Clarence Fanto: Employees at bottom pay the price


LENOX -- One cheer, and only one, for the new law increasing the Massachusetts minimum wage, now $8 an hour, step-by-step to $11 on Jan. 1, 2017.

Yes, it’s progress, and as of now, the $11 rate would rank as the highest statewide minimum in the U.S.

But no, it’s well below what it should be, especially since many workers in fast-food joints and other businesses paying the minimum are trying to put food on the table and help pay the rent or the mortgage for their families.

It’s not like it was in 1961, when I bought my first McDonald’s burger for 15 cents in Mamaroneck, N.Y. Working there were teenage acquaintances earning the minimum, then $1 an hour, to pick up some spending money so they could fuel up their used cars and head to the beach. Gas was 22 cents a gallon, a new car cost $2,050 on average, typical monthly rent was $88 and a new house cost $11,700, on average nationwide.

These basic costs have gone up by a multiplier of 13 since then, according to federal statistics. But the average minimum wage has only increased by a factor of seven. To keep pace with living costs, the minimum ought to be $13 an hour.

That’s why the state increase signed by Gov. Deval Patrick on June 26, while welcome, deserves only light applause. Patrick acknowledged as much when he stated that "this minimum wage is great progress, but it’s not a livable wage."

At the Boston bill-signing ceremony, Richard Trumka, president of the national AFL-CIO, declared: "The minimum wage should help people out of poverty, not trap people in poverty."

But many business leaders are upset: "This is a one-sided piece of legislation that largely ignores the pleas of the small businesses for balance, and instead ensures that Massachusetts will continue to be one of the most expensive and difficult places to operate a retail business in the nation," Jon Hurst, president of the Retailers Association of Massachusetts, stated.

This, despite the fact that the new law freezes unemployment insurance costs for businesses until 2017 and offers other adjustments favoring owners.

For those who believe that the mega-chains running the nation’s fast-food emporiums can’t afford to hike the minimum, it should be noted that McDonald’s net income for 2013 was $5.6 billion. Last year, the company offered a hot line briefly to guide workers on how to apply for food stamps and public assistance for medical costs and heating bills. Taxpayers already are on the hook for $1.2 billion a year for the chain’s employees on those and other programs.

Most of the chain’s sites are operated by franchise-holders who must pay the company a hefty portion of the sales, as well as rent since McDonald’s usually owns the properties.

There are better ways to run these businesses.

In California, the well-regarded In-N-Out Burger chain pays at least $10.50 an hour to all its workers, while Moo Cluck Moo, a Michigan startup chain, offers $15 an hour.

"Our people work really hard, and $15 impacts their lives in a very positive way," Moo Cluck Moo founder Harry Moorhouse commented. "The whole notion that it’s all kids starting out and they don’t deserve to be paid much, that’s all specious. We’re paying people $15 an hour so they have a living wage, so they really care about you when you come in the store. We don’t have any turnover. We don’t have to train people constantly."

"The number one reason we pay our team well above the minimum wage is because we believe that if we take care of the team, they will take care of our customers," said Randy Garutti, the chief executive of Shake Shack, which pays $10.70 an hour on average, offers monthly bonuses at stores that meet sales goals, and provides health coverage to all who work more than 30 hours a week.

Boloco, the Boston-based burrito chain, pays a median hourly wage of $11.50 (compared to a national fast-food average of $8.83). The manager of the Concord, N.H., Boloco restaurant told reporters earlier this month that he can pick from many job applicants -- "when you teach talented individuals, once they get it, they’ll be a rock star for you."

The chain’s co-founder, John Pepper, told The New York Times recently that he used to pay low wages, but in 2002, when the minimum wage was $5.15, the company raised its scale to $8, started subsidizing commuting costs, contributed up to 4 percent of pay toward a 401(k) retirement package and offered English classes to immigrant workers.

"In the company’s early years," he explained, "our goal, like much of the industry, was to pay as little as you can get away with and have people still show up and be reasonably productive." Eventually, he realized, "we were talking about building a culture in which we want our team members to take care of our customers. But we asked, ‘What’s in it for them?’ Honestly, very little."

"If we really wanted our people to care about our culture and care about our customers, we had to show that we cared about them," Pepper added. "If we’re talking about building a business that’s successful, but our employees can’t go home and pay their bills, to me that success is a farce."

McDonald’s defends its pay practices. "We continue to believe that we pay fair and competitive wages," CEO Don Thompson told the company’s shareholders at their annual meeting in May. "We provide job opportunities and training for those entering the workforce. We are trying to be a really great employer."

It’s logical that if more people at the lower rungs of the economic ladder were paid living wages, the nation’s economy would accelerate and the inequality chasm might narrow, at least slightly. But when the priority is maximizing already enormous profits, it’s the hard-working hourly employees who pay the price.

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