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Living wages

Forty years ago there was no expectation that a fast food job would pay a living wage, much less support a household. The portrait of the fast food worker of that time—an image that persists in the popular imagination—was of a teenager doing part-time work to make some spending money. The portrait of the fast food worker has changed since then—the average age is now 28—but the pay scale has not.

And boy, did the fast food industry get an earful about it last month. On the front page and editorial page, on cable news and comedy shows, McDonald’s, Wendy’s, Domino’s and their peers were lambasted as their workers took to the streets demanding higher wages.

And it was hard to feel sympathy for the fast food giants as worker salaries (minimum wage is $7.25) were juxtaposed against McDonald’s profits ($5.5 billion last year). But those numbers don’t change the fact that the issue does not stem from fast food wages not changing, but the fact that fast food workers are changing. And, in the larger context, the fact that the U.S. economy has dramatically changed from the 1970s.

As James Surowiecki points out in an illuminating column in The New Yorker, the nation’s largest employer in 1960 was General Motors. It was also the country’s most profitable company and paid large wages. Today, the restaurant industry is the nation’s largest employer and it is made up of companies that, for the most part, have built their profits on slim margins that depend on low wages. A typical McDonald’s franchise makes about six cents on the dollar, according to analysis from Janney Capital Markets.

The restaurant industry has every reason to be proud of its record of job creation and its capacity to put future business leaders on a career path. But when the nation’s largest employer relies on low-wage jobs to be profitable, the country as a whole has a problem.

We’ve seen the fallout from the loss of manufacturing in the United States and the larger loss of middle class jobs play out in a number of arenas (I’m looking at you, Detroit). We’re seeing it now play out at fast food restaurants. Fast food workers of today would have been working at General Motors in the 1960s and making a solid middle class wage. But those jobs are long gone and the service industry is what’s left.

The problem being laid at the feet of fast food restaurants is a larger structural problem with the nation’s economy, and the solution shouldn’t rest with the restaurant industry alone.

And what is the solution? That’s above my pay grade, but here are some options: increase the earned income tax credit; expand the social safety net, of which health care reform is part (agriculture subsidies help keep the cost of a Big Mac cheap, why shouldn’t social subsidies—subsidized child care, for instance—as well); fast food needs to experiment more with raising prices, as the fast casual segment has done; and we need to get those middle class jobs back. As Surowiecki says, a recent McKinsey report suggests a trillion dollars needs to be invested in rebuilding the nation’s infrastructure. Sounds like a good place to start.

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