Fast Food Companies and Higher Wages
Labor Unions and Disgruntled employees are trying to coerce the owners of Fast Food restaurants to pay more money for jobs. Some of their reasons or complaints are: The companies are making lots of money and can afford to pay higher wages, the employees can’t live on the wages they earn, and the employees work hard and deserve more money.
These concerns scream of a lack of understanding of economics or business. Let’s start with the easiest reason to argue against. Fast food employees can’t live on the wages paid by the fast food jobs. A job is worth what a job is worth. The employer determines for every job that it has for how much that job is worth. Availability of applicants, the wages paid by competitors in the area for similar jobs, turnover for that position, as well as the value added to the organization determine how much the company can and should pay for that job.
The impact of the pay for any job on the employee is not a consideration. The employer sets a price and communicates the opportunity to the employee and the employee accepts or rejects the job offer. The employee has an obligation to themselves and to their families to make the right decision.
Employees who need jobs look for work; they compete with all the qualified candidates for jobs and salary. Based on skill sets and experience candidates compete for jobs. As the bread winner for a family I have an obligation to earn enough to support the family. I have the obligation to EARN for my family. My employer does not have an obligation to pay me enough to support my family. I have an obligation to make myself a candidate for a job or jobs to support my family. It may take more than one job to adequately support my family, but that is my obligation not my employers.
Let’s discuss another reason the unions feel that the fast food restaurants should pay more to employees, the companies make lots of money and can afford to pay more. Without a detailed look into the books of any of the hundreds of companies who hire fast food employees we won’t know if they make enough money to pay more to their employees. One thing that we do know is that it is a good business practice to pay what a job is worth to the employer not what the employee, or a union thinks a job is worth.
A company is either privately owned or publicly owned. The owner or stock holders expect a return on their investment. The owners or stockholders have capital at risk. The success or failure of the business will impact their investment. Poor business practices by the company such as paying too much, or more than a job is worth, will have a negative impact on the investor’s capital.
Owners and stockholders demand and expect a return on their investment. They make it possible for the company to hire employees at the prevailing rate for the jobs they have. Paying more than a job is worth causes less capital available to reward the investors. It does not make sense to keep your capital at risk when there is not enough of a reward for the risk. Investors deserve the reward; employees deserve the compensation they agreed to when they accepted the job. Every one of these employees accepted the job they have for the wage they were offered.
The last reason discussed was that the employees work hard and deserve more money. Hopefully that is a true story; the employees do work hard and are dependable and stay out of trouble. When they were offered the job that they accepted that’s what they agreed to do. The employer agreed to hire the employee; employee agreed to perform the tasks associated with the job, show up regularly and on time and to stay out of trouble. Working hard and staying out of trouble are normal expectations for most jobs, not a justification for more money.
A free market economy requires that salaries and wages are set by the market. Fast food restaurants in a community would all be paying similar wages. The wage would be established by the free market. Fast Food Restaurant A pays $5 an hour for entry level fast food employees; however Fast Food Restaurant B pays $5.50 for entry level fast food employees. That would have an impact on entry level fast food employee wages. As fast as Fast Food Restaurant A hired entry level fast food employees they would quit and go to Fast Food Restaurant B for the extra fifty cents an hour.
That would work until the market was saturated with competent entry level fast food employees. With little to no movement in the work force the wages would stay stable at $5.50 at Fast Food Restaurant B and either $5.00 or $5.50 an hour at Fast Food Restaurant A. If the turnover is so great the employer may choose to raise the starting wage to match Fast Food Restaurant B to stabilize his work force.
The saturated market would cause the wage to stay stable until circumstances caused the employer to raise them.
The cost of labor is part of what determines how much the restaurant charges for their products. Wages impact the cost and the prices. Artificially increased labor costs would require an increase in prices and that would clearly have a negative impact on the restaurant’s competitiveness.
If you argue that an increase in the minimum wage that would impact the all fast food restaurants equally I would still argue that it would not. The free market is not impacting the price; artificial wages created by legislators would be impacting the price of food at fast food restaurants.
Diners, other restaurant chains, grocery stores, hardware stores, landscapers and an infinite number of other businesses who depend on labor would either not be effected or would have an unfair advantage in their pricing.
How fair is it to coerce Fast Food Restaurants to pay artificially inflated wages to satisfy labor unions and their bought and paid for legislators. How should the laws be written, should they specifically spell out what a fast food restaurant is but exclude diners, food truck vendors, grocery stores that sell prepared food, or some nonfood preparing entity? Should the law be vague enough to coerce any company that the legislators want to entrap into artificially increased wages to satisfy their masters in the labor unions?
The free market needs to be free. Minimum interference from government, especially when government takes the form of gullible legislators willing to do the bidding of labor unions at the expense of the tax payers in their communities.
Artificially increased wages will negatively impact the cost of goods at Fast Food restaurants. That will negatively impact the prices of the food at those restaurants, that will have a negative impact on the sales in those restaurants, and that will have a negative impact on the earnings of the restaurants reducing the tax revenue that will in turn reduce the money the irresponsible legislators can misspend.