities went on a one-day strike to protest their inability to form unions and low wages. Organized by the Service Employees International Union (SEIU) and community organizing groups and taking place a day after the fiftieth anniversary of the March on Washington, the protests captured the interest of the national media and sparked a discussion about the state of the nation’s economy, what constitutes a living wage, and the possibilities of unionizing a sector of the economy that has thus far resisted such efforts.
This week’s brief will explore the motivations behind the recent fast food strikes, opposition to the protests, and the likelihood of their demands being met in the near future.
Readers are also encouraged to use the links below and in the related R&D to bolster their files about this topic.
What is Motivating the Strikes?
The drive for striking at fast food establishments, especially those owned by McDonald’s, Wendy’s and YUM! Brands (which includes Taco Bell, Pizza Hut, and KFC), began in November when about 200 workers went on strike over their working conditions and low wages. As the New York Times reveals on August 29th, these strikes slowly spread to other major cities in the spring and summer and Thursday was larger manifestation of these protests, which were the largest fast food strikes in history. Thursday’s strikes forced a brief closing of fast food establishments in Milwaukee, Detroit, and St. Louis and other cities like Las Vegas, Seattle, and Chicago saw protests.
A major demand of the strikers is for a “living wage” of $15 an hour. Typically, fast food jobs are entry-level work and their work is unskilled. Based on these requirements, the wages of a fast food employee typically hover around minimum wage. The federal minimum wage is currently $7.25 an hour and the last time that it was increased was 2009 when the Democratic Party controlled Congress and the White House. President Obama supports another increase of the minimum wage, but wants a modest increase to $9 an hour and Democratic candidates in the 2014 midterm elections are already campaigning on this idea. However, extempers keep in mind that while the federal government can set its own minimum wage, states are free to set a higher minimum wage standard and as Mother Jones reveals on August 29th, there are eighteen states, not including the District of Columbia, that does this. USA Today on August 30th has an excellent visual chart at the bottom of an article on the fast food protests that extempers should try to add to their files because it can provide a state-by-state comparison of minimum wage standards (last week I had a reader e-mail me why I include USA Today articles in my briefs and the reason is that they usually summarize complicated issues in “lay” terms and have some nice visual charts that can be useful from time to time). The Christian Science Monitor of August 29th reveals that if fast food workers succeed in their demand, then they would see a doubling of their average yearly wages from $15,000 a year to $31,000 a year.
In the past, demands for a $15 an hour wage for fast food workers would appear ridiculous, since the dominant stereotype is that these jobs are occupied by young people in their late teenage years or early twenties. However, with the economic recovery not bringing many full-time jobs, the composition of the fast food industry is changing. The Christian Science Monitor on August 30th explains a study done by Arne Kalleberg, a University of North Carolina sociologist and author of the book Good Jobs, Bad Jobs, which revealed that seven out of ten occupations that will see the fastest job growth in the United States for the next decade are low-wage jobs. The article goes on to explain that the median age of a fast food worker is now twenty-eight and Reuters on August 29th reported that more than 25% of fast food workers are raising children. One of the reasons that these strikes are increasing is that as the fast food workforce gets older and cannot easily move to other jobs those workers want to improve their current situation and they are more willing to vocally protest than younger workers.
Although there would be immediate complications in raising the wages of fast food workers to $15 an hour, which I will explain below, there are several arguments in favor of doing so. The first, as the Business Insider of August 29th reveals, is that from 2000-2012 the cost of a Big Mac climbed 72% to $4.33 from $2.51. At the same time, though, the median wages of a fast food worker only increased 33% to $8.78 from $6.52, which averages out to a mere seven cents above the rate of inflation. What this means is that in 2000 fast food workers could buy 2.6 Big Macs for every hour that they worked, whereas today they can only purchase 2.02 Big Macs. The conclusion that can be reached from all of this data is that workers wages are not keeping up with cost of the products they are producing and that they may not be sharing in the profits of their industry. Workers are correct when they point to their need to unionize because typically a unionized workforce receives higher wages than a non-unionized workforce. As the New York Times previously cited notes, union workers have median weekly wages of $943 in 2012 versus non-union wages of $742 according to the Bureau of Labor Statistics (BLS). Finally, advocates point to the growing profits of fast food industry giants and argue that they are not trickling down to workers. Reuters on August 29th explains that last year McDonald’s made $5.5 billion in profits, which represented a 27% increase over the last five years, and YUM! Brands made $1.6 billion in profits. Advocates also point out that it would take a minimum wage worker 930 years of work to earn as much as the CEO of YUM! Brands.
