Summary List Placement
As discussion of a $15 federal minimum wage heats up, corporate giants who once staunchly opposed the move are remaining surprisingly quiet.
“You’ve seen fast food chains push against or lobby against a $15 minimum wage … but you’re not seeing them at this point,” Credit Suisse analyst Lauren Silberman told Insider. “They’re just kind of taking it.”
Take, for example, McDonald’s. Fight for $15, the Service Employees International Union (SEIU)-backed movement to raise the minimum wage, has long been at odds with the fast-food giant. McDonald’s workers have spent years organizing protests calling for higher pay.
Then, in 2019, the company announced it would no longer lobby against minimum wage regulation.
McDonald’s CEO Chris Kempczinski seemed borderline breezy about the potential change in a recent call with investors. Kempczinski highlighted the fact that many states have already passed minimum wage legislation, including Florida, which voted for a $15 minimum wage in late 2020.
“As this has been rolling into the states, we have seen and developed quite a bit of experience with how this works out,” Kempczinski said.
Kempczinksi added: “The positive for us has been, so long as it’s done in a staged way and so long as it is done equitably across the entire market without sort of any carve outs or special exemptions for people, then we do just fine.”
Retail giants have figured out how to make $15 per hour work
The acceptance of a higher federal minimum wage among corporate giants extends beyond fast food. A $15 minimum wage is less of a concern in 2021 than it was in 2011 because most national companies have already raised workers’ wages, either voluntarily or due to state or local legislation.
“Generally, I think most retailers would prefer wages to be left up to the market rather than legislated for,” GlobalData managing director Neil Saunders told Insider.
“However, a lot of retailers have been voluntarily increasing wages over the past few years so an increase to $15 is now not seen as such a big deal by some,” Saunders continued. “Indeed, many have raised, or are in the process of delivering on promises to raise, wages to $15.”
On Wednesday, Walmart announced it would raise pay for 425,000 frontline workers, while keeping its minimum wage at $11 per hour. Amazon, Costco, and Target have already committed to paying all employees at least $15 per hour. Companies have largely countered the increased cost of labor by increasing prices or cutting costs elsewhere.
The Congressional Budget Office said last week that raising the federal minimum wage could cost the US 1.4 million jobs by 2025. Other studies have offered mixed results, with some indicating higher minimum wages actually increase employment.
Saunders said it was unlikely that major retailers such as Walmart or Target would increase costs if they have to pay employees more. However, in the chain restaurant industry, higher regional minimum wages have already resulted in higher costs at chains including Texas Roadhouse, Kura Sushi, and The Cheesecake Factory
“Ultimately in any business, the customer pays for everything,” Waffle House CEO Walt Ehmer told Insider in November. “We don’t have any other source of revenue other than the customer. So, we have to be careful how we treat our customers and we don’t stick it to them with giant price increases.”
The lines are being drawn for new political battlegrounds
So, with the war over the $15 minimum wage in the rearview mirror, what are the new battlegrounds? Here is what experts had to say:
- Hero pay. “The biggest issue for many right now is dealing with local ordinances mandating temporary hero pay boosts and bonuses,” Saunders said. “This is causing a lot of issues and a patchwork of different wage structures. Many of the rules are illogical and hard to implement.” For example, Kroger recently announced it would close two grocery stores in Long Beach, California after the city passed a rule boosting workers’ pay by $4 during the pandemic.
- Tipped minimum wage. Silberman said tipped minimum wage is a less straightforward proposition than the hourly minimum wage, with the potential to cause problems for independent, sit-down restaurants in particular. “If someone is making an earned wage plus tips, they’re effectively making twice the minimum wage,” TGI Fridays CEO Ray Blanchette recently told Insider’s Allana Akhtar.”If you mess around with the tipped wage, this is just optics.”
- Joint employment. Joint employment refers to whether a franchisor is considered liable in cases related to franchisees’ employees. For example, currently, if a worker at a McDonald’s franchised location sues for wage theft, only the franchisee would be legally liable — not the corporate entity. The definition of the relationship between franchisor and franchisee has changed multiple times in recent years and could shift again under the new administration, Stifel analyst Chris O’Cull wrote in a recent note. “This could substantially impact the franchisor-franchisee relationship and is likely to be fought strongly by the restaurant industry in court,” O’Cull said.