The Economics of the Fast Food Industry Essay Example

to increase the hourly wage of approximately one thousand workers across 61 stores located in western Washington to $15.16 per hour for 20 hours per week over the course of a full year! If the company's profits of $812 million were utilized similarly, it would provide this benefit to 100,000 employees.

A survey carried out by Nation's Restaurant News in 1997 found that, on average, corporate executives received a bonus of $131,000 excluding their salaries. In 1995, McDonald's managers earned an annual salary of $150,000 per restaurant they owned, which was seven times more than the minimum wage paid to full-time crew members. Fast food chains can receive up to $2,400 in tax credit for every new low-income employee hired through the Work Opportunity Tax Credit program. Although this program aimed at encouraging the hiring of young workers for training purposes initially, it has continued despite scrutiny into whether it constitutes corporate welfare.

A higher percentage of employees in the fast food industry earn minimum wage compared to other US industries. Approximately 3 million workers are employed in this industry, and a report by the US Department of Labor in 1996 discovered that 92% of these workers would have been recruited regardless. Despite investing roughly $3 billion per year in TV advertising, this expenditure could be redirected towards societal benefits and compensating thousands of employees with salaries ranging from $40,000 to $75,000. It is important to highlight that migrant farm laborers are the only individuals who receive lower hourly wages.

Across the country, about 90% of fast food industry employees lack benefits and receive shifts as needed with limited career growth prospects. Assistant managers hoping to advance within

these chains are also exploited, often working up to 70 hours per week without pay and little prospect for promotion. During my two-year tenure at Pizza Hut, approximately 20 assistant managers I worked with received only slightly above minimum wage despite frequently performing duties beyond those required of a store manager. Only one was ultimately promoted. In 1998, employee benefits comprised just 2%.

Employee benefits constitute only 8.6% of total compensation while 5% of total expenses are referenced in Sacks 2000.

The percentage of employees nationally in 1999 was 27.5%, and service workers had a slightly lower percentage of 26.2%.

According to Tony Royle's "Labor Relations in the Global Fast Food Industry," during the organizing drive, management attempted to justify the poverty level wages of workers. The arguments made by Emerald City are typical of those made by many pizza and other fast food franchises. We will focus on Emerald City's claims, but the following responses can be used by workers to refute similar arguments made by other franchises. One common argument is that the company cannot afford to give raises and cannot compensate workers for delivery costs.

When workers request better compensation for their labor, corporate executives and owners often claim that they cannot afford it. This statement is a mere assertion without any concrete supporting evidence. It is unreasonable to expect us to simply accept it. As such, we should inquire about the financial records, which should include details regarding all payments made to directors and shareholders and the multinational companies. Unfortunately, an Emerald City executive declined to produce these records when requested to do so by a union organizer.

During a discussion about compensation for labor, an

executive tried to claim that he was just like everyone else because he drives a used car. However, organizers had previously visited his home and taken photos of his extravagant multi-million dollar house in an exclusive Seattle neighborhood. Without access to all relevant records, it is difficult to believe management's pleas of poverty from franchise owners. It's important not to let these distractions delay us from our goal of fair compensation.

The chapter on the fast food industry demonstrates that it is immensely profitable, resulting in the establishment of multinational corporations that generate considerable profits for their executives and shareholders. The acquisition of such vast wealth prompts us to question how it was obtained. Despite this profitability, employees from pizza makers to delivery drivers are paid minimum wage, which appears illogical. Some owners may argue that their entrepreneurial skills led to their wealth and that their workers should appreciate any job opportunity they receive.

Their argument suggests that as workers, we must follow the example of businesspeople and save money to succeed. However, working individuals know this is a naive belief. Bills make it impossible to save for a small business, which would likely be overshadowed by major corporations such as Wal-Mart. Additionally, part-time minimum wage jobs cannot lead to success.

As workers, our responsibility is to produce and deliver pizzas. Our labor in heated kitchens is what brings the end product. However, we are vulnerable to harm from table blades and hot pans, often resulting in injury to our fingers. Additionally, navigating rough road conditions causes wear and tear on our vehicles over time.

All fast food workers, as well as individuals in other professions such as

teaching, plumbing, computer programming, and Boeing work, contribute to the creation of wealth in society through their labor. It is their labor that produces essential products that drive the economy, not the efforts of business owners. The wealth discrepancy between workers and bosses exists because employees lack control over the wealth generated by the sale of such products.

Essentially, the wage system involves workers providing unpaid labor that generates profits for their boss who owns the product. The acquisition method of owner's wealth may not be immediately clear but is easily comprehensible. Workers agree to a fixed payment for a specific time period under a contract when commencing work, like in a job where $7 per hour is paid.

Although we received a payment of $150 for working 20 hours at a rate of $7.50 per hour, our boss expects that the work we accomplished in that time frame will yield pizza worth anywhere from $300 to $1000.

Essentially, our boss can make a profit by producing only $300 worth of pizza because our week's work costs him just $150 for labor expenses. This means he can keep an extra $150 as pure profit without any effort. When considering the efforts of the entire team, this profit could be several thousand dollars.