To counter arguments that their demands are unrealistic and would harm the economy, advocates for the fast food strikers argue that if fast food establishments granted their workers higher wages they would be more productive and would funnel more money into the national economy, which would lead to higher employment in other sectors. As Demos, a public policy organization, points out, higher wages would reduce the high turnover rates in the fast food industry and would improve the industry’s overall health. Demos also alleges that it would reduce public assistance costs, since fast food workers sometimes turn to welfare or Medicaid and other public assistance programs to supplement their wages. The logic goes that if these workers made a higher wage to provide for themselves and their families they would not have to acquire government assistance and the tax burden would come down on Americans across the country.
Opposition to the Strikes
The fast food strikes that began impacting New York City in November have not resulted in many gains for fast food employees. In fact, although consumers appeared sympathetic to worker’s protests in many of the cities affected by the strikes on Thursday, they still went and bought food from these establishments after they talked to reporters. Similarly, although major cities were affected by the strikes they do not seem to have made significant in-roads into small town America. As the Atlantic on August 29th explains, the fast food industry might reconsider workers wages if they faced an intense consumer boycott based on the interests that workers are championing. Without such pressure, it is likely that these strikes will fail.
The Christian Science Monitor of August 30th also mentioned criticisms that economists are levying against the fast food protests. The article writes that the goal of $15 an hour appears unrealistic when one considers that if the workers succeed in their demand then they would make more per hour than occupations like preschool teachers, barbers/hairdressers, tailors, insulation workers, and liberal clerical assistants that require more training and skills than fast food work. Home health aides, bailiffs, correctional officers, childcare workers, telemarketers, and emergency dispatchers would also make less than fast food workers if they won their demand for making $15 an hour. Economists argue that if the workers succeed in their protests then inflation would suddenly take off throughout the economy because if non-skilled labor could make $15 an hour then workers in other sectors would demand wages that would be above that level. After all, if you were a skilled welder that is making $25 an hour now relative to someone that does not have any skills making the federal minimum wage, you are probably going to demand that your wages double if non-skilled workers suddenly acquire a doubling of their wages in order to justify the time, training, effort, and education you put into obtaining your current job.
According to Politico on August 29th, the Natural Restaurant Association argues that only 5% of its employees make minimum wage and those that do are part-time workers and teenagers. Those associated with the industry also insist that if they increased wages for workers significantly then the cost of their food items would increase, leading to reduce purchases by consumers, and thereby harming their bottom line. What extempers must realize when analyzing economic issues that deal with wages is that businesses are not required to be socially responsible entities. In fact, they are accountable more to shareholders, who demand profit margins and signs of successful market penetration. The New Yorker on August 29th reveals the case of Pepsi, who tried a socially responsible marketing strategy by focusing on healthier products, but has curtailed that effort after Diet Coke replaced it in sales as America’s second most popular drink. There has also been a public relations campaign that suggests that workers could be replaced by robots if they succeed, leading to ridiculous ads like this one that appeared in the Wall Street Journal last week, despite a Japanese robot company claiming robots cannot cook fast food (at least not yet):
However, if fast food companies were forced to start paying $15 an hour then they could start looking at ways to significantly reduce their workforce through some type of mechanization, whether that be the use of mobile technology to take orders from customers or having customers ring up their purchases at counters. This has been done by some grocery giants like Kroger with self-service checkout aisles.
