business news in context, analysis with attitude

by Kevin Coupe

Continuing protests around the nation by people seeking a higher minimum wage, or at least income adequacy, are drawing attention to the plight of low-wage earners in this country, especially in the fast food industry. I think it is fair to say that the argument against wage increases is that such raises would be unsustainable, that they would make it harder for business owners to make money, and would result in fewer jobs, ultimately hurting the economy. The pro-argument is that higher wages help the economy, giving people money to spend, not to mention creating a climate in which people can afford housing, food, and clothing for their families.

Of course, adding a bit of spice to this discussion is the fact that - for unrelated reasons - McDonald's continues to seek new ways to find relevance for a younger generation of consumers that would rather buy their fast food at Chipotle and Five Guys, abandoning Mickey D's in droves.

Now, let's add this story for a bit of interest…

On National Public Radio's The Salt, there is a story about Moo Cluck Moo, described as a "small but growing fast-casual burger and chicken chain" in suburban Detroit that has managed to find profitability despite starting pay for employees of $12 per hour.

"The idea, according to co-founder Brian Parker, was to train everyone to multitask," The Salt writes on its website. "No one is just flipping burgers. All of the workers are expected to be jacks-of-all-trades: They bake buns from scratch daily, they house-make aioli and prepare made-to-order grass-fed burgers and free-range chicken sandwiches.

"And, now, says Parker, the investment is paying off. Revenue is up at the chain's two locations. And workers are sticking around. And their pay now? It's up to $15 an hour. By comparison, a typical fast-food worker in the U.S. makes about $8 or $9 an hour."

To be sure, the burgers there are six bucks apiece on average, more expensive than at many fast food joints. But the owners say they are building a brand, with an equal emphasis on sustainable sourcing of product and a sustainable supply of motivated, committed employees.

Now, not everybody would agree that this is a template for how all fast food joints should pay their employees.

Michael Strain, an economist at the American Enterprise Institute, argues that there is a chasm between Moo Cluck Moo and McDonald's, and that the two restaurant formats appeal to very different consumers and have very different financial models.

Which is true.

Of course, the question is whether McDonald's might be seen as more relevant if it spent less money on training because it had less turnover, and had more employees who felt and behaved as if they are an asset to the business, not just a cost. (It is a pretty good bet that the vast majority of fast food employees don't feel this way. Hell, it is a pretty good bet that a high percentage of all employees don't feel this way.)

My point is that this is not as simple a calculation as some would like us to believe. There is at least some evidence out there that higher pay at lower levels of organizations does not necessarily lead to fewer jobs, does not necessarily lead to a weaker economy.

Which is just a long way of saying that this is a discussion worth having. As the economy continues to improve, and the need for employees grows, I suspect that wage rates will go up simply because companies will have to pay more in order to attract good people. Suddenly, the argument about how higher wages hurt the economy will become moot.

This not about making low income people rich, and not about rewarding people who don't deserve it. But it is about income adequacy, and a what income inadequacy means not just to the economy, but also to the culture.

Again, this is a Eye-Opening discussion worth having.

One other thing, if I may.

Yesterday, I took note of a Reuters report that "US fast-food workers and supporters marched for higher pay in Chicago, Milwaukee and Boston" last week, "as demonstrations advocating for a $15 minimum wage and other labor rights in about 190 cities began around the United States." Organizers said that the protests "under a banner organization called Fight for 15 and aimed to include home care and airline industries, are the most expansive to date, increasing to about 190 cities from 150 in a similar protest in September. No arrests have so far been reported."

Which prompted one MNB reader to write:

It just struck me as a more or less revealing nature of reporting today that when a group of rich and influential people get together, trying to put forth a point of view, they have meetings, symposiums and special access to lawmakers, we cover the speeches and the ideas discussed. But when a group of ordinary citizens use one of their very few possible methods of gaining attention, a public protest that demonstrates support by gathering people together in large enough numbers to be significant, we assume there might be violence and it is considered normal reporting to comment “no arrests have so far been reported” – a statement which besides being utterly gratuitous, contains within it an assumption of future arrests being well- nigh inevitable.

Shame on you for reiterating this useless and slanted addendum.

I think this is absolutely legitimate criticism and an important point. I wish my radar had picked up on this, and that I'd been thinking more critically.

The next time some fat cat lobbyist appears before a group of legislators to argue for or against some bill that would help an industry and line somebody's pocket with even more cash than they already have, maybe the "no arrests have so far been reported" line ought to be used … because it is a pretty good bet that there are higher incidences of corruption at that level of society than there is on the streets of major American cities where people are seeking some level of income adequacy.

That would be an Eye-Opener.
KC's View: