Despite pay raise, McDonald's still faces heat over wages

Massive union-backed protests, an improving economy and regulatory action undertaken by the Obama administration all contributed to McDonald’s decision Wednesday to raise workers’ wages.

But the move likely won’t be enough to take the heat off the fast food giant.


In announcing late Wednesday a roughly $1 boost in hourly pay, McDonald’s followed in the footsteps of Wal-Mart, Target and TJX, all companies that in recent weeks announced companywide minimum wage increases. These changes clearly reflect a tightening of the labor market at its lowest end, at least partly as a result of 15 states raising their legally required minimums in 2014.

But McDonald’s — unlike Wal-Mart, Target, and TJX’s TJ Maxx and Marshall’s — doesn’t employ the vast majority of its minimum wage workers. Fully 95 percent of McDonald’s workers are employed by franchisees who may or may not choose to follow the company’s lead. The McDonald’s announcement affects wages only for the 90,000 workers who work at restaurants the corporation itself owns and operates, which represent about 10 percent of all McDonald’s restaurants.

McDonald’s surely hopes the pay raise will take the fire out of planned strikes by low-wage workers on April 15. The company faces continued pressure from Fight for $15, a group funded by the Service Employees International Union that has used protests, strikes and the court system to pressure the company to raise its wages. The SEIU spent at least $14 million last year on efforts to raise the minimum wage, and with the April 15 protests it hopes to extend the movement beyond fast food workers to adjunct faculty and other low-wage workers.

“It’s almost implausible to claim that there’s no relationship between Fight for $15 and this wage increase,” said Benjamin Sachs, a labor law professor at Harvard. “It’s good news. It’s not good enough news.”

The new pay scale will raise the average hourly rate of affected employees from $9.01 to $9.90 by July. That average will creep up to more than $10 by the end of next year. The move comes as McDonald’s struggles with falling operating income, which dropped 15 percent in the final quarter of last year.

The company is also facing heightened regulatory scrutiny over its relationship to franchisees. In December, Richard Griffin, general counsel of the National Labor Relations Board, filed complaints against McDonald’s USA LLC for allegedly working in concert with its franchisees to retaliate against Fight for $15 strikers in 2012. The cases are significant because McDonald’s has never before been held liable for how the operators of its franchised restaurants — the majority of its stores — treat their workers.

The first administrative law hearing for the “joint employer” challenge opened Monday in New York, with McDonald’s attorney Willis Goldsmith claiming Fight for $15 had victimized the company. “There can’t be any doubt that this is an attack on the brand,” Goldsmith told an NLRB judge.

The International Franchise Association, a business group lobbying Congress to oppose the NLRB general counsel’s attempt to assign McDonald’s joint liability, used the raises to further distance McDonald’s from the operations of its franchisees.

“Today’s announcement is a reminder to policymakers, government agencies and unelected regulators at the NLRB and the Department of Labor that McDonald’s and all franchisors are not joint employers with their franchisees and make separate and independent decisions about the wages and benefits for employees over which they exercise direct and immediate control,” said IFA President & CEO Steve Caldeira.

Sachs disagreed. The raise is “in no sense evidence, certainly not proof, that there’s no employment relationship here,” he said. “You can’t message your way out of an employment relationship.”

SEIU President Mary Kay Henry claimed the McDonald’s raise as a victory for fast food protesters. “Workers proved that by joining together, they can improve their lives,” she said in a statement. But “it’s not nearly enough,” she added. “The overwhelming majority of McDonald’s workers will still be paid wages so low that they can’t afford basics like rent and groceries.” Henry said SEIU remained “more committed than ever” to pressing for a $15 per hour wage floor and securing for “all workers … the right to join together in a union to improve the lives of all working families.”

In a statement, McDonald’s President and CEO Steve Easterbrook said the company was acting with a “renewed sense of energy and purpose to turn [its] business around.”