McDonald’s feels heat over low wages

Fast-food franchise lists growing movement for higher pay among a number of ‘risk factors’ in its latest stock filing

Walkouts over low pay in cities across the U.S. have caught the attention of McDonald’s, which employs hundreds of thousands of minimum-wage workers.
Richard Drew/AP

McDonald’s hasn’t raised employees’ hourly wages across the board, but it has taken note of the growing protest movement against low pay. Its latest stock filing, for 2013, shows the fast-food giant views campaigns for higher pay as one of a number of “risk factors” it will have to contend with in the near future.

Along with sorting out how it will continue its popular dollar menu, the cheapest eats on offer at the chain restaurant, McDonald’s wrote in a filing with the Securities and Exchange Commission (SEC) that “the impact of (wage) campaigns by labor organizations and activists, including through the use of social media and other communications and applications,” could pose a threat to the global fast-food brand.

An area of concern for the company is increasing calls for wage hikes in “mature markets.” McDonald’s says it cannot “offset” increased labor costs “through price increases” to keep pace with the “long-term trend toward higher wages and social expenses in both mature and developing markets.”

The company added that these costs “may intensify with increasing public focus on matters of income inequality.”

McDonald’s acknowledged the required annual filing with the SEC, but did not elaborate further.

“The SEC requires McDonald’s as a publicly-traded company to make certain disclosures to our shareholders regarding possible circumstances or events — whether in or out of our control — which may impact our future business performance,” the company said in a statement.

With walkouts from fast-food restaurants making headlines in 2013, as well as challenges to low wages at airports in New York City and Seattle, the issue of income inequality has snowballed into a subject likely to be debated in the 2014 midterm elections.

President Barack Obama has seized on the issue, making income equality a central theme of his 2014 State of the Union address. His calls for reform have already affected minimum-wage workers employed by companies on government contracts, raising their pay to a mandated minimum of $10.10 per hour, including disabled workers who had been paid even less than minimum wage under Great Depression–era rules

Advocates for fast-food workers call for a $15-per-hour minimum wage, arguing that low-wage employees cannot get by on what restaurants currently pay. Many of the employees say they have to rely on public assistance to make ends meet. Until it was shut down, a McDonald's employee help line even recommended that employees having trouble surviving on their paychecks apply for food stamps

Faced with such challenges, advocates for workers’ rights showed no sympathy for the “risk factors” McDonald’s said it faced.

“For the second year in a row, McDonald’s cited the nationwide strikes by fast food workers demanding $15 and a union without retaliation as a risk factor,” said Low Pay Is Not OK, one of a number of groups calling for higher wages, in a press release. The group lauded the growing movement’s social media campaign that it said revealed a bungled, and now defunct, McDonald’s employee help site.

In addition to recommending luxuries very few McDonald’s employees can afford, like taking vacations, the site also told workers to avoid eating fast food in favor of healthier, and more expensive, alternatives.

How much would a hike to the minimum wage hurt the company?

Andy Brennan, an industry analyst with the market-intelligence firm IBISWorld, told Al Jazeera that any negative impact on the company’s stock price would likely be “minimal.”

“IBISWorld doesn’t specialize in making stock market predictions. However, it’s likely that any minimum-wage hike would have a minimal long-term impact on only those industries that hire a large amount of minimum-wage employees,” said Brennan.

“Also, it’s likely that stock prices have already factored in potential wage increases.”

Brennan added that McDonald’s might even be using the SEC filing to alert investors of a pending increase in wages.

“With this statement in their SEC filings, the company might be communicating that getting ahead of the minimum-wage curve may be something they are going to pursue this year. A number of companies, including Gap and Costco, have wages much higher than the mandated minimum. This behavior is becoming increasingly common for large consumer companies with brands to protect.

“It’s common for public companies to prepare investors and the market for the future through announcements like this.”

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