For years, McDonalds resisted raising wages for its hourly workers. But last year it relented just a bit and raised wages for some of its hourly workers by about a dollar, from roughly $9 an hour to $10. It also allowed employees to earn up to five days of paid vacation every year following the first year of employment.
The result? As McDonalds U.S. president Mike Andres told Wall Street analysts at a UBS conference this week, the increase has improved employee loyalty and reduced turnover: “90-day turnover rates are down, our survey scores are up – we have more staff in restaurants.” Indeed, McDonalds sales are rising. Andes’s conclusion: “So far we’re pleased with it—it was a significant investment obviously but it’s working well.”
Many of us predicted exactly this outcome. In fact, if McDonalds raised its minimum a bit more, to $11 or even $12 an hour, the increased costs would be more than offset by savings from more choice of whom to hire, greater employee loyalty, and reduced employee turnover, and its sales would rise further because of higher customer satisfaction.
Why did it take so long for McDonalds to see this, why isn't it raising its wages further, and why is it still lobbying so fiercely against increases in the federal and various state minimum wages? Because McDonalds’s top management, like the top management at Walmart, is wedded to an ideology that equates higher minimum pay with higher costs and lower profits. Even when they’re proven wrong and admit so publicly, that ideology remains unshaken.
What do you think?