December 2012, Week 1


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Sat, 1 Dec 2012 12:27:36 -0500
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Organizing McDonalds and Walmart, and Why
Austerity Economics Hurts Low-Wage Workers the

By Robert Reich
November 30, 2012


What does the drama in Washington over the "fiscal
cliff" have to do with strikes and work stoppages
among America's lowest-paid workers at Walmart,
McDonald's, Burger King, and Domino's Pizza?


Jobs are slowly returning to America, but most of
them pay lousy wages and low if non-existent
benefits. The Bureau of Labor Statistics estimates
that seven out of 10 growth occupations over the
next decade will be low-wage - like serving
customers at big-box retailers and fast-food chains.
That's why the median wage keeps dropping,
especially for the 80 percent of the workforce that's
paid by the hour.

It's also part of the reason why the percent of
Americans living below the poverty line has been
increasing even as the economy has started to
recover - from 12.3 percent in 2006 to 15 percent
in 2011. More than 46 million Americans now live
below the poverty line.

Many of them have jobs. The problem is these jobs
just don't pay enough to lift their families out of

So, encouraged by the economic recovery and
perhaps also by the election returns, low-wage
workers have started to organize.

Yesterday in New York hundreds of workers at
dozens of fast-food chain stores went on strike,
demanding a raise to $15-an-hour from their
current pay of $8 to $10 an hour (the median hourly
wage for food service and prep workers in New York
is $8.90 an hour).

Last week, Walmart workers staged demonstrations
and walkouts at thousands of Walmart stores, also
demanding better pay. The average Walmart
employee earns $8.81 an hour. A third of Walmart's
employees work less than 28 hours per week and
don't qualify for benefits.

These workers are not teenagers. Most have to
support their families. According to the Bureau of
Labor Statistics, the median age of fast-food workers
is over 28; and women, who comprise two-thirds of
the industry, are over 32. The median age of big-box
retail workers is over 30.

Organizing makes economic sense.

Unlike industrial jobs, these can't be outsourced
abroad. Nor are they likely to be replaced by
automated machinery and computers. The service
these workers provide is personal and direct:
Someone has to be on hand to help customers and
dole out the burgers.

And any wage gains they receive aren't likely to be
passed on to consumers in higher prices because
big-box retailers and fast-food chains have to
compete intensely for consumers. They have no
choice but to keep their prices low.

That means wage gains are likely to come out of
profits - which, in turn, would affect the return to
shareholders and the total compensation of top

That wouldn't be such a bad thing.

According to a recent report by the National
Employment Law Project, most low-wage workers
are employed by large corporations that have been
enjoying healthy profits. Three-quarters of these
employers (the fifty biggest employers of low-wage
workers) are raking in higher revenues now than
they did before the recession.

McDonald's - bellwether for the fast-food industry
- posted strong results during the recession by
attracting cash-strapped customers, and its sales
have continued to rise.

Its CEO, Jim Skinner, got $8.8 million last year. In
addition to annual bonuses, McDonald's also gives
its executives a long-term bonus once every three
years; Skinner received an $8.3 million long-term
bonus in 2009 and is due for another this year. The
value of Skinner's other perks - including personal
use of the company aircraft, physical exams and
security - rose 19% to $752,000.

Yum!Brands, which operates and licenses Taco Bell,
KFC, and Pizza Hut, has also done wonderfully well.
Its CEO, David Novak, received $29.67 million in
total compensation last year, placing him number
23 on Forbes' list of highest paid chief executives.

Walmart - the trendsetter for big-box retailers - is
also doing well. And it pays its executives
handsomely. The total compensation for Walmart's
CEO, Michael Duke, was $18.7 million last year -
putting him number 82 on Forbes' list.

The wealth of the Walton family - which still owns
the lion's share of Walmart stock - now exceeds the
wealth of the bottom 40 percent of American
families combined, according to an analysis by the
Economic Policy Institute.

Last week, Walmart announced that the next Wal-
Mart dividend will be issued December 27 instead of
January 2, after the Bush tax cut for dividends
expires - thereby saving the Walmart family as
much as $180 million. (According to the online
weekly "Too Much," this $180 million would be
enough to give 72,000 Wal-Mart workers now
making $8 an hour a 20 percent annual pay hike.
That hike would still leave those workers making
under the poverty line for a family of three.)

America is becoming more unequal by the day. So
wouldn't it be sensible to encourage unionization at
fast-food and big-box retailers?

Yes, but here's the problem.

The unemployment rate among people with just a
high school degree - which describes most (but not
all) fast-food and big-box retail workers - is still in
the stratosphere. The Bureau of Labor Statistics
puts it at 12.2 percent, and that's conservative
estimate. It was 7.7 percent at the start of 2008.

High unemployment makes it much harder to
organize a union because workers are even more
fearful than usual of losing their jobs. Eight dollars
an hour is better than no dollars an hour. And
employers at big-box and fast-food chains have not
been reluctant to give the boot to employees
associated with attempts to organize for higher

Meanwhile, only half of the people who lose their
jobs qualify for unemployment insurance these
days. Retail workers in big-boxes and fast-food
chains rarely qualify because they haven't been on
the job long enough or are there only part-time. This
makes the risk of job loss even greater.

Which brings us back to what's happening in

Washington's obsession with deficit reduction
makes it all the more likely these workers will face
continuing high unemployment - even higher if the
nation succumbs to deficit hysteria. That's because
cutting government spending reduces overall
demand, which hits low-wage workers hardest. They
and their families are the biggest casualties of
austerity economics.

And if the spending cuts Washington is
contemplating fall on low-wage workers whose
families are under the poverty line - reducing not
only the availability of unemployment insurance but
also food stamps, housing assistance, infant and
child nutrition, child health care, and Medicaid - it
will be even worse. (It's worth recalling, in this
regard, that 62 percent of the cuts in the Republican
budget engineered by Paul Ryan fell on America's

By contrast, low levels of unemployment invite wage
gains and make it easier to organize unions. The
last time America's low-wage workers got a real raise
(apart from the last hike in the minimum wage) was
the late 1990s when unemployment dropped to 4
percent nationally - compelling employers to raise
wages in order to recruit and retain them, and
prompting a round of labor organizing.

That's one reason why job growth must be the
nation's number one priority. Not deficit reduction.

Yet neither side in the current "fiscal cliff"
negotiations is talking about America's low-wage
workers. They're invisible in official Washington.

Not only are they unorganized for the purpose of
getting a larger share of the profits at Walmart,
McDonalds, and other giant firms, they're also
unorganized for the purpose of being heard in our
nation's capital. There's no national association of
low-wage workers. They don't contribute much to
political campaigns. They have no Super-PAC. They
don't have Washington lobbyists.

But if this nation is to reverse the scourge of
widening inequality, Washington needs to start
paying attention to them. And the rest of us should
do everything we can to pressure Washington and
big-box retailers and fast-food chains to raise their


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