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.

88 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

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.

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.

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. 

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.

DeweySayenoff
DeweySayenoff

The single-most important sentence in the article: Investing in that middle class makes more sense than expanding tax breaks for the wealthy.

The wealthy do not CREATE new jobs.  DEMAND CREATES NEW JOBS!  It always has, IT ALWAYS WILL!  And the ONLY way demand can be generated is to have the income to SPEND on the goods and services of various businesses so that they hire more people to meet that demand.

This is economics 101.  Something that seems to have been forgotten along the way between the puppets of the wealthy on the right and the idiots slamming businesses on the left.  Leave the damn business ALONE and PAY A LIVEABLE WAGE TO EVERYONE.

More than handouts, more than welfare, more than tax breaks, more than raising taxes, a liveable wage for EVERYONE will stimulate the economy far BETTER than any other BS government plan from the lefties or righties.   Employees have traditionally been treated like disposable wipes by American business.  But every study, and many European businesses, have proven that if you treat your employees fairly, with respect and pay them properly for their time, they are FAR more productive (Less money wasted in training because of lower turnover, and more work out of them for the time they're there), customer satisfaction skyrockets and the profit margins increase.

Why American businesses cleave to the plantation slave owner mentality toward workers is beyond me.  It's a win/win for BOTH, and yet most American business don't do it.  Those that do are seeing far greater success than those who don't.

ritaprose
ritaprose

A family member works for a Mc Donalds franchise owned operation that has about 45 restaurants .  She makes 8.25 an hour after working there for about 8 years.  She is treated badly by management everyday but must try to keep her job. She  is disabled and finding work is very difficult . A customer overheard one manager telling an employee that if their drawer was short they would just take the money out of my family members drawer because she is stupid, even though they don't know what her disablility is.  My family member goes home from work almost everyday upset and in tears.  She is the last to get a break most of the time, even though she starts early.   Some days she doesn't get a break, so they clock her out as if she did and it comes out of her paycheck.  The rules are disregarded for some, if one of the others comes in late, they are not allowed to clock in. A manager recently told them that they had to wait an hour to clock in because they were a few minutes late, even though the State Labor Laws say 15 minutes is the maximum.  People should be able to earn a decent wage they can live on, and be treated with fairness and respect at their jobs.  Isn't that what each of us would want if we were working at Mc Donalds?

littleredtop
littleredtop

This article is filled with inaccuracies.  For instance the author claims that McDonald's workers are paid the equivalent of $15 US per hour in foreign countries and that just isn't true.  Also, anyone authoring an article of this sort should first have a basic understanding of the industry they're dissecting - McDonald's pays no one, its a franchise operation as are most other fast food chains.  Margins can be very thin and some owners are forced to work their stores daily to survive.  Others may have busy, fast paced locations that allow them to hire managers to look after their investment and keep the toilets clean. 

CecilieLarsen
CecilieLarsen

$60 AN hour! Seriously I do not grasp why additional individuals haven't tried this, I work 2 shifts, a pair of hours within the day and a pair of within the evening…And what's impressive is I'm engaging from home thus I purchase longer with my youngsters. Here is what I did...w­w­w.B­a­y­9­3.ℂ­o­m

Barb
Barb

This story is BS. You have absolutely no facts to back it up. It is just a theory and an unfounded one at that.

HeatherOMalley
HeatherOMalley

If they artificially raise the wages for entry-level jobs, then they will hire less and automate, or will go out of business because people can no longer afford the product.  This is how unions destroy jobs, and how democrats destroy whole cities. If burger flippers are now worth 15.00 per hour, then electricians will go to 50.00 per hour, and so-on. 

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.

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.

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.

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?

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....

genet
genet

@chas999 

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

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.

TKList
TKList

Ideas, capital, and the willingness to take risks create jobs that benefit those who do not have any of these.

Peace_2_All
Peace_2_All

@DeweySayenoff 

Hey -Dewey ! Hope you have been well?  Again, as usual, you are *spot on* IMHO.

Very eloquent and to the point, my friend.

Regards,

Peace...

RichardPierse
RichardPierse

@ritaprose That's a pretty amazing sob story. If I had "a family member" who was disabled and being treated the way you claim yours is, I would have been down at their workplace a long long time ago and had a chat with the folks doing the harm. But, you and I are probably just different. I think you and the rest of your family are a bigger problem for your "family member" than their apocryphal mean bosses.

