Generally speaking, thinking about a burger and fries is fun, while thinking about the Federal Reserve is kinda dull. Here’s a chance to combine topics into a happy meal of sorts: McDonald’s plan to raise the minimum wage for certain workers is smart for the company and a good sign for the economy.
Business has been off at McDonald’s, especially in the United States, for many reasons, including stronger competition from other chains and branding problems at the Golden Arches. The company has faced criticism about the healthfulness and quality of its food, about the service in its stores, about its environmental record, about the low wages it pays. There’s nothing positive for the company in the endurance of the term “McJob.”
Sometimes McDonald’s seems like the least loved brand on the planet.
Yet 27 million Americans still eat there every day. McDonald’s remains immensely popular.
Facing its head winds, the company recently replaced its CEO and has started on some changes in how it operates. Last week, new CEO Steve Easterbrook launched a McShot heard ‘round the world: McDonald’s will pay workers at least a dollar above the local minimum wage at its company-owned stores.
This is a big deal. More than 90,000 McDonald’s employees at 1,500 U.S. restaurants will see a paycheck bump. The average hourly wage for employees at these stores will exceed $10 by the end of 2016. Staffers who have worked for more than a year will qualify for paid personal time off.
“Employers need to create more programs and pathways to help people stretch and develop,” Easterbrook wrote in a Tribune opinion piece.
McDonald’s, he said, is redefining the McJob.
These moves affect only stores owned by the company. Some 90 percent of McDonald’s outlets are owned by franchisees, who make their own hiring and pay decisions. Expect, though, that they’ll feel pressure to meet the company standard. Expect that other restaurants paying minimum wage will feel pressure, too. Every local restaurant hires from the same labor pool and wants to retain good employees. Hiring and training replacement workers is expensive.
McDonald’s has been both icon and lightning rod for a long time. Its every act is magnified. No one ever pickets, say, Arthur Treacher’s Fish and Chips. (Yes, some still exist.)
This is where the decision at McDonald’s intersects with the bigger economic picture.
The economy is growing. The unemployment rate has come down to 5.5 percent. But wage gains in the aftermath of the Great Recession have been tepid, much slower than usual in a post-recession period.
Let’s hope the actions by McDonald’s — and other retailers, including Wal-Mart and Ikea, that have given out raises recently — signal the start of a trend that puts more money in workers’ pockets.
Yes, that ripples in different ways. “You increase the wages of the least-paid workers by a buck or a buck and a half and that’s going to push up the cost of a burger on a plate,” Brookings Institution economist Gary Burtless tells us.
It can prompt inflation. But higher wages can also prompt stronger consumer confidence, more consumer spending, a more robust economy.
Which brings us to the Federal Reserve, which is waiting for signs of inflation before raising interest rates, a move that would constitute another important step in the healing of the economy.
Perhaps McDonald’s is responding to signs that competitors are raising wages. Just as likely, it is seeking a fundamental shift in its appeal to its potential workforce. That McJob thing again.
“We must recruit and retain talented people and motivate them to bring their best to the job every day,” Easterbrook wrote in the Tribune. “We must provide them with valuable skills that they use at McDonald’s or wherever their career might take them. Our challenge is the same as other large companies that seek to close the skills and education gap America is confronting.”
Easterbrook also recognizes that the company needs a new compact with its customers. That can be as significant as his move to serve antibiotic-free chicken, and as simple as testing around-the-clock breakfast service.
McDonald’s changes should improve the company’s image. The wage hike will certainly be welcome in the workforce. And if it signals the return of a U.S. economy where businesses have to compete for the best workers, putting upward pressure on wages, that will have the most enduring impact.
Plus, you might be able to buy an Egg McMuffin at noon or midnight. Is this a great country or what?