Coverage: McDonald’s raises its pay

Will less than $1 be enough for McDonald’s workers? That remains to be seen, but the company is planning to raise its minimum wage to $9.90 for workers across the U.S.

The Washington Post had these details about the company’s decision in a story by Lydia DePillis:

McDonald’s will raise its minimum wage to an average of $9.90 by July 1, up from $9.01, in advance of a planned wave of strikes on April 15 by fast-food workers demanding better pay and working conditions.

The move will cover roughly 90,000 people across its 1,500 company-owned locations in the United States, the company announced today. A full 3,100 of McDonald’s locations are franchised, and the company can’t dictate wage hikes at those employers, but it’s possible that franchisees could follow suit.

The federal minimum wage is still $7.25, although more states and cities have been raising their own minimum wages in recent months. Major employers have also acted on their own this year to raise wages, including Walmart, T.J. Maxx, and Target, which some economists have interpreted as evidence that demand for service workers is finally outstripping supply. Unlike those retailers, which set an initial floor of $9 an hour, McDonald’s will instead set its minimum at $1 above the local minimum wage wherever the employee works.

Annie Gasparro and Eric Morath wrote for The Wall Street Journal that the decision mirrored that of other retailers but wouldn’t apply to many McDonald’s employees:

The move follows similar efforts by other major U.S. employers including Wal-Mart Stores Inc., which is raising hourly pay for 500,000 workers to at least $10 next year, and reflects wider public pressures over income inequality as well as intensifying competition for low-skilled workers.

The increase doesn’t apply to employees of franchisees, which operate nearly 90% of the 14,350 U.S. McDonald’s stores—a fact critics seized on. But it applies to some 90,000 workers at all levels of experience and rank at company-owned restaurants and it will lift the average hourly rate to $9.90 on July 1 and more than $10 by the end of 2016, from $9.01 currently.

McDonald’s Chief Executive Steve Easterbrook, who took over on March 1, said the policy is a response to employee surveys and is central to his plans to revive sales after more than two years of declines.

The New York Times story by Stephanie Strom reported that the move was likely an effort to keep employees happy as the labor market strengthened:

The decision was the boldest move yet by Mr. Easterbrook, who broke the news in an interview with The Wall Street Journal.

Mr. Easterbrook has acted quickly to introduce changes aimed at improving McDonald’s standing with consumers. This week, the company announced plans to offer breakfast all day and to retool a grilled chicken sandwich to use an “artisan” bun and remove ingredients like maltodextrin.

The company’s sales in outlets open at least a year were down 4 percent in February, one of the worst performances among the largest restaurants that publicly report their sales.

Several large companies that have direct contact with consumers have raised wages over the last year, including Walmart, the TJX Companies and Ikea. There was a risk that McDonald’s could lose its better employees to other companies that compete for low-wage workers. Many of its franchisees face similar challenges, which could ultimately lead to broader wage gains at other McDonald’s fast-food outlets.

Mark Kalinowski, an investment analyst who follows McDonald’s at Janney Montgomery Scott, said a restaurant executive he met with recently said he would have to raise wages to keep employees as the labor market improves.

The USA Today story by Kaja Whitehouse and Paul Davidson said many thought it wasn’t enough of a boost in pay:

An organization of fast food workers who have been pushing for chains to raise wages to $15 a hour criticized the increase as insufficient.

“It’s a weak move for a company that made $5.6 billion in profits last year,” said Kwanza Brooks, McDonald’s worker from Charlotte, North Carolina who is associated with Fight For $15, an organization of fast-food workers that has been protesting wages.

Brooks, who said she is paid $7.25 an hour, called the increase a “PR stunt” on a conference call with reporters.

Organizers of Fight For $15 said they will protest the pay increase in front of McDonald’s restaurants on Thursday due to concerns that it is insufficient and that it will only benefit 5% of McDonald’s workers.

Indeed, the pay increase and vacation benefits apply to employees at stores McDonald’s operates — not the company’s franchise-operated stores, which make up close to 90% of McDonald’s 14,350 U.S. locations.

It’s a start, but really only that. There are still so many McDonald’s workers waiting for raises. But for those who are getting one, it’s likely welcome money, especially as the economy improves.