McDonald's pressured to hike pay as Wal-Mart raises, economy improves

Fri Feb 20, 2015 6:51pm EST
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By Lisa Baertlein

(Reuters) - McDonald's Corp and its franchisees may have few options but to begin raising hourly wages as an improving U.S. economy creates competition for good workers and as mega-employer Wal-Mart Stores Inc sets a higher bar on pay, according to labor experts.

The pressure comes at a particularly difficult time for the world's biggest fast-food chain. McDonald's and its roughly 3,000 U.S. franchisees are fighting to break a long streak of lackluster sales that has made it virtually impossible to boost prices on its famous hamburgers and french fries to cover higher labor costs.

McDonald's declined comment. It referred reporters to a December statement saying that franchisees set wages for roughly 90 percent of the chain's more than 14,000 U.S. restaurants. McDonald's Corp says it can increase pay only in the small number of restaurants it operates.

Wal-Mart on Thursday said it would increase entry-level pay to $9 an hour, a move it estimated would cost $1 billion and affect some 500,000 employees.

Gary Chaison, professor of industrial relations at Clark University in Worcester, Massachusetts, said there is substantial overlap between fast-food and Wal-Mart workers in smaller communities.

    "They are going to have to raise their wages," Chaison said of the fast-food chains in those locations. "They cannot afford to be unstaffed."

Wal-Mart, the world's biggest retailer, and McDonald's have been the target of frequent protests by union-supported hourly workers demanding that their pay be increased to $15 per hour from an average that is closer to the federal minimum wage of $7.25 per hour.

While supporters of those campaigns declared victory following Thursday's Wal-Mart announcement, economists said it reflected an improving U.S. economy that has added more than a million jobs over the past three months, a performance unmatched since the late 1990s.   Continued...

McDonald's Golden Arches are seen next to a Starbucks at the Union Square location in New York January 29, 2015. REUTERS/Brendan McDermid