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Economists Weigh in on McDonald's Plan to Hire 50,000 New Employees

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On April 19th, McDonald's Corp. plans to hire 50,000 store-level employees in a one-day McJob-creation orgy.

As has been widely reported already, the chain has been advertising heavily in an effort to change the image of a "McJob."

"We want to show people what a McJob really means to those of us who have them," Jim Norberg, a senior vice president in McDonald's restaurant support office who began his career 30 years ago as a fry guy, told the Wall Street Journal. "About 40% of our company staff started out working in the restaurants, so the opportunities are out there in a big way."

Jan Fields, who started behind the counter and is now president of McDonald's USA, told the Chicago Tribune, "I have a McJob. And I'm darned proud of it."

A few years back, no one could have predicted McDonald's would eventually embrace the term which has been a persistent thorn in MCD's side.

The original McJobs program was a system-wide effort to mainstream the mentally retarded. McDonald's was honored by the President's Committee on Mental Retardation in 1991, citing the more than 9,000 retarded employees the program brought on.

By 2003, the term "McJob" came to mean, simply, a low-paying, deader-than-dead-end job.

After Merriam Webster added the word to the dictionary, then-CEO Jim Cantalupo wrote an open letter to the publishing house to publicize his opposition.

"A dictionary is usually considered a reliable source for the true meaning of words," he wrote. "Not anymore. Your inclusion of the term 'McJob', with its definition of 'low paying and dead end work', is not only an inaccurate description of restaurant employment, it's also a slap in the face to the 12 million men and women who work hard every day in America's 900,000 restaurants."

McDonald's says the addition of 50,000 new workers will boost its workforce by nearly 7%, translating into:

• $518 million more in wages and salaries in the coming year.

• The addition of 50,000 potential hires translates into $54 million more in payroll taxes contributed to the broader economy.

• Using a statistical multiplier effect, 50,000 new workers will generate almost $1.4 billion in annual spending.

• Our new employees will spur creation of additional jobs in contiguous sectors, some 13,300 other jobs nationwide.

The $1.4 billion in spending capacity our new hires represent translates into more than $430 million injected into the housing market; $180 million in grocery purchases; $191 million to autos and gasoline; more than $61 million in apparel, and almost $186 million in taxes. , writes Jan Fields, president of McDonald’s USA, overseeing 14,000 restaurants in the U.S.

Barry Hirsch, the W.J. Usery Chair of the American Workplace and Professor of Economics at Georgia State University's Andrew Young School of Policy Studies, gave me his take on the McJobs program earlier today.

"It sounds like it might make sense for McDonald's on a lot of fronts -- in the current labor market, they will probably attract a large number of applicants, and a lot of applicants for long-term management jobs that might not otherwise think about working at McDonald's."

Hirsch says the high turnover in the fast food industry means "50,000 jobs" doesn't mean 50,000 net jobs, and that attrition will likely smooth out any short-term overstaffing issues that might arise from the April 19th mass hire.

"I don't know to what extent they need all these new people right now," he explains. "Though, as workers leave, McDonald's will ultimately wind up with the right number of employees over time."

Keith Bender, Associate Professor in the Department of Economics at UW-Milwaukee, sees the McJobs program as an optimistic signal regarding the broader economy.

"50000 jobs is certainly nothing to sniff at in terms of getting people back to work," he told me in a telephone interview. "For a workforce that is in some respects desperate to find work, 50,000 jobs is significant. Is it a good thing in the long term? Not particularly, considering these types of jobs don't come with particularly good pay or benefits. However, stepping back and looking at the situation as a labor economist, for McDonald's to be expecting enough growth to hire 50,000 people is a good sign. While I wouldn’t necessarily make too much out of one hiring binge by one company, it does show that they are feeling some confidence."

So, while more McDonald's employees may not be the single catalyst the US economy needs to boom again, it's certainly a good start. And, if the Golden Arches can change the perception of a "McJob," well, anything's possible, really.
POSITION:  No positions in stocks mentioned.