I think that one of the best signs that something is unbelievably wrong with American culture is that, during one of the worst periods of unemployment in the nation, a time when a bulk of the people who can actually find work are doing part time labor, there are protests that McDonalds doesn't pay its employees enough.
Its difficult to even imagine someone being that completely out of touch with economic reality and the problems on the street, but here we are. Now, I understand that their thinking is a bit... different than most people. They see people in need and not getting good jobs and think "the evil corporations are to blame, they should pay more!"
I mean, it worked in Chicago; the already well-paid teachers there ($76,000 a year plus benefits on average) went on strike during an economic crisis for the state of Illinois when they were plunging rapidly into deeper and deeper debt. And they got a raise! But then, they did it during a presidential campaign which involved a Democrat from Illinois, so the machine wanted that problem to be quieted down and put away.
This time, its just amazing to behold. These people are ignorant enough of how business and economics works to not realize that nearly doubling personnel costs for a business will not cost jobs. Or, they have a different motivation.
Looking deeper into these protests you find some very familiar faces. The Service Employees International Union (SEIU) is there every time. They are organizing the protests, printing signs, handing out shirts, and paying people to stand in picket lines. Originally formed to be for public sector employees (i.e. those which work in government jobs), the SEIU is branching out.
They see a huge opportunity for labor to expand its power, wealth, and influence by unionizing fast food employees. McDonald's is a big, easy target with lots of places to picket and a high profile. Its easy to get on the news by protesting McDonald's, especially when the news directors and editors are generally sympathetic with the cause.
SEIU hires PR firms, manpower organizations, and other companies to get their message out and so we get these irrational protests. SEIU employees are paying dues... so that their union can pay PR firms... so that they can try to get fast food employees onto the union. How exactly this helps the public employee that pays these dues is a question that none of them seem to be asking. See, that's what dues are paid for: to offset the costs of helping employees, not create new markets for the union, hire publicity and protesters, and donate to politicians. At least in theory.
So how do they hope to gain? What is their game plan here?
Well I don't know the inside thinking but the SEIU isn't stupid. They may be leftist ideologues, but they know that if they push labor costs to 15 bucks an hour, McDonald's is going to start automating more and eliminating employees. They cannot stay open paying that kind of wages, even if they push the Big Mac over 8 bucks (like it would have to be raised just to stay open). And customers of McDonald's would not pay that much for fast food.
Now, if you're a leftist, you consider this a good thing - those poor people would be forced to eat better! - but that's not how it would work. Even assuming poor people could afford to get better food, they'll just go to a different fast food company, one that isn't unionized and can sell 99 cent burgers.
And if you're a leftist you're probably yelling about the greed and riches of franchise owners. They make so much, they can get paid less, and pay their employees better! Stop swimming in your vat of money, Scrooge McDuck!
Well, that's misguided as well. The National Employment Law Project, a left-leaning think tank did a study of franchise owners across the nation and what they came up with was not what they expected or wanted to hear.
“Fast food franchisees themselves are in many cases unprofitable,” NELP said in a May report on franchising.
A 2012 Franchise Business Review survey of 4,000 franchise owners found that the average franchisee earns a little more than $82,000 per year. However, that figure may be misleading. The report found that more than 50 percent of small business owners earned less than $50,000 in 2011—less than the median U.S. income on the year—while one in three owners earned $25,000 or less.
Some are getting rich, but many are not and some aren't making money at all. In fact, you don't have to be fabulously wealthy to start up a franchise. With loans and working with the company you can do it for less than you'd think. According to HowStuffWorks, McDonalds has this kind of structure:
Your total costs to open the restaurant, however, will be anywhere from $685,750 to $1,504,000, which goes to paying for the building, equipment, etc. Forty percent of this cost has to be from your own (non-borrowed) funds. You'll pay an initial franchise fee of $45,000 directly to McDonald's.
You can borrow 60% of what it takes to start up your franchise, and it can cost less than a million dollars. That's certainly a lot of money, but these days, its not exactly super rich. And making an average of around 80 grand a year might sound a lot to someone living in Scio, Oregon, but its barely enough to get by in Manhattan. Certainly someone who owns and runs the company, putting their own cash on the line and facing the entire business success by their own efforts deserves at least that much.
So its not like these guys have huge sacks of cash they light cigars with, money they can easily spare to help pay employees more. Fifteen bucks an hour is around a 50% increase in pay, and that doesn't include the matching taxes that employees must pay, plus other related expenses (insurance, etc). Taxes and fees such as Social Security alone cost an employer about an additional 10% extra. The average personnel cost for a McDonald's is about 35% of its annual income. Employees are the number one cost for a restaurant - and almost every business.
Multiply that times the number of hours the average employee works, times the number of average employees working at McDonald's and that more than eliminates the entire franchise earnings the average McDonald's owner makes in a year. In other words: the owner literally cannot give that much up.
This is why analyses such as one at Huffington Post which claimed a Big Mac would only go up about 68 cents are such trash. They are written by people who have virtually no clue how the business world works and miss all the personnel costs a company has to carry. The real cost is unknown but it could be as much as $5, and that's even if some employees are replaced by machines and expenses are slashed.
So what on earth is the SEIU thinking, I ask again? Well I suspect they are using high pressure tactics. They are shooting high, knowing that will never happen. What they intend to do is make it so unbearable for McDonald's that the company has to sit down at the table and start negotiating with employees. But the employees can't all sit at the table, so they will need representatives - the SEIU - who will make deals.
Their goal is to get a small raise, unionize the entire McDonald's staff, and get a huge influx of dues from the million or so employees in the US alone. Will that raise be more than the dues? Doubtful, but hey, who cares, the SEIU isn't about the employees any more than another union. Imagine what they could do with all that money from all those fast food employees! Why, its another vacation house for the union bosses and more money to pour into Democrat political election funds and groups such as Planned Parenthood's coffers.
Because that's not all they have in mind. The left is faced with two choices: admit their economic policies suck, or distract people from how bad they are and try harder to make them work. Instead of changing to policies to encourage creation of better-paying jobs, their scheme is to force jobs that exist under their policies to pay more!
And as has been abundantly demonstrated, private sector unions are dying. Steven Greenhouse writes at the New York Times:
The Bureau of Labor Statistics said the total number of union members fell by 400,000 last year, to 14.3 million, even though the nation’s overall employment rose by 2.4 million. The percentage of workers in unions fell to 11.3 percent, down from 11.8 percent in 2011, the bureau found in its annual report on union membership. That brought unionization to its lowest level since 1916, when it was 11.2 percent, according to a study by two Rutgers economists, Leo Troy and Neil Sheflin.People are coming to the conclusion that paying dues to corrupt fat cats to misuse while gaining no benefits is a stupid waste. Why unionize? All they do is take your money and give you no benefits. The SEIU is in the only booming union sector in America: government employees. And they want to expand, baby.
So this is what you get: pressure that will result in loss of jobs for an expansion of power, to try to get failed and idiotic policies to somehow work, while giving unions more money. Those people standing in the picket lines, at least the ones not paid under minimum wage by the SEIU to stand around with signs and chant, are suckers. They are only thinking "I want more money" and they're just very useful idiots for the ones behind the scenes.
But by all means, blame the corporations.