McDonald’s and the Fate of the Middle Class

What fast-food companies pay people today will affect us all

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John Minchillo / AP

Demonstrators in support of fast food workers march towards a McDonald's as they demand higher wages and the right to form a union without retaliation in New York City, on July 29, 2013.

In recent weeks fast-food workers have staged dramatic one-day strikes in cities across the country, demanding a $15 starting wage, instead of about $8 on average at places like McDonald’s. The strikes have prompted much debate about fast food and the cost of a Big Mac. But this moment isn’t just about burger-flippers—it’s about the realization that the American middle class has been hollowed out to the point of decimation. Today, one in four jobs is low-wage, and at current pace it will be one in two jobs by 2024—which means that what fast-food companies pay people today will affect us all.

(MORE: The Dollar Menu for Rent and Gas: McDonald’s Budget Advice for Employees Falls Short)

Companies like McDonald’s may protest that their margins are too thin, their workforces too transient to justify a $15 minimum wage. Yet in other countries the company pays exactly that wage and manages to make profits while charging only a few cents more for burgers. In this sense, fast-food workers are like water drops on a hot griddle: once they’re vaporized, everyone else is about to get cooked. And as these strikers are now showing, more and more low-wage workers in America, even ones that aren’t unionized, are tired of being vaporized.

A $15 minimum wage is the key element of “middle-out economics” (a concept I’ve helped shape, along with my co-author Nick Hanauer). Middle-out economics, as opposed to trickle-down, says that the best job creator is a healthy middle class with the purchasing power to generate and sustain demand. It says – as Henry Ford figured out a long time ago – that workers aren’t costs to be cut; they are customers to be cultivated. Investing in that middle class makes more sense than expanding tax breaks for the wealthy.

A middle-out policy agenda includes a more progressive tax system, but also focuses on high-skill education and fostering more entrepreneurs. And it crosses left-right lines: after all, the rock-bottom wages of a “free enterprise” like Wal-Mart leads to more “big government” spending on food stamps and Medicaid. A $15 minimum wage would take tens of millions off the dole and turn them into more robust consumers and less dependent citizens.

The fast-food strikes have framed the issue and are a sign of a reorganization of labor itself. Because traditional unions now cover only a tiny slice of the private workforce, new forms of organized, joint action are emerging to pressure employers for a better deal, such as coalitions of domestic workers in various states, or advocacy centers for oft-abused guest workers.

Too many American think that the plight of the low-wage worker has nothing to do with them. In fact it is both a preview and a parable. The fate of the middle class rests, in part, on whether more Americans learn to see the fate of fry cooks as their own.

103 comments
ZackSchindler
ZackSchindler

So lets say that in 2026 that 100 million people are paid minmum wage and there is no way that the vast majority of them can advance to anything that pays more. Do you think that they may get a bit upset with this situation and want to do something drastic about it? Looking at history does not show this ending well.

raunchex
raunchex

THE ACTUAL COST OF MCDONALDS FOOD

Burger Patty depending on size - 18 cents, 48 cents, and 68 cents
Grilled Chicken Patty - 66 cents
Crispy Chicken Patty - 67 cents
Sausage Patty - 13 cents
1 McNugget - 6 cents
1 Egg - 9 cents
Filet O Fish Patty - 35 cents
Candian Bacon Slice - 14 cents
Hot Cakes - 8.3 cents
French Fries - 3.44 a huge bag for multiple servings
Yogart Mix - 4.14 a large bag for multiple servings
Slice Of Cheese - 6 cents
Hamburger Bun - 8 cents
Bacon - 16 cents
Tomatoes - 16 cents
McNugget Sauce - 6 cents
Paper Napkins - .001 cents
Plastic Straw - 5 cents
Ketchup Packet - 1 cent
Biscuits - 10 cents
Muffins - 10 cents
12 oz Soft drink no ice - 26 cents for Coke - 16 cents for others

Info Link:   http://imgur.com/R8OyA

McDonalds profits are 20.4% or their revenue, which is double and triple
that of some other businesses.

