What Can Europe Teach Us About Better Pay, Conditions at McDonald's?

By Lila MacLellan  DEC 06, 2012 1:45 PM

Fast food workers in New York City will stage a major rally today. Should they look overseas for inspiration?


MINYANVILLE ORIGINAL Toward the end of a morning strike outside the Madison Ave. McDonald’s (NYSE:MCD) last Thursday, a passerby, an older man in an overcoat, asked a young organizer what was going on.

“What’s all this?”  

“We’re protesting McDonald’s.”

“Yeah, I see that. But why?”

The chipper organizer explained (with perhaps too well-rehearsed a response) that many McDonald’s employees only make about $7 or $8 per hour, and face shortened schedules, fines, or suspensions from management when they try to organize. “We think people should be able to earn more when the company they work for makes billions,” she said.

The man started walking off before the organizer could finish, muttering, “Yeah, but so do the shareholders.”

Cynical, but at least his attitude was articulated, which was more that could be said for the other New Yorkers who passed the picketers without pausing. The fact that McDonald’s, Wendy’s (NASDAQ:WEN), Taco Bell (NYSE:YUM), and other fast food restaurants have been able to pay hard-working, loyal, and now much older employees wages at or slightly above state-set minimums for years has become, to many, a seemingly unchangeable norm.

To help mobilize the public, organizers behind last week’s Fast Food Forward campaign -- spearheaded by New York Communities for Change, along with the Service Employees International Union, UnitedNewYork.org, and the Black Institute -- have given the media dramatic employee stories, tales that would make any feeling person irate. (Read about struggling workers Raymond Lopez and Pamela Waldron in this New York Times piece, or in the same paper, see the stories of two of last week’s strikers -- New York and Brooklyn fast food employees, aged 79 and 29, who require food stamps to survive.)

Slowly, more consumers and some business pundits are becoming more vocal about the idea that change, and unionization, may be necessary. Since October, when hourly employees began striking at another major Dow Jones (INDEXDJX:.DJI) component company, Wal-Mart (NYSE:WMT), that campaign, called OUR Walmart, has attracted  20,000 Facebook followers. Fast Food Forward has managed to collected 125,000 signatures for its petition (circulating via various platforms) in only a week. 
Courtesy of Fast Food Forward

Today the campaigners will stage a massive rally just after 4 p.m. EST in midtown Manhattan. Jonathan Westin, director of the Fast Food Forward campaign, told Minyanville in an email, “This is only the beginning of the movement. Our economy can’t grow when workers can’t afford to live. That’s why workers from the fast food industry are joining with those at car washes, airports, and in retail to demand decent wages and the right to form a union.”

According to the Bureau of Labor Statistics,  New York’s lowest-paid job category is “Combined Food Service and Preparation Workers, Including Fast Food.” State Labor Department data shows that the city’s fast food jobs have grown by more than 50% over the past 12 years. The median pay for fast food workers in New York City is about $9 an hour; which would equal pay of less than $20,000 per year for a full-time employee, and far less for part-time staff. In New York, the poverty line is set at $11,500 for a single person and $23,021 for a family of four.

But can the crew members of restaurants like McDonald’s or Wendy’s expect progress? Is there any place in the world where employees of the mega-chains are treated fairly? In fact, it is marginally better for food service employees in a few developed countries, though conditions are not yet ideal -- from the point of view of workers advocates, anyway -- anywhere.

The highest paid McDonald’s employees in the world are in Western Europe, where collective agreements protect workers in the restaurant industry sometimes even when trade unions are not present. A 2012 National Bureau of Economic Research paper by Princeton economist Orley Ashenfelter found that in Western Europe from 2000-2007, the average crew worker at McDonald’s earned 1.29x the wages of a US crew employee, the equivalent of $9.44 per hour versus $7.33 in the US.  (Ashenfelter’s paper was designed to measure real wages by comparing the number of Big Macs McDonald’s employees in various countries could earn with their hourly wages. See coverage in The Atlantic for more.)

Outside big cities, that kind of a pay bump for American employees would be a start, though crew workers in the New York City region are pushing for salaries to be raised to $15 per hour, citing the high cost of living.

Dr Tony Royle, author of Working For McDonald’s in Europe: The Unequal Struggle? (Routledge, 2000), and a lecturer at the J.E. Cairnes School of Business & Economics at the National University of Ireland, Galway, says that working conditions and employee treatment in those countries where collective agreements are in place are somewhat better than what’s seen here, and the real value of wages was generally better in Europe than in the USA, with McDonald’s workers in the Scandinavian countries doing much better than elsewhere. Nevertheless, many problems remain in Europe even where unions have fought and won collective agreements or where these have been automatically imposed.