Through exploitation, workers generate massive amounts of wealth for company owners, often totaling in the millions or billions. This form of legal theft is rarely challenged, while stealing a mere $150 from someone on the street would be met with opposition. As a result, workers are left to struggle without access to benefits such as healthcare, pensions, paid vacations, and job security. The factories, farms,

and restaurants that make up the means of production all contribute to perpetuating this unjust system.

The "means of production" refers to the resources required for producing products that support societal functions. Interestingly, those who operate these resources do not own them, and those who own them do not operate them.

The top 1% in America constitutes a distinct class that does not require employment for sustenance. They hold more wealth than the bottom 95% and enjoy financial advantages that exempt them from relying on their own work as a livelihood. Instead, they profit by exploiting the labor of others. The notion that hard work leads to riches is misleading since wealth accumulation often entails making others work hard instead.

The possessing class earns their living solely from the profits generated by the labor of the working class, who are paid for their work. Inequality used to be enforced violently through weapons like swords and whips, forcing individuals into servitude. Nowadays, large-scale robbery is legally approved instead of using violent methods.

In a privately owned economy, the possessing class holds power over the non-possessing class (i.e. you). This results in non-owners obediently following orders from capitalist owners who are able to live without working and dictate working conditions. Profit is generated by buying labor for

less than its produced value.

The importance of labor can be attributed to its ability to generate new wealth, which sets it apart from expenses such as dough, tomato sauce and rent. These costs cannot produce new wealth or add to the owner's profit and are instead transferred at their original cost into the overall value of the pizza. Consequently, labor is essential in creating profits for management.

The significance of our work is evident from the fact that if we collectively stopped working, the employer would not earn any profits. The labor movement operates on the premise that by refusing to work, we can prevent the owner from making potential profits. It is apparent that our labor is vital as without it, employers cannot produce profits or support their luxurious lifestyles. Their objective is to recruit more workers who generate surplus income which they have a lawful right to.

Imagine the possibilities if workers were able to take home the full value of their labor. Their living standards could immediately be elevated. However, society's owners rely on a legal system to defend their system of large-scale theft. To ensure their interests are maintained, corporate-funded political parties like the Republicans and Democrats elect politicians who pass legislation that restricts workers' rights, making it nearly impossible to form unions and setting minimum wage rates below the poverty line. Additionally, adequate funding for public healthcare and childcare systems is overlooked.

Through lobbying efforts aimed at Congress and other low-paying industries, the fast food sector was successful in reducing the value of minimum wage by approximately 40% between 1968 and 1990. Even today, it remains 27% below that of the

late 60s. The agreement you signed upon employment serves as your acknowledgment to allow for the exploitation of your labor. The amiable expressions from both the corporate staff and manager are designed to minimize the unpleasant nature of this theft. Fast Food Nation author Eric Schlosser illustrates this phenomenon: "Local fast food franchises have little ability to reduce their fixed costs: their lease payments, franchise fees, and purchases from company approved suppliers."

Franchises hold some power over wage rates and try to keep them low. The fast food sector depends on a workforce of inexperienced young workers, creating a tension between the chains' immediate needs and teenagers' long-term objectives. The belief is that enhancing salaries and perks will damage the franchise's ability to compete, leading to reduced customers and employment opportunities.

It is crucial to investigate Emerald City's finances thoroughly in order to decide whether a salary raise is warranted. However, due to their non-public status, they do not reveal their financial details, and our previous request to review them was denied. In contrast, Pizza Hut is publicly traded.

As Yum! Brands Inc owns the company, financial figures are merged with those of other chains. To comprehend revenue generation, comparable published statistics should be examined. Despite being highly profitable, fast food operations call for significant mechanization and entail high overhead costs such as real estate, transportation, and advertising expenses. Labor cost represents only a small portion of the total expenses. According to Lee and O’Roark Research’s survey on ‘The Impact of Minimum Wage Increases,’ an increase of $1 in minimum wage would result in just a 2-cent addition to the cost of a McDonald’s hamburger according to their

financial review. (Fast Food Nation, p.)

73) The insignificance of wages in the ultimate expense of fast food is demonstrated, and comparable statistics may be identified in other areas of fast food. The website "pizzamarketplace.com" is also a useful source of knowledge, with numerous articles published by Dominos managers describing their company's expenses. These articles suggest that labor accounts for approximately 20% of the cost of a pizza, exclusive of the manager's salary.

Considering the fierce competition among the leading brands, it can be inferred that the situation is similar across all pizza companies. This inference is supported by the limited research data obtained from ECP. Assuming a $2 hourly wage increase for store employees, and given that labor accounts for only about 20% of pizza prices, the cost of a pizza would rise by approximately 40 cents ($2 times 20%). As workers, a wage increase of this magnitude would represent significant progress.

The executives of Emerald City have stated that they are unable to increase wages as it would lead to customer loss. However, the company recently raised prices on nearly all products by $1 without addressing its potential impact on customer retention. Although the hike may be attributed to increased cheese costs, the delivery charge was also increased by $1.60, indicating a lack of concern for losing customers. It seems that profit is the primary consideration being disregarded in this discussion.

