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Work and Be Poor. It's for Your Own Good

David Callahan

The fast food worker strikes have become an occasion to repeat age-old arguments that raising pay for low-skilled jobs will result in fewer such jobs. In effect, the advice to fast-food workers—many of whom work full-time but still live in poverty—is to endure low wages because lousy pay is better than no pay. 

A recent piece by Jillian Kay Melchior in the National Review Online, "Foolish Fast-Food Striking," is a case in point. Melchior relies heavily on data from the Employment Policies Institute—a think tank created and funded by industry—to argue that it's a "well-documented fact that when wages increase, employment decreases."

Of course, though, the connection between wages and job growth is hardly so simple. Historically, job growth and wage increases have gone hand-in-hand. Most recently, the late 1990s saw major wage gains for low-skilled workers at the bottom of the economic ladder amid a huge expansion of new jobs. Employers paid these workers more because the job market was tight and they had to part with a greater share of their profits in order to secure labor. 

As long as business is good, employers can afford to pay higher wages while also adding new workers. If fact, that's a best case scenario for any owner: things are booming, you're hiring more people, and you're able to do better by your employees by raising their pay. (Which most employers know is a good thing to do because it rewards loyalty and reduces expensive turnover.) 

So what's the situation today? Well, business is definitely booming for the biggest fast-food employers in America. Consider Yum! Brands, which owns Taco Bell, KFC, and Pizza Hut—making it the second largest fast-food company in the nation, after McDonalds, with hundreds of thousands of workers on its payroll. 

Yum! Brands has soared like a rocket in the past few years, a veritable money machine for its shareholders and top executives. Today, its stock price stands at $74—which is not only a historic high but is three times higher than the stock price four years ago. The company had $3.7 billion in gross profit last year and $1.4 billion in net income, which has meant huge payouts to shareholders and executives. Indeed, the CEO of Yum! Brands, David Novak, made $56.6 million last year through a combination of salary and excercised stock options. 

McDonald's stock is also now near an all-time high. Share values have quadrupled over the past decade and nearly doubled since Obama took office. 

In other words, fast-food workers at the majority of major chain restaurants are not enduring low wages because their employers can't afford to raise wages. They easily can, while also continuing to add new workers. Rather, these companies pay such low wages because high unemployment and a lack of unions allows them to get away with it. End of story. 

The fast-food workers who are striking aren't foolish, as Jillian Kay Melchior suggests. Quite the contrary: They're doing what any smart employee should do when their employer is flush—trying to get a bigger piece of the pie (a pie the workers actually bake, by the way.) 

And just about anyone with a stake in the economy should hope that these strikes succeed. Because if low-wage workers start getting paid more, that will mean more money in the pockets of these workers and more economic demand for all goods and services. 

The strikers aren't just smart. They're trying to do all of us a favor.