April 2, 2015
McDonald’s to give its workers a raise
Roughly 90,000 people working in restaurants operated by McDonald’s will be a little better off starting in July as the fast food chain has announced it will pay employees $1 above the mandated minimum wage. The bump will mean the average hourly worker will be earning $10 an hour working at McDonald’s by the end of next year.
McDonald’s, which has been the focus of labor protests because of the low wages paid workers in its 14,000 restaurants in the U.S., is also going to offer paid vacation time to full- and part-time workers who have been with the company at least a year. Workers who average 20 hours a week, for example, will be given 20 hours a year in paid time off. Employees who do not use the time they’ve earned will get paid for it instead.
"We’ve been working on a comprehensive benefits package for our employees — the people who bring our brand to life for customers every day in our U.S. restaurants," said Steve Easterbrook, president and CEO of McDonald’s, in a statement. "We’ve listened to our employees and learned that — in addition to increased wages — paid personal leave and financial assistance for completing their education would make a real difference in their careers and lives."
While workers at company stores will benefit, it remains unclear what McDonald’s franchisees will do. Roughly 90 percent of McDonald’s in the U.S. are operated by franchisees and those companies make their own decisions about wages and benefits.
McDonald’s also announced an expansion of its Archways to Opportunities program, which includes a free high school completion program and tuition assistance for college courses. Archways to Opportunities covers workers at company-owned and franchised locations.
"Businesses like ours have a vested interest in helping to create an educated and well-trained workforce," said Mike Andres, president of McDonald’s U.S., in a statement.
Critics dismissed the chain’s announcement as being insufficient.
Kwanza Brooks, who works at a McDonald’s in North Carolina and is part of the Fight for $15 group advocating for higher wages, called the move a "PR stunt" and "a weak move for a company that made $5.6 billion in profits last year" on a conference call with reporters.
Discussion Questions
Will McDonald’s announcement have any effect on the public perception of the company and its franchisees as employers? Do you expect the vast majority of franchisees to follow McDonald’s lead in raising wages and offering vacation time to restaurant workers?
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McDonald’s troubles continue with its menu issues, its nutritional issues and with its employee pay issues. It appears that they are going to work on all the issues and attempt to get more customers into their stores. I think the public will see this as one step in the right direction. However, the new wages will put more pressure on those retailers who also need a great deal of part time workers and still pay minimum wages. It changes the game of attracting the part timers.
The franchisees will follow the corporate stores since the option of not providing the new wages will put their stores in a bad light with corporate and no one wants to be on the outs with McDonald’s. There will be the appropriate pressure to do the same, but my guess is that it has already been agreed upon prior to the announcement.
All these PR stunts are intended to have an effect on public perception. But does the public really care about such things? Wages are rising anyway because of a strong economy and a worker shortage, not from giving in to worker demands. McDonald’s, Walmart, Target and other low-wage employers are cashing in on the PR when it’s really business as usual. I would expect franchisees to follow, as will many low-wage retailers, if they want to find people willing to work. It’s just that wages have now crossed a psychological milestone such as $9 or $10 so why not make it news? As far as benefits goes, most of these employers have nothing to worry about. Turnover is so high few will make it to six months or a year. Most certainly if an employee is not providing them with $10 a hour worth of labor they will be encouraged to move on.
I don’t care what you pay the workers, as to me the food is not good, and unless it is the only option available to eat, it won’t get me to go there. It comes down to quality food executed well and served in a reasonable amount of time (hello Five Guys), and for me fast food doesn’t cut it, and hasn’t in many years.
The other problem is keeping their $1 menu alive for folks who go there, and that could go out the window since this will increase costs for sure. Tough position for fast food to be in right now, as they are easy targets for the protestors, who have nothing better to do. I don’t see any rays of sunshine coming out of this scenario, so we’ll see.
I salute McDonald’s for taking this step, but remain cynical. It’s a good PR exercise, but it does not lift most McDonald’s employees above the poverty line. This will pressure franchisees to follow suit. Hopefully this is the first step towards meaningful wage increases at McDonald’s, but it does not go far enough.
There will be no lasting effect on the public: This will be old news next week and forgotten by the end of the month. McDonald’s suffers from what fifth graders in my day called “cooties,” and cures are difficult. It’s famous for unhealthy food and underpaid workers who don’t care. It may be able to upgrade its work force slightly, and thus move the needle a trifle on public perception. Franchisees will follow along with corporate on the pay raises, both to keep McDonald’s happy and to stay competitive in their markets.
Saw an interview on CBS This Morning in which the new McDonald’s president wanted the company to be known for making the best burger. Considering the competition, if they can achieve that, perceptions will change.
Yes McDonald’s will get kudos. No the franchisees will not follow. What America has forgotten is that the more money you invest in the lowest-level worker, the more that worker can buy your product.
Further kudos to Mike Andres for reminding us “Businesses like ours have a vested interest in helping to create an educated and well-trained workforce.” America has forgotten this also.
This is a classic case study of the zero sum discounting game McDonald’s played and is now suffering from as a result. McDonald’s did not sell cheap or low-cost burgers 20 years ago and began discounting recently to $1 value meals as a competitive ploy. Well, now everybody sees McDonald’s as the cheap burger joint and perceive Red Robin and Smashburger as quality gourmet burger experiences.
In answer to the questions posed and an additional thought:
The real questions is if the increase will get you better employees and better customer service. The answer is NO. Only a better hiring process and better management will get you those two.
Our country has lost its middle class manufacturing jobs to nations overseas. With certain exceptions, fast food and other retail employers are now the closest we have to “blue collar” jobs. I think America will need to get used to the idea of paying more for hamburgers in order to help keep more Americans employed. Frankly it’s going to take even higher wages than $10 per hour but it’s a good start. Sorry, don’t blame the messenger.
Mr. Thayer is right, it’s old news. Odd this was never news when McDonald’s went from $3.35 to $4.25 to $5.50. Wages of $9 or $10 are already ancient history in Hawaii, Alaska, North Dakota and West Texas. Whatever the wage rates are, these are the wages McDonald’s needs to pay in order to compete for workers and to some extent, subsidize unemployment. Employees at these low-wage jobs bounce around like high school kids change boyfriends/girlfriends. The kids at these places will move across the street for $20 more a week. As automation gains traction with new ordering kiosks, McDonald’s can be more selective on who they hire. Perhaps in the not so distant future McDonald’s will be paying $15 an hour but instead of having 60 employees in a store they will only have 30.
I don’t think this will help public perception at all. It is a non-event and will be viewed as a me-too move by McDonald’s. The issue with McDonald’s continues to be with the menu they serve not the wage they pay. The increase of wage will just eat into the franchises’ profits, but they will likely follow the lead as the market is demanding it.
Let’s forget for a minute about the quality of the food and level of employee hired. The main point to me is that these store-owned employees will see more in their paycheck. Let’s hope the franchise owners will follow suit. But I doubt it will be a long time before we see the prices rise to offset the loss in profit because of the wage line on the P&L.
It may be PR for McDonald’s, but it is a start and a very small step for our country. Perhaps other retailers/restaurants will follow suit. But if one looks at overall benefits and wages, a job at McDonald’s will never be viewed as a career. Seriously, offering 20 hours/2.5 days vacation—sure it’s a start, but the US lags in terms of “minimum standards” for paid vacation, holidays, retirement, healthcare, etc. Some companies and most government jobs provide good overall packages, but most small employers, retailers and restaurants do not. McDonald’s and most US companies have a long way to go. Let’s hope we stay on this course and keep moving toward a livable wage and benefit package to all.