Do Workers Even Stand a Chance in the Fight for $15?

source: http://www.flickr.com/photos/59937401@N07/

source: http://www.flickr.com/photos/59937401@N07/

McDonald’s (NYSE:MCD) employees backed by the Fight for $15 movement interrupted a speech by the company’s President of U.S. operations on Friday afternoon. Jeff Stratton, who oversees the operation of more than 15,500 McDonald’s restaurants in the U.S. and Canada, was speaking at the Union League Club’s First Friday luncheon, a forum for “men and women to make a connection between work, faith, values, and issues that affect our daily lives.”

The Chicago Tribune reports that seven protestors were escorted out of the luncheon and given tickets for criminal trespassing after they interrupted Stratton’s speech. Fight for $15, a coalition of Chicago fast food and retail workers advocating a $15 per hour minimum wage, confirmed with the publication that they bought tickets for 10 members to attend the event.

Additional protestors gathered outside of the building hosting the event. The protests, part of a loose string of demonstrations that have experience variable momentum over the past few months, reiterated the message that minimum-wage workers don’t earn enough money to live on.

For some context, the current federal minimum wage is $7.25 per hour, which took root in July 2009 following the full implementation of the Fair Minimum Wage Act of 2007. Although the rate has never been higher in nominal terms, the real value of the current hourly minimum wage is historically low.

“The peak value of the minimum wage in real terms was reached in 1968. To equal the purchasing power of the minimum wage in 1968 ($10.70), the current minimum wage’s real value ($7.90) would have to be $2.80 (or 26 percent) higher. Although the nominal value of the minimum wage was increased by $5.65 (from $1.60 to $7.25) between 1968 and 2009, these legislated adjustments did not enable the minimum wage to keep pace with the increase in consumer prices, so the real minimum wage fell.”

Workers at McDonald’s and other major employers of low- and minimum-wage workers such as Wal-Mart (NYSE:WMT) have argued that the current minimum wage is simply not enough for people to live on — and the data supports their claim. The average hourly earnings of someone in the fast food industry is $9, and even at this rate a worker takes home approximately $18,500 per year.

For comparison, here are the federal poverty guidelines for 2013. Keep in mind that according to the Economic Policy Institute, the average age of minimum-wage workers in the U.S. is 35, and more than one quarter have children.

Persons in family/household Poverty guideline

1

$11,490

2

$15,510

3

$19,530

4

$23,550

5

$27,570

Demos, a research and policy center focused on economic stability, calculated McDonald’s and Wal-Mart employ nearly 1.5 million low-wage workers between them. (Low wage, in this case, is defined as those earning $12 or less per hour.) This has made them prime targets for demonstrators organized by Fight for $15 and others.

Ostensibly, these groups have the backing of many policymakers including President Barack Obama. While the exact level to which the minimum wage should be raised differs, many people agree that the current level is simply too low and should be increased.

President Obama advocated increasing the federal minimum wage to $9 per hour and indexing it to inflation in his State of the Union address, saying that, “Even with the tax relief we put in place, a family with two kids that earns the minimum wage still lives below the poverty line. That’s wrong.”

Minimum Wage 3

But the movement faces tough opposition, mostly from conservative-leaning thinkers who argue that increasing the federal minimum wage is simply infeasible. While the president paints a rosy picture of a U.S. economy made healthier by a higher minimum wage, his position is hotly contested by business owners, members of the GOP, and the National Restaurant Association.

Critics of the increased minimum wage argue that such a move would actually have a net negative impact on the economy because many minimum wage employers — like those in the restaurant business — operate on thin margins. Increasing the minimum wage would therefore force layoffs and salary reductions, curb business growth, and possibly lead to higher prices for consumers, critics argue.

“The restaurant industry is dominated by small businesses,” National Restaurant Association member Melvin Sickler said when he testified before Congress in March. “More than seven in 10 eating and drinking establishments are single-unit operations.” Sickler, who owns several Auntie Anne’s Pretzels and Cinnabon franchises, was testifying before the U.S. Senate Health, Education, Labor, and Pensions committee in regard to a proposed piece of legislation that would have increased the federal minimum wage from $7.25 per hour to $10.10 per hour.

“Food and labor costs are the two most significant line items for a restaurant,” Sickler said. “With average pre-tax margins of roughly 4 to 6 percent, increases in food and labor costs can have a dramatic impact on a restaurant’s bottom line. Only a small minority of restaurants will be able to handle a 39 percent minimum wage increase without taking actions that will harm workers.”

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