The New York Times on August 29th suggested that although a granting of worker’s demands would hurt corporate profits, this was okay because there was enough money to share between workers and management. The problem with this idea, though, is that there are workers who have 401ks and other retirement plans that share stock in McDonald’s, Wendy’s, YUM! Brands, and other fast food establishments. If these corporations suffered reduced profits and stock prices as a result of granting worker demands, these workers would be negatively affected, which shows the interdependent nature of economics.
The Likelihood of Success
Since the recent strikes were just one day affairs, meant to raise awareness more than produce substantial change, it is tough to see the protesters getting their way in the near future. A $15 wage demand seems incompatible with the current U.S. economy, although Labor Secretary Thomas Perez announced last week his support for raising the minimum wage to benefit workers in the fast food industry. It is also hurt by the fact that many fast food establishments, at least those operated by McDonald’s and Burger King, are franchises that are locally owned. As a result, these national chains do not dictate wages and that can be a stumbling block for protesters going forward.
Ironically, the Atlantic mentioned above reaches the conclusion that the protesters would have a better chance of success if the labor market was healthy, since there would be fewer workers seeking fast food jobs and workers would not be as readily replacement. Unfortunately, these conditions are not likely to emerge in the near future. As the article reveals, since 1990 the share of manufacturing jobs in the country has fallen by 50%, retail employment has flatlined (which is significant because it made up for the decline in manufacturing jobs during the deindustrialization of the 1970s and 1980s), but food service employment has increased by 25% since that time. The result of this, according to the Atlantic, is a glut of low-skilled workers in the economy that are more than willing to do the jobs fast food workers are doing now at the wage that they are doing them for. As a result, extended strikes against these establishments are likely to fail, especially in “right to work” states, because the striking workers can be terminated and replaced by other Americans looking for work.
There are also still lingering questions about how to unionize the fast food sector. Many workers in the industry remain young and single and use the industry as a way to build income during high school, college, or if they are in between jobs. The industry also has an enormous turnover rate, which makes it very hard to organize and unionize a workforce. Since these are typical conditions within the industry that are unlikely to change in the short-term mobilizing workers for a prolonged period for $15 an hour wages appears daunting and unlikely to succeed.
The best solution for workers probably strikes many as obvious and is one that extempers should not fail to mention in speeches on this topic and that is a better economy. The Christian Science Monitor on August 30th argues that better investment in education, research, and infrastructure would boost employment and long-term growth, as would steps by the federal government to streamline regulations, simplify the national tax code, and resolve persistent federal budget deficit problems. The Monitor also stresses the role of maintaining healthy safety net programs for workers that can provide them affordable health insurance and provide security to low wage workers who are struggling in the economy. Not surprisingly, conservative Republicans champion this idea and use it to criticize President Obama. Conservative columnist John Hayward writes on August 29th that the “great untold story of the Obama years is the rise of ‘Waiter and Waitress America.’” These Republicans note that although the national unemployment rate is 7.4%, there are millions of Americans that have dropped out of the labor force and there are millions in part-time jobs that would prefer to work full-time. Political calculations aside, a stronger economy would provide more opportunities for skilled and unskilled labor and bolster the wage demands of fast food workers. The Wall Street Journal of August 26th provides an excellent summary of the part-time worker situation in America today, as one in five workers are part-time workers, which is classified as the Labor Department as working for fewer than 35 hours a week. The Journal qualifies that there are more than eight million Americans that cannot find full-time employment in the national economy and that although layoffs have declined to pre-recession levels, hiring remains slow so therefore companies are not really cutting hours as much as they are refusing to hire employees at all in the current economic climate. If this logjam can be broken and the labor market can return to strength then it may open better job opportunities for workers and better wages, since companies would feel more pressure to raise wages to keep employees who cannot be replaced easily.