It took a mandatory Securities and Exchange Commission filing, but McDonald’s appears to have finally acknowledged the obvious in its recently-issued 2013 annual report: it may have to pay its workers more money.
Still, don’t mistake McDonald’s CEO Donald Thompson for Henry Ford. McDonald’s doesn’t want to pay its workers more; rather an “increasing public focus on matters of inequality” may jeopardize its business model by amplifying a “long-term trend” toward higher wages. (For this, we can thank “campaigns by labor organizations and activists,” another one of the risk factors McDonald’s cites. The protests, by the way are unlikely to stop until McDonald’s gives workers a raise and respects their right to organize a union.)
McDonald’s sky-is-falling pronouncements around worker pay ring increasingly off-pitch. Though it professes concern about inequality, with its low pay and unpredictable scheduling, McDonald’s is the one that’s making things worse. The fast-food behemoth raked in nearly $5.6 billion in profits last year, up slightly from 2012. Thompson makes more than $9,200 an hour, nearly 1,200 times the pay of an average McDonald’s employee. The company can clearly afford to pay more without gutting profits.
Many businesses in fact see a bottom-line benefit to raising wages, part of what MIT professor Zeynep Ton calls the “Good Jobs Strategy.” Gains include reduced turnover, higher productivity, improved employee morale, and ultimately, better customer service and satisfaction.
Costco, as President Obama likes to remind us, pays a starting salary of $11.50 an hour, because long-term “it’s a lot more profitable” to “minimize employee turnover and maximize productivity and commitment,” according to a senior Costco executive.
Trader Joe’s enjoys sales revenue per square foot that’s three times higher than the average U.S. supermarket; starting pay for full-time employees is between $40,000 and $60,000 a year.
Gap recently announced an increase in the hourly salary of its store workers to $10, a move CEO Glenn Murphy expects will help “attract and retain a skilled, enthusiastic, and engaged workforce” and “deliver a return many times over.”
Even a Walmart official has begun putting two and two together on worker pay, conceding that an increase in wages for all workers could boost sales revenue enough to “offset and exceed” the larger payout to its employees.
Could this work for McDonald’s as well? Can higher wages sell more burgers? At least one investor finds that providing more spending power to low-wage earners is likely to accomplish just that.
McDonald’s executives, it seems, remain a little chicken.