Tag Archives: Fast Food Workers
Earlier this month, leaders from the New York Senate and the Assembly joined fast food workers outside a McDonald’s restaurant in midtown Manhattan to demand that the $8 minimum wage being paid to workers in the state be raised. New York State recently…
The fast food industry is notorious for handing out lean paychecks to their burger flippers and fat ones to their CEOs. What’s less well-known is that taxpayers are actually subsidizing fast food incomes at both the bottom — and top — of the industry.
Take, for example, Yum Brands, which operates the Taco Bell, KFC, and Pizza Hut chains. Wages for the corporation’s nearly 380,000 U.S. workers are so low that many of them have to turn to taxpayer-funded anti-poverty programs just to get by. The National Employment Law Project estimates that Yum Brands’ workers draw nearly $650 million in Medicaid and other public assistance annually.
Meanwhile, at the top end of the company’s pay ladder, CEO David Novak pocketed $94 million over the years 2011 and 2012 in stock options gains, bonuses and other so-called “performance pay.” That was a nice windfall for him, but a big burden for the rest of us taxpayers.
Under the current tax code, corporations can deduct unlimited amounts of such “performance pay” from their federal income taxes. In other words, the more corporations pay their CEO, the lower their tax burden. Novak’s $94 million payout, for example, lowered Yum’s IRS bill by $33 million. Guess who makes up the difference?
My new Institute for Policy Studies reportcalculates the cost to taxpayers of this “performance pay” loophole at all of the top six publicly held fast food chains — McDonald’s, Yum, Wendy’s, Burger King, Domino’s, and Dunkin’ Brands.
Combined, these firms’ CEOs pocketed more than $183 million in fully deductible “performance pay” in 2011 and 2012 , lowering their companies’ IRS bills by an estimated $64 million. To put that figure in perspective, it would be enough to cover the average cost of food stamps for 40,000 American families for a year.After Yum, McDonald’s received the second-largest government handout for their executive pay. James Skinner, as CEO in 2011 and the first half of 2012, pocketed $31 million in exercised stock options and other fully deductible “performance pay.” Incoming CEO Donald Thompson took in $10 million in performance pay in his first six months on the job. Skinner and Thompson’s combined performance pay translates into a $14 million taxpayer subsidy for McDonald’s.
What makes all this even more galling is that these fast food giants are pocketing massive taxpayer subsidies for their CEO pay while fighting to keep their workers’ wages at rock bottom . All of the big fast food corporations are members of the National Restaurant Association, which is aggressively working to block a raise in the federal minimum wage to a level that would let millions of fast food workers make ends meet without public support.There’s an easy solution to the perverse “performance pay” loophole. A bill introduced by Senators Jack Reed (D-RI) and Richard Blumenthal (D-CT) would simply set a firm $1 million cap for executive pay deductions — with no exceptions. Corporations could still pay their CEOs whatever they choose, but at least taxpayers wouldn’t be subsidizing anything above $1 million. The Joint Committee on Taxation estimates this legislation would generate more than $50 billion over 10 years.
It makes no sense for employees of highly profitable giant corporations to have to rely on government assistance for basic needs. It makes even less sense for ordinary taxpayers to subsidize the CEOs who are benefiting most from the fast food industry’s low-road business model.
With Congress again mulling deficit-reduction strategies, it’s high time that Washington stopped letting fast food giants gorge on both of these absurd subsidies.
You Won’t Love These McSubsidies
Let us all now bow before the god of free enterprise, whose awesomeness was revealed in a recent news release announcing that the divine managers of fast-food deity McDonald’s achieved a profit of $1.5 billion in just three months this summer.
Holy Big Mac! How does Mickey D’s do that? Peek behind the curtain and you’ll see that the secret power that McDonald wields is thee and me — America’s taxpayers.
The corporation rips off its huge workforce by paying poverty wages and no benefits, then directs the workers to the food stamp office and other government-funded safety-net programs.
Neat, huh? A major chunk of the chain’s cost-of-doing-business disappears from the corporate books and — shazam — reappears on the government’s books. In fact, theNational Employment Law Project reports that McDonald’s’ phenomenal profits are bloated by an estimated $1.2 billion that we taxpayers will shell out this year to support its predatory wage-and-benefit policy.
Aren’t you “lovin’ it,” as the chain’s ads say?But the golden arches are not alone in this fast-food flimflam. Yum! Brands, the conglomerate that owns KFC, Pizza Hut, and Taco Bell, soaks us for $648 million to underwrite its poverty pay . Subway burrows into us for $436 million . Burger King, taps us for $356 million , little sweet Wendy’s grabs more than a quarter-billion bucks from us , and Dunkin’ Donuts dips into our pockets for $274 million .
And look here — it’s Domino’s pizza, whose extremist right-wing owner says he hates government spending. But he’s picking taxpayers’ pockets to the tune of $126 million to subsidize his “free” enterprise .