Link: http://money.cnn.com/magazines/fortune/fortune500/2012/snapshots/2262.html

By comparison, the Supermarket industry operates on a 1 to 2 percent profit margin

Link: http://yourbusiness.azcentral.com/profit-margin-supermarket-17711.html

genet
genet

@RichardPierse 

I'm absolutely disagree with you, I hope it's quite clear that how the inflation

has brought huge financial crisis after the credit crunch, right? in my point of 

view not only Mcdonald but also the other industries should think about it.

jawomack25
jawomack25

Fast food workers are hired into a job that requires ZERO skill or knowledge of the business.  While employed they learn and obtain valuable skills that aren't taught in high school.  North Dakota pays $22 an hour for fast food, but that's because they can't find anyone who wants to work for less. The market will dictate what wages need to be paid.  Fast food isn't a career unless your goal is management and it should be used to build skills and work experience.  I mowed lawns and delivered papers to gain my work experience and skills.

ErakZerebelem
ErakZerebelem

@jawomack25 There is no such thing as un-skilled labor. Read some Barbara Ehrenreich. Can you provide a link proving that fast food workers in North Dakota get $22 an hour?

You are correct that minimum wage Fast Food work isn't anyone's career goal. But, it is all an increasing number of workers have. Read Nickle and Dimed.

WJM980
WJM980

One result of this push for higher wages is that more and more owners are looking for ways to replace workers with technology. Companies like Momentum Machines have offerings that mechanize the process of (for example) making a hamburger. That is the future, not a "living wage" for a minimum wage job.

RekkaRiley
RekkaRiley

@WJM980 Not necessarily.

Sure, those employers might be able to replace most of their workers with robots and technology...

But technology cannot consume the products they create.

Any employer attempting such a venture will eventually learn, probably the hard way, that cheaper production costs mean nothing when there is no one left to BUY the products created.

NaveedXVO
NaveedXVO

@RekkaRiley @WJM980 

I'll still buy hamburgers, and be happier about it because the machines won't make mistakes or serve me 6 hour old french fries.

The employers will only learn that they're more competitive and don't have to deal with employees who don't want to show up. 

They'll have to lower the minimum wage so people can do other work.

RekkaRiley
RekkaRiley

@NaveedXVO @RekkaRiley @WJM980 

1.  Machines are not immune to mistakes.

2.  Machines still can't consume the products they produce, which means the employers profits still start dropping because no one has the purchasing power to actually buy their products.

3.  What makes you think your own job is immune to being replaced by a machine?  When that happens, where will you get the money to purchase any hamburgers, regardless of how they are made?

TKList
TKList

@ericpliu 

The middle class is the byproduct of a free market economy; it is not manufactured by a politician's tax gimmicks and or government redistribution of wealth. 

ErakZerebelem
ErakZerebelem

@TKList The Middle Class (which is diminishing rapidly) is the product of Labor Unions and a Social Safety Net. Read some history instead of fb memes. Medicare, Social Security, The G.I. Bill and Labor Unions created what was once a vibrant Middle Class in the U.S.. De-regulation, unpaid for Wars, Free Trade Agreements, Tax Breaks for the .01% and Union busting are what caused the recession. Who's wealth is being redistributed? Can you answer?

TKList
TKList

There is no such thing as a living wage, there is only a wage that someone can afford to pay.

 You have to tailor your living around your wage, not have the government tailor your wage around your living.

chas999
chas999

The issue is not about minimum wage, it is about fairness. If there are laws on minimum wage, it should be changed to total corporate compensation. In this way profits and jobs are not affected.

Take for example the strike at McDonald’s. Top executives feel they are a one-man team who compensate an increase for themselves to the tune of 300% over one year, 2011-2012 and nothing for the bottom people.

Their compensation in 2011, an average of the top 5 people, was 200 times more than the bottom people. In 2012 it was 670 times. Can you imagine if this happened on a sports team where the superstar makes 200 times more than the bottom person; and when the team wins the championship he gets all the prize money. Yet this happens in corporate America.