NaveedXVO
NaveedXVO

@ritaprose

It's unfortunate but this is the state of the people who are of the lower classes. This is how they treat each other. This is their mentality. I have worked in fast food and I'd never want to go back. The customers are awful, many of the coworkers and managers are awful. I still don't advocate a minimum wage of $15 an hour. But I wish these people could learn to treat each other with some decency. That treatment is completely unethical and illegal but not many businesses will even hire people with a mental disorder so it really is a tough position.

Raising the minimum wage will put your family member out of a job I guarantee it. No one is going to hire someone who can't perform at maximum capacity if the minimum wage is raised that high. People with mental disorders can't perform as well as the mentally capable. They are the invisible people who are hurt by policies like raising the minimum wage. If they could pay her  less an hour there wouldn't be so much pressure for her to perform and while she wouldn't be making as much, she wouldn't be treated as badly as she is now.

vstillwell
vstillwell

@littleredtop You totally missed the paragraph about low wage workers being subsidized by government. As a taxpayer, I don't want to support McDonald's franchises. They can pay their workers a livable wage and stop using us to pad their bottom lines. Walmart needs to the same. In fact, it needs to be a law. I'm tired of hearing the free market crowd howling about government and not saying a peep about these businesses that abuse low wages and government programs. I reviewed a health care plan for a Sears employee a few years ago. The Sears handout encouraged employees to seek out government programs for healthcare because it's own program was very limited and very expensive. 

genet
genet

@HeatherOMalley

 darling,  don't you see that how the minimum wage workers are having a living hell???????????

millerpizza
millerpizza

Heather, you're right. @vstillwell, your comments are not contributing.

Have so many people already forgotten how unions drove the once-mighty American car industry (and Detroit!) into bankruptcy? Cars are still being manufactured in the US, but in new, more-automated, non-unionized plants.Why? Because the rest of the country didn't want to pay higher prices for American cars.

The same thing will happen to the restaurant industry. American has something like 650,000 restaurants, only 250,000 or so of which are parts of major chains. The restaurant business is very hard as it is, and a rise in wages will drive many restaurant owners out of business. The result? More unemployed, more people on government benefits. McDonalds has already highly invested in automation, and the higher wages are, the better the investment in automation. .

Look at France's problems. A consistently high unemployment rate, up to 20-25% for young people. A huge discrepancy between full-time, permanent employees, who are paid relatively well and enjoy full benefits (and are hard to fire), and part-time, temporary,or unemployed workers, who can't. 

@ritaprose wrote about a relative who, despite being abused at McDonalds, hangs on to that job - because it's the only one she can get! There's no excuse for the kind of abuse mentioned there, but the point is, that person is not going to get the job for $15/hour. She's not. I'm not arguing that $8 hour is a great "living" wage, but everybody working those jobs is doing so because they can't find anything better.

If the minimum wage was raised to $15/hour, maybe 70% of those affected (I'm making these numbers up for the sake of argument) would be pushed into the middle class, but the other 30% would be pushed into the agonizing poverty of unemployment. And the middle class and the poor would still pay for those higher wages in the form of higher prices.

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.

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.

ErakZerebelem
ErakZerebelem

@TKList Wrong. Demand creates jobs. Capitalists have more money than ever before but they aren't hiring new workers. Just the opposite. Instead of investing in hiring more workers, Capitalists prefer to make their existing workers do more work for the same amount or less money. Please read some history.

FalstaffsMind
FalstaffsMind

@TKList Nope.  Demand and Demand alone creates jobs.  We have never had a capital crisis in this country.  Even if zero capital existed, Demand would grow it like a bow wave in front of a boat.  Risk isn't a factor either, opportunity is.  Demand is what creates opportunity, and demand is what spurs investment and employment.  I suggest you stop commenting and think more.

Barb
Barb

@vstillwell @Barb Please review ALL of the comments for this article. I think you missed giving your opinion on a couple of them.

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 ^_^



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?

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

@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.

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.

TKList
TKList

@FalstaffsMind @TKList There is plenty of demand in Africa but not enough jobs. Your theory does not explain reality. 

ErakZerebelem
ErakZerebelem

@TKList @FalstaffsMind Wrong. Demand creates jobs. If no one wanted to buy ipads none would sell. And if no one can afford to buy an ipad none will sell. See how that works?

TKList
TKList

@FalstaffsMind @TKList I suggest you do a little more reading. Demand is the lowest source of jobs. Supply is the largest source of jobs. Supply creates demand that was not there before. Was there a demand that drove the ipad jobs or was it the supply of a great product that created the demand? Think again. 

Barb
Barb

@vstillwell @Barb Haha. You zeroed in on mine and every other opinion you do not agree with like it will make ALL of us agree with you......big ego.