These corporate powers piously preach about the “magic” of the marketplace, but as these facts reveal, magicians don’t do magic. They perform illusions.
Fast food workers around the country are making headlines in their fight for a union and a living wage. While the target of the Fight For 15 movement are the fast food chains, local activists also follow on the heels of other low-wage worker uprisings throughout New York City. As communities, perhaps its time we started really thinking about the moral meaning of a wage that pays a full-time worker too little to reach the poverty line. If the minimum wage had kept up with inflation over the last forty years, it would be $10.74 an hour (it’s currently $7.25).
Counter to the panic-stirring by right-wingers and the shadiest of corporations attempting to keep wages below the poverty line, an increase in minimum wage would only mean the tiniest of increases to consumer prices. As explained by demos:
“The potential cost to consumers would be just cents more per shopping trip on average. If retail firms were to pass the entire cost on to consumers instead of paying for it by redirecting unproductive profits, shoppers would see prices increase by only 1 percent. “ (source)
But it's not only employees in the low-wage professions who stand to win from significant increases in the minimum wage. Small business owners also stand to benefit in several ways from a serious wage hike for their lowest paid workers.
Here are 5 reasons small business owners should support a significantly higher minimum wage for their workers:
1-- A higher minimum wage will not hurt job growth. Economic studies have shown that, contrary to the stream of right-wing talking points coming out of the right-wingers in corporate America, a higher minimum wage does not hurt job growth. In a survey of the past 20 years of research, economists found little or no effect on job growth. Furthermore in a 2013 survey, economists agreed, 4 to 1, that the benefits of increasing the minimum wage substantially outweigh the cost.
2-- A higher minimum wage is good for local business. States that have a minimum wage higher than the federally mandated minimum actually have significantly higher small business and retail growth. From a strictly capitalist perspective, shoppers have to have enough money (for most of us, that means from a job) to keep shopping.
3-- Higher wages means less turnover (and less turnover cost). As small business owners know all too well, the cost of replacing an employee can involve a lot more than just the wages they’re eventually paid, In fact, a 2012 study by the Center for American Progress found that " it costs businesses about one-fifth of a worker’s salary to replace that worker."
When researchers at the Harvard Business School examined Costco’s business model (the average wage at the store is $17/hour), they found that for Costco “[employee] turnover is unusually low, at 17% overall and just 6% after one year’s employment. In contrast, turnover at Wal-Mart is 44% a year, close to the industry average.“
In 2003, San Francisco airport raised wages from $6.45 to $10 an hour--and saw a dramatic drop in turnover from 95% to 19%. Similarly, “a study of home-care workers in San Francisco found that turnover fell by 57% following implementation of a living wage policy.” (source). A study released in July of this year by Dube, Lester and Reich examined the impact a higher minimum wage had on employment rolls and found that turnover rates “fall substantially” after a minimum wage increase.
4--Higher wages may lead to higher levels of trust between employees and employer. It’s always kind of a strange moment when a company that constantly rips off its employees fires an employee for ripping the company off. Nonetheless, the National Retail Security Survey found that over $15 billion in merchandise was lost nationwide to employee theft in 2011.
A research team at the Harvard Business School wanted to explore the relationship between higher wages and employee theft. It turns out researchers found a strong connection between higher wages and a significant decrease in employee theft. Savings on otherwise lost inventory amounted to around 39% of pay increases. That is to say research shows that for every $1 retail employee wages are raised, the company saves an average of some 40 cents in lost merchandise. Conversely, researchers have found that decreased wages has a strong connection to increased employee theft.
5-- It’s the right thing to do. American businesses have been squeezing much higher productivity from working folks at stagnating wages. Put most succinctly by EPI, : “While productivity grew 80% between 1979 and 2009, the hourly wage of the median worker grew by only 10.1%, with all of this wage growth occurring from 1996 to 2002.” Meanwhile, the cost of living in America has risen by 67% since 1990 alone (source).
Inequality in America has reached historic proportions (one study found that our level of inequality is even higher than the Roman Empire’s). A study published earlier this year in The Journal of Economic Perspectives found that out of all “developed nations,” America has the greatest levels of income inequality. Point blank: American businesses owe their workers for nearly two generations of increased profits during stagnated wages.
While President Obama continues his economic speaking tour, walkouts at fast-food restaurants rippled across cities nationwide last week, calling attention to the nation’s growing wealth gap. At the franchise stores of McDonald’s, Taco Bell, Burger King and KFC and other grease-slinging corporations, thousands of people protested the low wages dished out by the biggest names in the industry and raised a common demand: $15 an hour and the right to unionize.
“We are all going through the same thing,” said Naquasia LeGrand, who works at a Kentucky Fried Chicken franchise in Brooklyn and has emerged as one of the most outspoken voices in what is emerging as a national campaign. “We get burns from deep fryers. We don’t have health benefits. We get treated unfairly in the workplaces. We need more wages.”
