Labor report: Wages sink as fast-food chains make billions

The number of fast-food workers in New York state has shot up by 60 percent over the last 15 years, and their wages have deflated even as their employers’ profits surged, the National Employment Law Project (NELP), a labor rights group, said in a report released Friday.

The report comes after months of steadily growing efforts by fast-food workers and their supporters across the country — often using a demand of a $15 hourly wage as their rallying cry at demonstrations — have yielded victories for higher compensation in some places, including Los Angeles, Chicago and the city of SeaTac in Washington state.

Buoyed by their apparent momentum but frustrated by situations like the one outlined in Friday’s NELP report on New York state, 1,300 labor rights activists and fast-food workers from chains such as McDonald’s and Wendy’s were set to hold a convention this weekend in Detroit to discuss strategy.  

New York’s minimum hourly wage is $8.75, slated to go up to $9 at the end of the year. Activists say workers can often afford to live on this wage only by going on public assistance, which they say has effectively become a subsidy to fast-food companies. 

This year NELP found a 60 percent jump since 2000 in the number of people employed as low-wage, fast-food workers in New York state. In New York City, that number grew by 87 percent.

The workers’ wages stagnated even as their employers enjoyed a profit increase from 2010 to 2014 of 14.5 percent, according to the report. McDonald’s did the best, with worldwide profits totaling $4.7 billion in 2014 alone, NELP said. McDonald’s did not reply to a request for comment on the report by the time of publication. 

Over the last four years, fast-food workers workers saw the buying power of their wages fall by 5.5 percent because of inflation, since the minimum or just-above-minimum wages many earn aren’t adjusted to keep up, the NELP report said.

This follows a national trend. According to a Pew study released last October, the $4 average national wage of 1972 had the purchasing power of about $20 dollars today. 

“Despite the billions of dollars in profits companies like McDonald’s rake in each year, fast-food workers nationally have seen their wages decline,” Christine Owens, NELP’s executive director, said in a statement. “With sales revenues across the industry growing, it’s clear that workers’ wages are egregiously out of sync with the corporate profits they help grow and out of touch with what it takes to afford rent, groceries and gas in cities nationwide, from Los Angeles to St. Louis to New York City.”

On Friday, NELP made its case for raising the minimum wage before the New York’s Fast-Food Wage Board, an administrative body set up in May by Gov. Andrew Cuomo. The group will make recommendations on wage increases this summer, The Associated Press reported. 

“The fast-food industry can readily accommodate giving front-line workers a raise. In fact, it may not even need to reduce profits to do so,” said Irene Tung, a senior policy researcher at NELP, in prepared remarks she delivered Friday before the board in Buffalo.

Tung quoted a University of Massachusetts at Amherst study saying high turnover rates hurt low-wage companies in general, costing employers $4,700 each time a worker leaves and is replaced in the high-turnover sector. Higher wages would help keep workers in place longer, Tung said. 

The National Restaurant Association, which represents the industry, said in an email Thursday that lifting wages to at least $15 would harm bottom lines and force franchises operating on “razor-thin profit margins” to stop hiring.

The association also called out the Service Employees International Union (SEIU) for helping organize fast-food workers.

“America’s restaurants provide opportunity for millions of Americans each day,” the National Restaurant Association said in the statement. “They are the cornerstone of communities, creating jobs across the nation. SEIU has spent millions on a campaign to attack an industry that provides real pathways to achieving success.”

The New York State Restaurant Association called the state’s new wage board a “dog and pony show,” the AP reported, with the association’s president, Melissa Fleischut, saying she believed the board has already decided to raise the wage.

The Employment Policy Institute, a conservative-leaning think tank, on Thursday released results of a survey in which 70 percent of New York state fast-food franchise owners queried said they would have to raise prices in response to a $15 minimum wage. Of the 924 owners surveyed, 48 percent said they would reduce worker hours because of a wage increase. Almost 40 percent of them reported a profit margin of 1 percent or less. 

“Some of the surveyed businesses are facing more than price-sensitive customers. They’re also facing competition across the border,” the institute report found. It said that “12 percent of surveyed businesses were located near the state border with Pennsylvania, where the minimum wage is $7.25 — over 50 percent lower than the proposed $15 wage mandate."

But Jeff Grabelsky, the associate director of the Worker Institute at Cornell University's school of Industrial and Labor Relations in New York City, said he believed the state’s minimum wage will increase because of the determination of activists and workers who have changed the conversation on the issue. 

“The public discourse has shifted decisively so that virtually every politician must address the issue of low-wage work and the need to raise the minimum wage,” he wrote in an email.  

“The only question in New York is how fast and how high it will be raised. But $15 an hour is clearly a standard established in Seattle, Los Angeles, San Francisco and elsewhere.  How can New York possibly lag behind that wave?”