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Yes, McDonald's Can Do Better

Catherine Ruetschlin

When I was 18, I spent a year and change flipping burgers in one of those restaurants where customers eat from a tray balanced across their car windows. It was one of the three jobs I held at the time, affording a simple budget and enough left over to save up to go to college after a couple of years. I put in hard hours for my employer and it eventually worked out just fine for me. It also makes for a nice story, but one that is embarrassingly dated. The fast food industry where I worked is not the fast food industry of America today—just ask the thousands of workers on the streets, standing up for same opportunity to get by and get ahead that built the American Dream.

For today’s fast food work force, erratic scheduling makes holding down more than one job impossible—you can’t commit to a second employer if you’re on call for the first. At the same time, low wages barely cover basic household needs, leaving millions of workers in poverty despite being employed, and making saving for the future impossible. And the 18-year-old serving your root beer float? Today she is 29, and likely to have been to college and have a family to support.

What else has changed since I was behind the counter? Oh yeah, fast food companies are making more money than ever.

In our report "A Higher Wage is Possible," my co-author Amy Traub and I show how Walmart could meet worker demands for a fair wage without passing costs onto consumers. Every year, Walmart directs a portion of its profits to buying back its own public stock, consolidating ownership and increasing earnings per share. If they used that money to invest in their workforce instead, Walmart could offer a raise of $5.83 per hour to all of its 825,000 low wage workers. In addition to pulling thousands of families out of poverty, Walmart would see lower turnover and higher productivity and contribute to economic growth that benefits Walmart, retail, and the economy overall.

Share repurchases have become an increasingly popular business strategy. Last year, McDonald’s Corp spent $2.6 billion on them. YUM! Brands Inc, which includes Taco Bell, KFC, and Pizza Hut, spent $965 million. But while the long term value of buying back shares accrue mainly to those executives whose compensation is tied to stock performance, using that money to invest in the workforce would have benefits that apply to all stakeholders—workers, customers, communities, and shareholders too.

A quick calculation shows that McDonald’s and Yum could give raises of $2 to $3 per hour to every U.S. worker at their restaurant locations using just the money they now spend buying back shares. Since the details of their corporate pay structures are not public record, that is a raise applied to even the workers already earning above the threshold of $15 demanded on the streets. If we broke out the low-wage workers, or added in the billions in additional money paid to dividends each year, that raise could go even higher—without costing customers a dime.

There are lots of good reasons why fast food employers should do better for their workforce. It’s a win-win situation for everyone with a stake in the economy—and that is everyone. Moreover, fast food can do better, by using the money now syphoned to the top to invest in their workers and grow the economy.

To people like me who made their way through jobs similar to those of the workers on the street today, the cripplingly poor terms of employment in today’s fast food industry look like more than just greed. It looks like the end of opportunity and the exchange of performance on paper for the substance of the American Dream.