TIME FOR 'BIG MAC' STATESMANSHIP
The Washington Post, August 14, 2013
The flurry of one-day strikes by low-earning fast-food workers has created an opportunity to transform the national debate about wages—and if a fast-food CEO doesn't have the imagination to seize it, President Obama should do so himself when he resumes his middle-class road show next week.
Front-line workers at outlets such as McDonald's, Taco Bell and Kentucky Fried Chicken have staged walkouts recently in New York, Chicago, Detroit, Washington, D.C., St. Louis, Milwaukee and Flint, Mich. These protests, funded in part by the creative Service Employees International Union (SEIU), have garnered headlines and given voice to hard-working Americans who can't possibly make ends meet on $9 or $10 an hour, let alone on the $7.25 federal minimum wage.
The corporate response to such protests follows a standard playbook. Offer soothing nostrums about the organization's commitment to employees. Add facts about the higher-earning career path (a small minority of) front-line workers have built. Let the trade association explain that fast-food chains have thin profit margins and argue that wage hikes could lead to reduced hiring.
In short: stand firm, lay low and hope things blow over. Call it Risk Aversion 101.
That strategy may once have worked, but it won't make the issue go away today. That's because these strikes take place against the backdrop of widespread anxiety in an era in which global competition and rapid technological changes have put the middle class at risk. Four years into a "recovery," we've still got 20 million Americans who want full-time work and can't find it. Half of all jobs in the United States pay less than $35,000 a year. Wages have been stagnant for decades, while a handful of top earners have walked off with nearly all the recent gains in national income.
Meanwhile, according to the SEIU, the typical hamburger flipper is no longer the teenager of popular imagination, but a struggling adult of 28. Many have lost better-paying jobs and are scrambling for whatever they can get.
The paradox is that for both fast-food employers and their critics these trends present an opportunity. If global economic integration is putting downward pressure on the wages of jobs that can be performed elsewhere, the one sector immune to these pressures is in-person service work. That means jobs in areas such as home health care, retail sales, teaching, personal grooming and fast food.
In-person service work accounts for roughly 30 million jobs in the United States. The sector is experiencing faster job growth than the economy overall, but wages are relatively low and lag wage growth in the broader economy. If we could make this non-offshorable segment of American work a more certain path to the middle class, it would offer an important measure of security and optimism in a global economy that poses threats to many Americans. Figuring out a feasible way to do this ought to be a national priority.
What we need is a commitment to this goal and a way to test different options to get us there. So imagine if the chief executive of McDonald's (or another chain) called a press conference and said the following:
"We realize we're in a new era in which in-person service sector work now needs to be an important piece of any effort to save the middle class. But to be honest, this is a new mission for us, and we're not sure how best to balance the interests of workers, consumers and shareholders—many of whom are pension funds on whom workers depend—as we try to get there. After all, fast-food firms have pre-tax profit margins of just 3 to 5 percent.
"So we're proposing a test. Starting on Jan. 1, our chain will raise the minimum pay in our stores in New York, Topeka and Denver to $12 an hour plus health care. We'll also raise prices in ways that keep our profit margins roughly similar to what they are today. I call on our competitors to make the same wage commitment in these three cities. We've asked the RAND Corp., aided by an advisory board of leaders from labor, business and the nonprofit sector, to rigorously study these changes for the next five years to determine their distributional impact.
"We need this study because we need to think through who bears the burden of turning fast-food jobs into higher-paying jobs. How much of the adjustment should be borne by consumers via higher prices? How much by shareholders in terms of reduced returns? Is there a role for taxpayers to do more via an expanded earned-income tax credit? Will this higher wage unintentionally hurt less-skilled Americans because chains will end up hiring only workers who, in economic terms, are 'worth' $12 or more? Will it lead to faster automation that reduces the number of jobs? We're committed to sharing our findings every step of the way. We believe we can be a laboratory for democracy and help inform a national conversation about how to make a modern economy work for every American."
This brand of "Big Mac" statesmanship would require business to get its head out of the sand and accept a duty to help solve broader social challenges. It would also require labor to give up its rhetoric slamming the chains' "billions in profits," when those sums go largely to shareholders that benefit workers, such as pension fund shareholders, and when actual profit margins in the sector (the relevant metric) are small.
I know how reluctant executives are to wade into such controversies. But different times call for different thinking. The business leader who took this approach would be hailed as a patriotic visionary (in ways that would be good for business). If none can be found, Obama should use the fast-food strikes as a teachable moment, bring all parties to the table and call for exactly this kind of in-person service sector wage test under the aegis of the White House.