We do not intend to raise food prices for the working class. Instead, we can lower ECP's profits to achieve the proposed salary increases. In the event of a worst-case scenario, there may be a small increase in menu prices. Nonetheless, we aim to primarily

use the funds obtained from reducing company profits and executive bonuses. It is widely known that pizza industry jobs typically offer low wages that are considered during hiring. Our wages correspond with the hiring rate.

Although fast food jobs are meant to serve as a stepping stone towards better employment opportunities, workers in the industry feel that their pay and working conditions are not fair. While teenagers used to make up most of the workforce, significant changes have occurred in the sector. Workers believe they have no option but to take these jobs to avoid starvation. However, those who aspire for better compensation and benefits should consider seeking alternative employment.

The closure and layoffs caused by the disappearance of higher paying jobs in the 1980s and 1990s made it necessary to consider alternative options. MSN News reported on 10/27/03 that lost jobs had an average salary of $34,000 ($16 per hour), while created jobs only offered an average salary of $19,000 ($9 per hour). Consequently, unemployment rates have skyrocketed, leaving nearly nine million people without work and five million settling for part-time employment despite their preference for full-time positions. This unemployment crisis has taken a significant toll on Washington state.

Being a small franchise means having limited options, but it is important to recognize how companies like yours contribute to low wages and poverty-wage jobs with no employee rights. Despite your success, many individuals still struggle financially. To improve this situation, it is crucial to transform these positions into living wage jobs.

Emerald City informed us that despite understanding the difficulties of living on current wages, they cannot afford to increase pay. However, we have compiled a list of

possible income sources that could support higher wages. These include opening new stores, which Emerald City did last year, spending approximately $300,000 on each of the two stores. While management may argue the costs come from profits, profits are essentially the result of our unpaid labor. Management may also claim the money was borrowed from a bank, but repayment will still come from profits that should be going towards employee wages. It's worth noting that building new stores is not an essential measure for survival.

Emerald City's executives and owners are taking advantage of us by accumulating wealth from profits that were siphoned off from the wealth we created. If they redirected this money towards us workers, it could improve our wages and benefits. According to Terry Hopkins' memo from April 2004, $600,000 could increase driver reimbursement by around 20 cents per delivery, resulting in an hourly raise of about 80 cents to $1 for every driver in Western Washington. Meanwhile, the executives and owners enjoy a luxurious lifestyle.

Emerald City is a company that gains wealth from profits, bonuses, stock options, and dividends. The employees are not paid minimum wage and receive health benefits and paid vacations. At a Pizza Hut meeting, President Terry Hopkins disclosed his salary being $150,000 per year, but the salaries of other executives are unknown. Every dollar that is earned by Emerald City reduces the money in the pockets of customers. Emerald City serves as subcontractors for Yum Brands Inc and their goal is to maintain lower labor costs than what is possible.

According to Yum! Brands Inc, they are the largest and most lucrative fast food company globally due to

their ownership of Pizza Hut Franchise. Nevertheless, it is suspected that this success was achieved by exploiting workers in the United States who aided in the brand's expansion into a global empire. Therefore, it is imperative to prioritize fair treatment of workers over profits.

Emerald City's organizing drive led to an increase in delivery drivers' pay from 60 cents to 65 cents, despite rising gasoline prices. While considered a small victory, the company initially denied profiting from raising the delivery charge from $1.50 to $1.60 during a meeting with employees. However, Terry Hopkins, the President of the Company, later informed drivers through written communication that adding another five-cent reimbursement would cause an annual loss of approximately $156,000 for the business.

According to the displayed data, Emerald City makes $156,000 per year for every five cents charged for delivery. This openly acknowledges their profit from the delivery charge. Last year, after paying drivers sixty cents, there was one dollar remaining with 20 five cent increments resulting in a total of $3,120,000 earned by the company from delivery charges (20 x $156,000). With an upcoming increase of five cents, this year's expected earnings are estimated at $2,964,000 (19 x $156,000). It is important to note that driver wages cover the cost of delivery and not Pizza Hut. Therefore these funds should belong to them and be utilized to improve their working conditions instead of cutting wages. In 2004 significant amounts were spent on organizing anti-union campaigns for workers including renting expensive convention halls over weeks, providing food and door prizes for attendees while also paying employee wages to watch videos with twisted and deceptive messages.

Our employer spent money on

costly consultation fees from a union-busting company that provided films instead of using those funds for better wages. The restaurant industry has invested significant resources to promote a state bill that establishes a sub-minimum wage of $2 per hour for employees who receive tips. While we do not have access to records to confirm our employer's involvement, we have not observed them terminating their membership from local restaurant associations that finance the legislation. These types of laws do not support the interests of us workers. Yum Brands has also been active at the federal level in advocating for comparable bills.

It is clear that any expenditure by Emerald City could aid in our effort to receive higher wages. It is important to acknowledge that the labor movement in Washington State has been actively working to oppose this bill. In conclusion, we believe that these statistics validate our request for living wages and that Emerald City has the means to enhance our compensation package. Additionally, we assert that since this money is generated from the work we do as pizza workers, we are entitled to these funds.

Once more, we believe that there are other franchises facing a comparable circumstance.