McDonald’s wage hike will push other retailers to boost pay: experts

SHARE McDonald’s wage hike will push other retailers to boost pay: experts
SHARE McDonald’s wage hike will push other retailers to boost pay: experts

McDonald’s announcement Monday that it will raise pay and give paid time off to employees at the 10 percent of its restaurants that are company-owned will push other retailers to boost their workers’ pay, too, experts say.

The Oak Brook-based company’s action followed worker protests for a $15-an-hour minimum wage, growing criticism of poor working conditions and earlier announcements by major retailers such as Wal-Mart, Target, Gap and Ikea that they would increase their minimum wages.

McDonald’s will pay workers at least $1 an hour more than the local legal minimum wage and offer new benefits such as paid vacation.

The increase will apply to 90,000 workers; will lift the average hourly wage to $9.90 initially; and will let employees with at least one year of experience earn up to five days of paid time off each year, the company said.

The other 90 percent of McDonald’s 14,350 U.S. locations, which are run by 3,100 franchisees, make their own decisions on pay and benefits and are not bound by the corporate parent’s move.

McDonald’s new CEO, Steve Easterbrook, who replaced Don Thompson on March 1 with a mandate to boost sagging sales and a flagging image worldwide, said the action was needed to create a motivated workforce and better customer service.

Retailers such as Deerfield-based Walgreen Co., as well as McDonald’s rivals Wendy’s, Arby’s, Burger King and Taco Bell, will feel pressure to improve their workers’ pay and benefits, especially because the improving economy is prompting employees to look for better opportunities, restaurant consultant John A. Gordon told the Sun-Times on Monday.

“The nation’s economy has grown so few jobs in the past 20 years, about one-third of the fast-food workforce are now parents,” said Gordon, principal at Pacific Management Consulting Group, based in San Diego. “It’s a totally different workforce than it was 20 years ago.”

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Gimme Credit analyst Carol Levenson said that while McDonald’s fast-food rivals must stay competitive, not all of them have the “financial strength” of McDonald’s and may be unable to afford to boost wages and benefits.

Yet Levenson said in an email interview that any retailer competing for the same labor pool “is certain to be following this [McDonald’s move] closely and running the numbers.”

Walgreen spokesman Michael Polzin said late Monday that the drugstore giant “regularly reviews our wages and benefits, and we will continue to do that.”

Meanwhile, critics contend that McDonald’s effort falls far short of ensuring that its workers make enough to live a quality life.

“Even for those employees who will benefit, the rate adjustment will still leave many hovering around the poverty line,” Christine Owens, executive director of the National Employment Law Project, said in a statement. “For a corporation that raked in nearly $5 billion in profit last year and compensated its CEO $13.8 million in 2013, in a $200 billion industry with the greatest disparity between CEO and worker pay, McDonald’s can and should do much better.”

After McDonald’s announced the pay raise, labor organizers emphasized that the move by McDonald’s shows the need for people to turn out for the next day of protests on April 15, which is set to include college campuses around the country.

“Raising wages only a little for only a small fraction isn’t change. It’s a PR stunt,” said Kwanaza Brooks, a McDonald’s worker in North Carolina, on a conference call set up by organizers.

Kendall Fells, organizing director for the Fight for $15 campaign, said protests also were being planned at McDonald’s stores on Thursday.

In December, labor unions won their argument before the National Labor Relations Board that McDonald’s is a “joint employer” of workers at its franchised restaurants, and therefore shares liability for labor law violations with the franchisees, including retaliating against workers who took part in protests for better wages. The NLRB found that 86 claims had merit — about one-fourth of them in the Chicago area.

Chicago’s City Council in December approved a minimum-wage increase to $13 at big-box retailers starting in 2019. The Illinois Legislature is locked in a dispute with Republican Gov. Bruce Rauner over how quickly and by how much the minimum wage should be raised statewide.

Contributing: Associated Press

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