BusinessGlobal Economy

Fast-food industry serves up a runaway wealth gap

America's working poor are getting poorer in restaurant sector, compared to their bosses

PUBLISHED : Thursday, 13 December, 2012, 12:00am
UPDATED : Thursday, 13 December, 2012, 5:28am

Tyree Johnson scrubs himself with a bar of soap in a McDonald's bathroom and puts on fresh deodorant. He stashes his toiletries in a bag and hops on a city train. His destination: another McDonald's about a mile away.

Johnson isn't one of Chicago's many homeless people who seek shelter in fast-food outlets. He's an employee at both stores.

He needs the makeshift baths because hygiene and appearance are part of his annual compensation reviews. Even with frequent scrubbings, it's hard to remove the essence of the greasy food he worked around.

"I hate when my boss tells me she won't give me a raise because she can smell me," he said.

Johnson, 44, needs the two pay cheques to pay rent for his flat in a single-room occupancy hotel. He's worked at McDonald's stores for two decades but he still doesn't get 40 hours a week and makes the minimum US$8.25 an hour.

This is life in one of America's premier growth industries. Fast-food restaurants have added jobs more than twice as fast as the US average during the recovery that began in June 2009. The jobs created by companies including Burger King and Yum Brands, which owns the Pizza Hut, Taco Bell and KFC brands, are among the lowest-paid in the US - except in the executive suite.

The pay gap separating fast-food workers from their chief executives is growing at each of those firms. The disparity has doubled at McDonald's in the last 10 years, according to Bloomberg data. At the same time, the company helped pay for lobbying against increases in the minimum wage and sought to quash unionisation efforts.

Older workers like Johnson are staffing fast-food grills and fryers more often, according to US Census Bureau data. In 2010, 16- to 19-year-olds made up 17 per cent of food preparation and serving workers, down from almost a quarter in 2000, as older, underemployed Americans took those jobs.

Johnson would need about a million hours of work - or more than a century on the clock - to earn the US$8.75 million that McDonald's paid then-chief executive Jim Skinner last year.

The recovery from the last downturn has been the most uneven in recent history. The earnings of the 1.2 million households whose incomes put them in the top 1 per cent of the US rose 5.5 per cent last year, according to census estimates. Earnings fell 1.7 per cent for the 97 million households in the bottom 80 per cent.

The widening chasm is most pronounced in the restaurant and retail businesses. The total number of people employed in the US at Wal-Mart Stores and McDonald's and Yum Brands restaurants exceeds the entire 2.7 million population of Chicago. Net income at those three companies has jumped at least 22 per cent from four years ago.

Shareholders, not employees, have reaped the rewards. McDonald's, for example, spent US$6 billion on share repurchases and dividends last year, the equivalent of US$14,286 per restaurant worker employed by the firm.

The wage gap between chief executives and store workers wasn't always so wide. Twenty years ago, the chief executive's compensation was about 230 times that of a full-time worker paid the federal minimum wage. The US$8.75 million that Skinner made last year was 580 times, according to Bloomberg data.

McDonald's is part of a larger trend of Standard & Poor's 500 companies, according to data from the American Federation of Labour-Congress of Industrial Organisations. The pay gap between the average S&P 500 chief executive and the average US worker, which was 42 times in 1980, widened to 380 times last year from 325 times in 2010, the umbrella group of 56 unions said.

Lai See is on holiday


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