It’s Time for McDonald’s to Super Size the Minimum Wage

Commentary about business and finance.
July 31 2013 1:32 PM

Super Size the Minimum Wage

Fast food workers are striking for better pay. Will the industry start listening?

Employees and supporters demonstrate outside of a Wendy's fast-food restaurant to demand higher pay and the right to form a union on July 29, 2013 in New York City.
Employees demonstrate for higher pay outside of a New York City Wendy's.

Photo by Spencer Platt/Getty Images

With thousands of fast food employees taking part in strikes in seven major cities across the nation this week over low wages and the right to unionize, the restaurant lobby has issued a forceful response. As hundreds of fast food workers picketed the Union Square Wendy’s in New York City, the industry attacked demands for higher wages as an impossible request that would force companies to lay off workers.

“Restaurants operate on very thin profit margins,” the National Restaurant Association’s executive vice president Scott DeFife said in a press statement. “Significant additional labor costs can negatively impact a restaurant’s ability to hire or maintain jobs.”

The Employment Policies Institute, a group considered by the Citizens for Responsibility and Ethics in Washington to be a restaurant-industry lobbying front, was far more blunt. In a full-page ad in USA Today, the group depicted a plaque celebrating an iPad-faced worker in a fast food uniform as the country’s new model for the “Employee of the Month.” The crudely drawn ad states that if forced to meet the strikers’ requests of a $15 hourly wage—an increase of more than double from the current $7.25 federal minimum wage—fast food restaurants would have to replace these employees with automated alternatives in order to survive.

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Though unsubtle, the iServer got the point across: Force us to raise wages, and you’ll force yourself out of a job. This is a familiar line of attack for the Employment Policies Institute and similar lobbying organizations. Run by the infamous corporate public-relations advocate Richard Berman, the group has been using self-funded (read: industry-funded) studies in a similar ad campaign against November’s minimum-wage constitutional referendum in New Jersey.

The message of these campaigns is that things will be worse for low-wage workers if they are paid more. But much of the research doesn’t back up that argument. One of the most heavily cited (and contested) minimum wage studies of the past 20 years, by David Card and Alan Krueger (current chair of President Obama’s Council of Economic Advisers), compared 410 fast food restaurants in Pennsylvania and New Jersey after the Garden State raised its minimum wage; the study, published in 1994, found no indication that the increase in pay reduced employment. (Six years later, however, minimum wage critics David Neumark and William Wascher reevaluated fast food employment in the two states and drew the opposite conclusion.)

In 2007, Arindrajit Dube, Suresh Naidu, and Michael Reich analyzed the effects of a minimum wage increase in San Francisco on fast food and table-service restaurants and found that improved wages had no negative effect on employment. “The policy increased worker pay and compressed wage inequality, but did not create any detectable employment loss among affected restaurants,” they concluded. Fast food restaurants in San Francisco responded to the increase in pay with a small price increase. The wage hike also lowered turnover significantly and improved the proportion of full-time workers. The research also rejected previous studies that had found employment decreases as flawed due to measuring errors. (Neumark and Wascher and Dube and Reich have since gone back and forth with dueling studies about the benefits of the minimum wage more generally.)

So, as recently as six years ago, cutting jobs likely wasn’t necessary to meet pay increases in the restaurant industry. But now that technology has improved and brought iServers with it, would pay increases put jobs at risk anyway? It’s difficult to predict what the effect would be on the U.S., but this sort of employee automation has already happened overseas. In Europe, McDonald’s has installed thousands of touch-screen ordering systems to replace human workers. If such a regime were implemented in the U.S., it could mean 14,000 fewer jobs at McDonald’s restaurants alone.

Just because automation has come to Europe doesn’t mean that America would follow, and even if the U.S. did embrace iServers, it wouldn’t necessarily mean a negative net employment cost. “Technology has been increasing restaurant productivity for some time—think of computerized ordering of supplies, Open Table and Yelp and electronic ovens—but that has not translated into lower employment in the aggregate,” Michael Reich, one of the authors of the San Francisco study, told me over email. “Indeed, employment in restaurants has been growing along with the use of technology. This is a more general phenomenon and gives lie to the idea that automation only eliminates jobs.”

Fast-food-employee activists say that even suggesting that such touch screens could handle the responsibilities of human employees—cleaning tables, mopping floors, cooking burgers—is both insulting and incorrect. Jonathan Westin, director of the Fast Food Forward group that was integral in organizing this week’s strikes and kicking off the fast food wage increase campaign with previous strikes last November, says that if fast food companies could have replaced employees with iServers without sacrificing customer satisfaction, they would have already done so. “It’s a continuation of the fast food industry and the restaurant association’s thinking around how employees are—they’re replaceable property,” Westin said.

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