Fast-food picketers demanding $15 an hour may earn themselves pink slips instead.
Raising the minimum wage is capturing headlines everywhere this week thanks to yesterday’s simultaneous strikes staged by fast-food workers across the country demanding higher wages. Picketers in over 50 cities protested outside of McDonald’s, Wendy’s, Burger King, KFC and other service eateries to demand $15-an-hour minimum wage. That is an eye-popping increase that more than doubles the federal minimum wage which currently stands at $7.25 an hour.
Stories have been trotted out about how fast-food workers are forced to accept wages that don’t meet living standards making them to choose between paying for housing or food. One man has worked at an Illinois McDonald’s for the past 21 years earning just $8.25 an hour. Twenty-one years, really?
Advocates of the protests point to stagnant wages over the past decade for workers in low-paying industries that they claim haven’t kept up with the costs of living, especially in metropolitan areas.
However restaurant industry groups take issue with the goals of the protestors and the facts being used to support their cause. According to the National Restaurant Association, only five percent of restaurant employees earn minimum wages and those who do are largely working part-time and teenagers.
Industry representatives also say the goals of these protestors are unrealistic because it is local franchise owners who determine wages and they are often working within thin profit margins due to high costs. So if owners raise wages, the costs will be borne by customers and workers. Here’s how:
"Mandating increased wages would lead to higher prices for consumers, lower foot traffic and sales for franchise owners, and ultimately, lost jobs and opportunities for employees to become managers or franchise owners,” Steve Caldeira, the [International Franchise] Association’s chief executive, said in a statement.
The organization also pointed to research from the National Restaurant Assn., which found that when the minimum wage was last increased in 2007, nearly 60% of eateries raised prices, more than 4 in 10 reduced employee hours and more than a quarter postponed plans to hire new employees.
Raising the minimum wage sounds egalitarian, but the affect on minimum and low-wage workers is anything but equal. It disproportionately hits low-skill and young workers and causes unemployment. Economists at the American Enterprise Institute explain:
The case against raising the minimum wage is straightforward: A higher wage makes it more expensive for firms to hire workers. How big an effect does this have on the job market? Economists debate this. But no one argues that increasing the minimum wage increases the number of unemployed workers who find jobs. In the end, the trade-off is clear. People who keep their jobs get more money; those who lose their jobs, or fail to get new ones, suffer.
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Research published in 2010 by economists Joseph Sabia and Richard Burkhauser concluded that if the federal minimum wage were increased from $7.25 an hour to $9.50 an hour (remember that the president's proposal is to increase the minimum wage to $9 per hour), only 11.3% of workers who would gain from the increase belong to poor households.
Why?
First, many people who live in poverty do not work, and would thus be unaffected by an increase in the minimum wage. In addition, workers who earn the minimum wage are generally not the primary breadwinners in their households. They are secondary earners – an elderly parent earning some retirement income or a spouse with a part-time job. Or they are young people living with their parents. Data from the Bureau of Labor Statistics show that while workers under age 25 make up only about 20% of those who earn hourly wages, they constitute about half of all workers earning the minimum wage or less. Raising the minimum wage is therefore an ineffective anti-poverty proposal.
The images of workers striking in front of our favorite fast-food joints are effective. However, when you consider that raising wages spikes menu prices and leads to reduced hours for workers and less hiring, then raising the minimum wage becomes a burger that no one wants to eat.