Starting July 1, McDonald’s will pay at least $1 an hour
more than the local minimum wage for employees at the roughly 1,500 restaurants
it owns in the U.S. 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. Labor
groups have grown increasingly vocal in their criticism of wages and conditions
at McDonald’s and other fast-food chains, but the company said recent protests
weren’t a factor in its decision.
Average hourly earnings for nonmanager employees at
limited-service restaurants like McDonald’s rose to $9.54 an hour in
January, up 3.5% from a year earlier, according to Labor Department data, well
above the 2.2% pace for all private-sector workers.
Historically, stronger pay increases are somewhat unusual at
this stage in the business cycle for lower-skilled workers, who typically are
the last to see better wage gains. The increases could reflect some payback
after several years of wages barely keeping pace with inflation, or could
indicate that skilled-workers who resorted to restaurant jobs in the economic
downturn are now seeking better-paying work.
Better pay among lower-skilled workers has the potential to
“bubble up” through the economy, said Patrick O’Keefe, an economist
at CohnReznick LLP. Raising the starting wage will likely boost wages of others
within a given company. Also, more money in workers’ pockets should provide a
boost to consumer spending and aid overall economic expansion.
McDonald’s said the move is its first unilateral,
across-the-board pay increase for restaurant workers. Some other restaurant
chains have said they are paying more, but haven’t provided details. Starbucks
Corp., long a champion of health care and other benefits for hourly workers,
increased pay for baristas in January, but didn’t say by how much.
The federal minimum wage of $7.25 an hour hasn’t increased
since 2009, although 29 states have set minimums above the federal level, as
have cities such as San Francisco, which requires pay of at least $11.05 an
hour. Efforts in Congress to increase the pay floor stalled last year. But a
growing number of large employers raising wages could set a “de facto” minimum
wage that is higher than the federal floor, said University of Michigan
economist Donald Grimes.
McDonald’s announcement didn’t satisfy its strongest
critics, who have been calling for much larger increases and demanding the
company take responsibility for pay and other policies at its franchisees.
In addition to the pay increases and time off, McDonald’s is
instituting a program to allow all U.S. workers—even those at franchised
restaurants—to get their high-school diploma free through an online program,
which could otherwise cost anywhere from $200 to $1,500, depending on the
program. McDonald’s is also going to start providing eligible workers at both
company-owned and franchised restaurants $700 in tuition assistance for college
credits obtained through McDonald’s training courses.
The broader impact of U.S. wage increases might not be all
positive. A Congressional Budget Office report last year found that raising the
federal minimum wage to $10.10 an hour would eliminate about 500,000 jobs
nationwide, even as it would be expected to increase pay for 16.5 million
workers.
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