In the wake of Walmart’s recent wage hike and implementation of employee education programs, McDonald’s just announced its intention to boost worker pay and offer paid vacation. The company plans to raise employee compensation to at least $1 above the state or municipal minimum wage on July 1.
This move will only affect companies owned and operated by McDonald’s Corp. and not its franchises. Regardless, these moves by some of the nations’ staple pay squeezers certainly seem to reflect tighter slack within the labor markets. Turnover costs – with hiring and retraining workers – are outpacing the cost of raising the wage rate. This proves especially relevant in high turnover industries like retail and dining. McDonald’s also plans to offer workers who complete at least 20 hours a week 20 hours of paid time off a year, a seemingly trivial figure, but nonetheless a key move to reduce turnover.
http://www.bloomberg.com/news/articles/2015-04-01/mcdonald-s-will-raise-worker-pay-by-more-than-10-journal-says
8 Comments
This is an interesting move — I wonder if other fast-food companies will follow their lead. I remember that Wal-Mart did this as a way to save money on training, I’m curious how much McDonald’s will save with this measure.
This is an interesting move for McDonald’s, given its fall in sales this year
I think Walmart’s decision to raise wages partially came from the fact that they’re the go to large corporation to scrutinize. While their wages are definitely very low, they do face more public scrutiny than other large retail organizations. McDonald’s has also been experimenting with offering all day breakfast at certain stores. I am interested to see how that will affect their EPS and stock price. Regardless, I could definitely get behind McDonald’s serving all day breakfast.
I’m glad to hear the news. I read somewhere that customers would only have to pay an a trivial number of cents extra per trip to McDonalds if they would pay employees $10/hour- I’m happy to pay it.
I wonder what this will do to the prices of their products. I am happy that the workers are getting paid more, but I think McDonalds and Walmart who both pride themselves in having the lowest prices around might have to start raising prices.
Happy employees = More productive employees
I’ll be curious to see to what extent this change affects the retention rate of workers, but it does seem that they are moving in the right direction to lower the turnover rate.
Andrew makes a key point, but we could turn it into econ-speak: workers are very near their reservation wage, so are nearly indifferent about showing up to work. That creates headaches for firms that try to operate on the cheap, particularly if such workers interface with customers. Who wants to go to a store to have a sullen employee fail to be able to help you find what you need? My judgement is that store-level management at Wal-Mart has been very poor. Part of that is the workforce, a product of compensation decisions made by Corporate. Part is that very little is delegated to local managers. It’s not the local employees who are at fault. Ditto Detroit in the bad old days: lousy car designs (in styling, function and quality) were not the fault of workers and factory management!
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