Fast Food Workers Strike - Is a Living Wage Really Possible?

The recent strikes by fast food and retail workers in the U.S. have helped supercharge an old, but familiar, topic: the value of the living wage.

Workers walked off the job last Friday in an effort to force major chains like McDonald's, Wendy’s, Domino Pizza and Nike to significantly increase the hourly wage for part-time and full-time workers. The protest may be one of the bolder moves to hit the food and retail sector which, for the most part, has been strike- and union-free. It also highlights an uncomfortable topic for industries that have for years been able to skirt the question of how they contribute – or don’t contribute – to improving living conditions for some of the country’s poorest workers.

In 2011, three researchers explored whether raising the federal minimum wage to $12 an hour in an effort to provide retail workers with a living wage would adversely affect a major retail chain’s ability to do business. Ken Jacobs and Dave Graham-Squire of the University of California Center for Labor Research and Education, and Stephanie Luce of the City University of New York Institute for Worker Education and Labor Studies investigated how raising workers’ wages to $12 an hour would impact the overhead and customer expenditures of a big-box store like Walmart .

Figuring that Walmart workers, on average, earned below $9 an hour, could an across-the-board raise to $12 an hour even be possible, and how would it affect the customer’s pocketbooks?

The researchers discovered that by raising the minimum wage by approximately $3.25 per hour, it would cost Walmart customers an average of $0.46 per trip to the store, or $12.49 annually if part of the increase was borne by the customer. The researchers assumed that part of the increase would be absorbed by the store’s profit margin, as well. However, passing on 100 percent of the average $3,250 annual increase per employee to the customer would require the store to raise its prices even higher.

However, the researchers noted that a voluntary increase of workers’ hourly wages would create an unequal competitive environment within their local community if other businesses didn’t also raise their hourly wage.

“However, a living wage (government) policy would require all large retailers to operate under the same standards,” said the analysts, who pointed out in their conclusion that according to Steve Hoch of Wharton Business School, previous efforts to pass living wage laws in Chicago had revealed that when all competitors are required to adhere to a living wage minimum, “then the playing field is level.”

And recent studies show that retailers and restaurants not only would be able to compete if living wage legislation were enacted, but could benefit from reduced turnover and increased worker incomes.

Retailers like Costco, Trader Joe's and Quik Trip convenience stores have already been shattering the concept that a store must keep its wages low to ensure a high profit margin. In March of this year, Costco CEO Craig Jelenik stepped forward to endorse President Obama’s efforts to raise the minimum wage to $10.10, and then to adjust it incrementally to meet inflation.

Jelenik pointed out  that new employees at Costco earn a starting wage of $11.50 an hour in all states where it does business, “and we are still able to keep our overhead low.” A 2006 article in Harvard Business Review also noted that Costco has a reputation for rewarding its long-term employees with wage increases. It’s average wage seven years ago was $17 an hour.

Trader Joe's declined an interview for this article, stating that it does not talk about its business or hiring practices. But the popular retail giant is known for its living wage policies and progressive working environment.

QuikTrip , which can be found throughout 11 states in the South and Midwest, also defies the trend when it comes to paying staff. Instead of paying minimun wage, it opts for an annual salary that is more than twice what its competitors pay for a similar full-time cashier and retail job.

And while many retailers and fast food restaurants in the United States may still be resistant to the idea of a living wage, retailers in the U.K. have already started making the shift. The non-profit organization Livingwage.org notes that more than 100 UK businesses have endorsed the policy by establishing minimums that are in line with the local cost of living. Employers reported 25 percent less absenteeism from work. More than 60 percent of  member companies noted also “significant impact” on efforts to reduce employee turnover. It’s an observation that, according to Jelenik, underpins Costco’s reasons for endorsing a living wage.

"Instead of minimizing wages, we know it's a lot more profitable in the long term to minimize employee turnover and maximize employee productivity, commitment and loyalty,” said Jelenik in his interview with Huffington Post.

It’s also a viewpoint that fast-food workers hope employers will eventually adopt as workers in New York, Chicago, Milwaukee and Detroit lobby for a living wage increase. It will be interesting to see whether companies like McDonald's and Domino’s Pizza will make the transition. If the authors of the Walmart study are correct, however, it will take a federal raise of minimum standards to get all fast-food and retail companies on board. And judging from the March defeat of the Obama administration's call for a staggered minimum wage increase, that may take a few more years to complete.

Image of Costco sign courtesy of stockmonkeys.com

Image of man with sign courtesy of Sasha Y. Kimel.