The campaign — underwritten by the Service Employees International Union — kicked off with a one-day strike New York City last November, when approximately 200 people walked off the job at stores across the five boroughs. Since then, the campaign has had no trouble finding a home in other American cities where the cost of living continues to rise but the minimum wage has flatlined.
On the anniversary of Martin Luther King, Jr.’s death on April 4, approximately 400 people picketed their shifts at fast-food restaurants across the Big Apple. They carried signs reading “I Am a Man” and “I Am a Woman.” The former was the slogan of the striking garbage collectors whom King was supporting in Memphis at the time of his assassination in 1968. Late April also saw low-wage worker actions sweep Chicago and Washington, D.C., while the campaign reached Seattle a few weeks later. Last week, thousands walked off the job at restaurants in Detroit, Flint, Kansas City and in the half-dozen cities where the campaign had already taken root.
“We can’t thrive in an economy where the fast-food industry generates billions in profits and their workers can’t put food on the table,” said Camille Rivera, Deputy Political Director for SEIU Local 32BJ, which has helped organize the strikes in New York City.
Based on economic trends since the 2008 Wall Street meltdown, Rivera predicts that a full 50 percent of the jobs in the United States will be low-wage positions by 2020. She argues that fast-food chains could use their profits as an engine for economic growth, rather than forcing the hordes of people with no other employment options to subsist on the bare minimum. Instead, “we’re continuing to live in an economy where we’re not making it,” she said.
For it’s part, McDonald’s has launched a personal finance education program for its employees rather than offering them a raise. The corporation teamed up with Visa to establish PracticalMoneySkills.com, a website promoting financial literacy that evenForbes magazine ridiculed as wildly unrealistic. A sample budget on the site allots $600 a month toward mortgage or rent even though the national average cost of rent is $1,062. There is no column in the sample budget for education or child rearing expenses. The original version of the budget did not include money for heat.
With more and more Americans facing fast-food insecurity, President Obama launcheda national economic speaking tour in late July. He has so far, however, offered little in the way of new, specific policy proposals. Meanwhile, the president’s proposal to raise the minimum wage to $9 an hour has stalled in Congress. Even if it were to pass, the slight bump would do little to lift millions employed in minimum-wage industries out of poverty.
Carlos Jefferson walked off his Job at Mcdonalds in Milwaukee. (Left in Focus/Bryan MacCormack)
Analysts agree that the odds are stacked against the fast-food campaign winning collective bargaining rights or what would amount to a near doubling of wages. The union drive, however, could have broader implications on the living standards for millions of people across the country.
Nelson Lichtenstein, the director of the Center for the Study of Work, Labor and Democracy at the University of California–Santa Barbara, doubts the campaign will achieve its immediate demands. Instead, he argues that the struggle could lead to broader victories if it keeps the discussion of wages front and center in the national dialogue.
“If your goal is a collective bargaining agreement at the 42nd Street McDonald’s, you might get it actually. But it won’t do you any good,” said Lichtenstein, explaining that the majority of the nation’s fast-food outlets are run by individual franchise owners and organized by regions. This structure enables mega-chains like McDonald’s to divert responsibility for abusive labor practices while generating super-size profits. Such a victory, however, could set off a larger wave of concessions from the industry in major metropolitan areas — compromises that likely wouldn’t include contracts but would most certainly feature a bump in pay.
More significantly, Lichtenstein explained that the strikes could energize the political campaign to force Congress to raise the minimum wage. They also bring the subject of inequality and the stagnation of wages to the forefront of the policy agenda, as Occupy did.
Yet Lichtenstein a draws sharp contrast between the low-wage worker campaign and the Occupy movement. While the latter offered a wide-ranging revolutionary vision for equality, the movement famous for its homemade cardboard signs featured little in the way of direct demands. The fast-food union drive, on the other hand, advances concrete objectives.
“The campaign clearly shares the same energy and spirit and even some of the same demographics of the Occupy movement,” said Lichtenstein. “But Occupy was a little too vague about what they wanted. This campaign isn’t vague at all. They want 15 bucks an hour and the right to form a union.”
The fast-food campaign, however, lacks the bottom-up structure that allowed Occupy to spread so quickly. Instead of encouraging spontaneity, SEIU and partner organizations have heavily scripted and controlled the actions, leaving few of the decisions to the actual people risking their jobs by walking off shifts and picketing their restaurants. But the campaign’s top-down structure has not diminished broader public sympathy for the campaign, nor the genuine commitment people employed in the fast-food industry who are becoming outspoken leaders in the struggle.
“I’m really proud of this movement,” says LeGrand. “It’s something historical; it’s never been done.”
By Peter Rugh
This article was originally published by Waging Nonviolence.