What would happen if a 19-1 rule for compensation was applied? In this case, the top person can only be paid 19 times more than the bottom person, including stock options, bonuses, cars etc. Unions should be arguing for total company compensation and not minimum wage.  Executive pay needs to be at more reasonable levels, so that the extra money taken from the top executives and can be cascaded down the company and paid to the rest of the team. And in this way people will get paid more and don’t feel so left out. Profits, jobs and prices are not affected.

In this way corporate profits are not affected, because it is a redistribution of money. And it makes the executives look even worse, if they are shown not to be part of the team, given America’s sports appetite.

If executives are not careful, people are going to react like the people in the Middle east. America’s Arab spring is in the making. You stress me out, I’m going to stress you out.  The Superstar attitude needs to be replaced by Team Spirit attitude.

vaccuu
vaccuu

could you please tell me the meaning of " In this sense, fast-food workers are like water drops on a hot griddle: once they’re vaporized, everyone else is about to get cooked. And as these strikers are now showing, more and more low-wage workers in America, even ones that aren’t unionized, are tired of being vaporized." ?

does it mean unemployment?  i really cannot understand this part exactly....

vaccuu
vaccuu

could you please tell me the meaning of " In this sense, fast-food workers are like water drops on a hot griddle: once they’re vaporized, everyone else is about to get cooked. And as these strikers are now showing, more and more low-wage workers in America, even ones that aren’t unionized, are tired of being vaporized." ?

does it mean unemployment?     thank you ^_^

can you see my reply??




RekkaRiley
RekkaRiley

@chas999 This, oh so very much!

Most of those overcompensated CEOs don't have any direct dealings with the company they earn profits from.  They have at one point in time, but after a few years most of them start farming out all of their duties to lower level employees.  What are they really doing to earn that excessive amount of money?

Part of the problem with the current economy is that companies started prioritizing unsustainable levels of increasing profits over long term stability.

A good analogy I think is Teddy Roosevelt's reasoning behind establishing a system of national parks and wildlife preserves:  He was an enthusiastic hunter, and he wanted to make darn sure that he would ALWAYS have something to hunt, so he made sure to set aside areas where the animal populations would be safe, where they could recover their numbers before spreading out again.

Companies that are willing to take care of their employees, even at the cost of slightly lower profits, often find that those employees are willing to work harder for them and thus create larger profits in the long run.  The post-WW2 economy was largely based around this concept, and that is how you get folks from older generations that proudly proclaim how they have worked for the same company for over 40-60 years, and would gladly do so again, and encourage others to buy from that company to keep it going.

"You catch more flies with honey than vinegar."

Sadly, just like the environment, economies and societies tend to go in cycles.  At some point, this may get to the point of an Arab Spring type revolution, before people learn from their mistakes, the society/economy stabilizes, and things continue to improve before peaking out and starting to drop again.  And the cycle continues.

NaveedXVO
NaveedXVO

@RekkaRiley @chas999 

I wonder how many high level CEOs you've personally seen farm out their jobs? 

That's great that companies that are willing to take care of their employees find it creates them bigger profits in the long run. Those companies will survive and the other companies that you hate so much will fail. Strange that they haven't yet? I'll keep holding my breathe. :X

You need to read less fanciful history about cycles and more Thomas Malthus.

RekkaRiley
RekkaRiley

@NaveedXVO @RekkaRiley @chas999 They actually did start to fail.

They've kept afloat only because of government bailouts.

Many high-level CEOs can't even tell you what tax form they use.  They aren't the ones keeping track of their own money, they pay someone else to do it.

RekkaRiley
RekkaRiley

@NaveedXVO @RekkaRiley @chas999 Also, define "less fanciful history."

I've read everything from Cicero to Keyes to Krugman and Malthus, and everything in between.

Many of these economic theories have been tried in history and proven to be unsustainable and even dangerous.

Without a strict definition of exactly what you mean by "less fanciful history," there is no way for me to determine what meets that requirement.

Basic rules of debating:  Define exact terms.

genet
genet

@chas999 

Thousand thanks for your lovely comment  and you absolutely got me.