Pay gap widens between fast-food employees, CEOs

Tyree Johnson, 44, watches a slow-moving train pass as he makes his way to work at a McDonald’s in Chicago. Johnson has worked at various McDonald’s restaurants for two decades but still makes minimum wage.
Tyree Johnson, 44, watches a slow-moving train pass as he makes his way to work at a McDonald’s in Chicago. Johnson has worked at various McDonald’s restaurants for two decades but still makes minimum wage.

— Tyree Johnson scrubs up in a McDonald’s bathroom and puts on fresh deodorant. He then stashes his toiletries in a travel bag and hops on an El train. His destination: another McDonald’s.

Johnson works at both Mc-Donald’s stores — one in the Loop, the other about a mile away in the shadow of Holy Name Cathedral.

He needs the makeshift baths because hygiene and appearance are part of his annual compensation reviews. Even with frequent scrubbings, he said before a recent shift, it’s hard to remove the odor of the food he works around.

“I hate when my boss tells me she won’t give me a raise because she can smell me,” he said.

Johnson, 44, needs the two paychecks to pay his rent at a single-room occupancy hotel on the city’s north side. While he’s worked at McDonald’s stores for two decades, he still doesn’t get 40 hours a week and makes $8.25 an hour, minimum wage in Illinois.

As one of America’s premier growth industries, fastfood restaurants have added positions more than twice as fast as the U.S. average during the recovery that began in June 2009. The jobs created by companies including Burger King Worldwide Inc. and Yum Brands Inc., which owns the Pizza Hut, Taco Bell and KFC brands, are among the lowestpaid in the United States.

The pay gap separating fastfood workers from their chief executive officers is growing at each of those companies. The disparity has doubled at McDonald’s Corp. in the last 10 years, according to data compiled by Bloomberg. At the same time, the company helped pay for lobbying against minimum-wage increases and sought to quash the kind of unionization efforts that erupted recently on the streets of Chicago and New York.

Older workers like Johnson are employed at fast-food grills and fryers more often, according to data from the Census Bureau’s Current Population Survey. In 2010, 16- to 19-yearolds made up 17 percent of food preparation and serving workers, down from almost a quarter in 2000, as older, underemployed Americans took those jobs.

“The sheer number of adults in the industry has just exploded” because fast-food restaurants “not only survived, but thrived during the economic recession,” said Saru Jayaraman, director of the Food Labor Research Center at the University of California at Berkeley.

Johnson would need about a million hours of work — equal to more than a century on the clock — to earn the $8.75 million that McDonald’s, based in the Chicago suburb of Oak Brook, paid then-CEO Jim Skinner last year.

The recovery from the last downturn has been the most uneven in recent history. The 1.2 million households whose incomes put them in the top 1 percent of the U.S. saw their earnings increase 5.5 percent last year, according to census estimates. Earnings fell 1.7 percent for the 97 million households in the bottom 80 percent — those who made less than $101,583.

The widening chasm is most pronounced in the restaurant and retail businesses. The total number of people employed in the United States at Wal-Mart Stores Inc. and McDonald’s and Yum Brands restaurants exceeds the entire 2.7 million population of Chicago. Net income at those three companies has jumped by at least 22 percent from four years ago.

Shareholders, not employees, have reaped the rewards. McDonald’s, for example, spent $6 billion on share repurchases and dividends last year, the equivalent of $14,286 per restaurant worker employed by the company.

Even with the unemployment rate dropping last month to 7.7 percent, minimum-wage earners have less power to demand higher pay because so many adults are willing to take low-wage positions, said Nelson Lichtenstein, director of the Center for the Study of Work, Labor and Democracy at the University of California at Santa Barbara.

A group called the Workers Organizing Committee of Chicago is pushing for a $15-an-hour wage. Asked about McDonald’s history with union organizing, Becca Hary, a company spokesman, said in an e-mail that “We don’t have a corporate policy” on whether store workers are allowed to form unions.

Employers are doing more to keep workers from organizing, said Dorothy Sue Cobble, labor professor and historian at Rutgers University in New Jersey. “The numbers of people who get fired for joining a union or trying to organize one has increased dramatically over the last 30 years,” she said.

Fast-food workers trailed other low-wage occupations, with median earnings in 2009 to 2011 at $18,564, compared with $19,099 for child care and $20,101 for cashiers, according to federal data. The U.S. average for the same years was $42,110. Fast-food employment jumped 7.3 percent in that period compared with the previous three years; the overall U.S. average dropped 1.3 percent. From February 2010 to February 2012, the number of restaurant jobs grew more than twice as fast as the average.

The wage gap between CEOs and store workers wasn’t always so wide. Twenty years ago, when Johnson first started at McDonald’s, the CEO’s compensation was about 230 times that of a full-time worker paid the federal minimum wage. The $8.75 million that Thompson’s predecessor as CEO, Skinner, made last year was 580 times, according to data compiled by Bloomberg.

McDonald’s is part of a larger trend of Standard & Poor’s 500 companies, according to data from the American Federation of Labor-Congress of Industrial Organizations. The pay gap between the average S&P 500 CEO and the average U.S. worker, which was 42 times in 1980, widened to 380 times in 2011 from 325 times in 2010, the umbrella group of 56 unions said.

The last federal increase to the minimum wage was in 2009, to $7.25. When adjusted for inflation, the wage was worth $9.07 an hour in 1968, according to the Economic Policy Institute.

In July, Sen. Thomas Harkin, D-Iowa, introduced a bill to raise the federal minimum wage from $7.25 to $8.10 an hour and for subsequent increases to $8.95 and $9.80 an hour.

Fast-food chain franchisees, who own 89 percent of McDonald’s 14,100 domestic stores, spend money lobbying against minimum-wage increases at the state level. In 2006, restaurant chains and their franchisees, including McDonald’s, spent at least $960,000 to fight minimum wage increases in Nevada, Colorado, Ohio, Arizona, Montana and Missouri, according to Followthemoney.org, a website operated by the National Institute on Money in State Politics. Other chains spending money to stem pay increases include Wendy’s, Bloomin’ Brands’ Outback Steakhouse, Jack in the Box and Domino’s Pizza.

A growing proportion of fast-food employees get federal assistance to buy food, according to census data compiled by the University of Minnesota Population Center. The proportion of fast-food workers who receive food stamps rose to 26.9 percent in 2010, compared with 15 percent of all Americans, the data show.

Johnson does get free food at one of the stores, though he has grown a bit tired of filling up on Double Quarter Pounders and Angus Mushroom & Swiss burgers. While he used to be able to eat his meals in the restaurant lobby, recently he’s been forced to dine in the small break room in the back.

“My boss said, ‘If I catch you on camera eating in the lobby, you’re going to lose your job,’” Johnson said. “I don’t understand that one, but I have to live with it. Those are her rules.”

Information for this report was contributed by Elliot Smith, Frank Bass, Phil Kuntz, Nick Tamasi and Andrew M. Harris of Bloomberg News.

Business, Pages 61 on 12/30/2012

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