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Michael Kouraba headshot

Living Wage Requirements and the Role of America's Food Policy


Fast food and wages

According to a 2013 study sponsored by the University of California, Berkeley’s Labor Center and the University of Illinois, the cost of public assistance to families of fast-food workers is roughly $7 billion a year; more than half (52 percent) of families of fast food workers are enrolled in one or more public programs (compared to 25 percent of the total workforce).

Of that $7 billion, McDonald’s employees received the most help: More than $1.2 billion in public assistance each year, from 2007 through 2011. In light of this, Bloomberg Businessweek recently observed that McDonald’s had become one of America’s “biggest welfare queens.” Congratulations, taxpayers. We are effectively subsidizing McDonald’s’ profits!

At the same time, it should come as no surprise that the fast food industry pays its employees a paltry wage. The Berkeley study found that “[m]edian pay for core front-line fast food jobs is $8.69 an hour, with many jobs paying at or near the minimum wage.” The federal minimum wage in the United States is even lower, at $7.25 an hour (though President Barack Obama recently called raising the minimum to $10.10 an hour a “top priority”). Assuming full-time employment, a minimum wage salary amounts to an annual income of roughly $15,000 per year. The poverty line in the United States is $23,000 per year, or $11.33 an hour, well higher than both the federal minimum wage and the fast food median.

Living wages and corporate social responsibility

A minimum wage employee living 30 percent below the poverty line is certainly not earning a “living wage,” which Merriam-Webster defines as “a wage sufficient to provide the necessities and comforts essential to an acceptable standard of living.” Whether a wage can be defined as “living” depends on one’s place of residence, and MIT offers a useful calculator for making these determinations. In New York City, for example, where the minimum wage was just raised to $8 an hour, a living wage is $12.75 (for a single adult); in San Francisco, the minimum wage is $8 but a living wage is $12.83 (for a single adult). While a number of different companies and localities have recently raised their minimum wage levels, the federal government still cannot even agree that raising the minimum wage is a good idea.

Some international instruments appear to codify a right to a living wage. Article 23 of the Universal Declaration of Human Rights, for example, requires “equal pay for equal work” and sets forth a human right to “just and favorable remuneration ensuring for himself and his family an existence worthy of human dignity.” Article 7 of the International Covenant on Economic, Social and Cultural Rights requires “fair wages” and “equal remuneration for work of equal value without distinction of any kind.” Yet, the primary CSR guidelines have avoided--or even “systematically excluded”--embracing living wage requirements. They are not a part of ISO 26000 (arguably the "definitive" CSR standard), for instance. Nor are they mentioned in the OECD Guidelines for Multinationals or any of the ILO’s eight “fundamental” conventions.

One result of this exclusion is that McDonald’s and other American corporations must simply meet the woefully inadequate state or local minimums. Another result is that multinationals are able to pay radically disparate wages to workers across their geographical operations, with those located in “developing” nations receiving significantly lower relative wages than their counterparts in America.

All of this, of course, maximizes “shareholder value,” leads to record corporate profits and delivers cheap goods to consumers, but does so on the back of an underpaid workforce.

The role of America's food policy

So what if McDonald’s were required to pay a living wage? According to Businessweek: “Based on recent restaurant financials, if payroll costs doubled”--in other words, if McDonald’s decided to double its wages--“and other expenses didn’t decrease, menu prices at McDonald’s would have to go up about 25 percent to offset the increase. That would mean paying up to an extra $1 for a Big Mac, likely sending price-sensitive consumers elsewhere.”

When I read that I’ll admit I had a naive image of consumers abandoning the fast-food industry in droves, opting instead for healthier alternatives. Unfortunately, even if consumers were entirely priced out of fast food and no equally cheap and unhealthy alternatives emerged, America’s food policy would have to undergo a radical transformation in order to encourage healthier eating.

Current farm policies in the U.S. are antiquated and destructive and the primary culprit is the farm subsidy. The subsidy, conceived as an emergency stopgap during the Great Depression, has grown into an “apparently inviolable institution” that continues to metastasize. According to Nobel laureate economist Joseph Stiglitz, in the 1930s, when 40 percent of Americans lived in rural areas and farm incomes had collapsed, the subsidies served an anti-poverty function. Now, however, they mainly serve to encourage the overproduction of soybeans, wheat and corn. The result is corn that is dirt cheap, which in turn means high fructose corn syrup, hydrogenated fats and corn-fed meats are dirt cheap as well. In other words, the stuff on the fast food menus and the stuff that leads to diabetes and obesity is also the stuff that is most affordable.

McDonald’s profits, then, are buoyed not only by the absence of living wage requirements, but by taxpayer largesse in the form of public assistance to employees and food laws that drive down the prices of their core ingredients. Of course, changing American food policy would require an epic shift in the way our democracy functions. We can support farmers markets, encourage those markets to take food stamps and support nutritional education programs, but food policy in this country is pretty entrenched.

In the meantime, then, the CSR community should push for the inclusion of living wage requirements in companies’ internal policies and in the relevant guidelines.  Not only would that make an immediate impact on the lives of the millions of low wage workers, but it might even encourage a change in the way we eat, too.

Image credit: Flickr/desrowVISUALS.com

Michael Kourabas headshotMichael Kourabas

Trained as a lawyer, I now focus on legal business development, corporate social responsibility (CSR), and business & human rights. My past experience includes work on complex commercial litigation, international human rights advocacy, education policy, pro bono legal representation, and analysis of CSR challenges in both the private and public sectors.

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