Take Sweden. That country has a collective agreement that covers everyone in the sector. Under Swedish law, it’s also easier than it is in the USA to establish a union and union membership is still the norm, with 70% of Swedish workers joining unions, Royle explains in a phone interview. “But even in Sweden, where you have a union official sitting in McDonald’s head office, you have problems in terms of the union adequately representing workers. You don’t have union officials in the stores, and the workers are usually economic migrants and young kids who don’t know what their rights are. In many cases, they might not even know that there’s an agreement in place,” he says. Based on what he’s seen in Europe, Royle cautions that union recognition “is only the starting point."

He continues, “And history tells us that it’s not only difficult to get union recognition in the US context but even more difficult to get a collective agreement because that’s when companies start using counter tactics, like firing unionized employees and hiring non-union new staff. In the 1970s, McDonald’s was even caught using lie detector tests to weed out union sympathizers. However, the problems don’t end there; ensuring that the agreement is properly applied can also be difficult.

“The thing is, labor costs is one of the few areas where McDonald’s can save money, so there are quite a few inappropriate practices,” he adds.

Royle was recently interviewed for a Swedish SVT documentary investigating life as a burger-flipper for McDonald’s in Sweden and the US called McFusk. The documentary also included interviews with US labor lawyers and McDonald’s workers. One of the issues covered was time-shaving, where managers delete a bit of time in small increments from an employee’s electronic time card, saving a few euros per person in most cases. “Five minutes here, ten minutes there; unless workers carefully record there hours, it's quite likely that workers will not notice,” says Royle, “but it really adds up, and the practice was found to be very widespread.”

Local managers shave time because they need to meet a specific sales-labor ratio target, Royle explains. When sales go down, they’re under pressure to send people home or adjust pay. The practice has been found in Denmark, Sweden, and Germany, “so one can only imagine what happens in countries where workers have no protection at all,” says Royle.  

A search of the New York Times shows that what appears to be the most recent article on shaving time in the US was published in 2004, and it indicated that experts on compensation felt “the illegal doctoring of hourly employees' time records is far more prevalent than most Americans believe.” (Fast Food Forward organizers say they’re not looking past issues of pay and the ability to unionize right now, but that the media can expect other issues to be addressed as the campaign gains momentum.)

In Europe, says Royle, “You also have people working off the clock. And health and safety concerns are an issue.” In Italy, there were some employees filing complaints this summer because managers were turning off the air conditioning to save on costs. “There have been issues about employers not providing the proper shoes and refusing to wash uniforms -- these are employer responsibilities that are covered under collective agreements.”

Employees who find jobs at McDonald’s in Western Europe are typically new arrivals fleeing shattered economies elsewhere. In the 1990s, that meant you’d find a lot of Eastern Europeans behind the counter. Now, says Royle, it’s men and women from Africa or the Philippines who are taking fast food jobs because they can’t get work anywhere else. “These are not the type of people who are going to speak up -- they just want to keep their jobs,” he says.

In the US, the situation is different. Here the median age of fast food workers is over 28. Two-thirds of the industry employees are women for whom the median age is over 32, according to the Bureau of Labor Statistics. The median age of big-box retail workers is over 30. They may be more politically empowered than teenage employees who used to work behind counters after school, but strikers at last week’s protests were still accompanied by clergy members and community organizers when they returned to work, a strategy to help prevent any firings or retaliation from chain managers.

For US workers to earn more, corporations would have to accept slightly lower profit margins, says UC Berkeley economist Robert Reich in his recent article connecting the debate over the fiscal cliff to the plight of low-pay workers in the US: 

Courtesy of Fast Food Forward
Unlike industrial jobs, these can’t be outsourced abroad. Nor are they likely to be replaced by automated machinery and computers. The service these workers provide is personal and direct: Someone has to be on hand to help customers and dole out the burgers.

And any wage gains they receive aren’t likely to be passed on to consumers in higher prices because big-box retailers and fast-food chains have to compete intensely for consumers. They have no choice but to keep their prices low.

That means wage gains are likely to come out of profits – which, in turn, would affect the return to shareholders and the total compensation of top executives.

Royle also points out that the wage differential between the majority of part-time fast food workers and senior management is huge -- and if anything, it is increasing.

He says there’s a chance that US fast food chains may bow to pressure to pay employees slightly more, but he doesn’t see Fast Food Forward’s successes as the beginning of the end for the system. "Wages and conditions are always likely to be mediated in different countries and at different times depending on the strength of the union movement, the activism of the workforce, and the nature of the local labor law, but the fast-food system relies mostly on a supply of cheap, low-skilled labor, and given the developments in the global economy in the last 30 years, I can’t see any shortage in low-skilled workers in the future and therefore no likelihood of any change in the basic system. We might not like it, but it works. It makes money.”
No positions in stocks mentioned.

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