The Real story why Unions are behind the Fast food workers and the $15 minimum wage.
On Friday, the Labor Department reported that the overall unemployment rate dropped slightly to 6.1 percent in August. There are six different measures of unemployment, the most common being the U-3 rate. The U-3 rate does not count discouraged workers or part-timers who wish to be full-time as unemployed, but the U-6 rate does. In July, the U-6 rate was 12.2 percent, far above the official unemployment rate of 6.1 percent. (1)
The Unemployment improvement of 6.1% was generally the result of Americans dropping out of the labor force, not of their finding work. The labor participation rate dropped to its lowest level 62.8% since the 1970s after 268,000 Americans gave up on their job search. In addition, the number of new jobs created in August by employers was at its lowest rate this year (142,000) well below the 225,000 jobs that economists had anticipated. (2)
Yet, President Obama still emphasized his desire to move forward with an executive action that would bring amnesty millions of illegal aliens and provide them with work permits, that would compete with existing labor jobs. However, he will delay it until after the Mid-term elections in November since it could impact some tight democratic races. Illegal Aliens costs the taxpayers of California over $25 billion a year in free health care, education, welfare, food stamps aka Supplemental Nutrition Assistance Program (SNAP), housing subsistence, free legal assistance, etc. This does not include the cost of crime, stolen jobs, auto accidents and more. (3) Well, so much for the cost of cheap labor. After you add up the cost of free government assistance, it doesn’t look cheap anymore.
In reality, today only a very small group of people are earning the minimum wage.. According to the Bureau of Labor Statistics there are about 3.6 million workers at or below the minimum wage. That is 2.5 percent of all workers and 1.5 percent of the population of potential workers. Within that small group, 31 percent are teenagers and 55 percent are 25 years old or younger. That leaves only about 1.1 percent of all workers over 25 and 0.8 percent of all Americans over 25 earning the minimum wage. (4)
Within this tiny group, most of these workers are not poor and are not trying to support a family on only their earnings. Per Forbes Study, 63 percent of workers who earn less than $9.50 per hour (well over the minimum wage of $7.25) are the second or third earner in their family and 43 percent of these workers live in households that earn over $50,000 per year. Accordingly, minimum wage earners are not a uniformly poor or struggling; many are teenagers from middle class families, and many are sharing the burden of providing for their families, not carrying the load all by themselves. (4)
Not part of the equation, begs the question, what percentage of these workers over age 25 are illegal aliens? Dependence on illegal labor is the elephant in the room for the U.S. restaurant business. The National Restaurant Association (NRA) has been lobbying the government for leniency on what it calls “paperwork violations” on I-9 forms, the one-page, proof-of-eligibility document every employer must file within three days of hiring an employee. (5)
The U.S. fast-food industry historically has offered relatively low pay and paltry benefits to legal workers and, as a result, has struggled with high employee turnover. It is hard to know the extent of hiring of illegal immigrants in restaurants. But immigrants — both legal and illegal — account for about a quarter of workers in the restaurant and food services industry. (6)
The Service Employees International Union (SEIU) has launched an expensive PR campaign calling for wages of at least $15 an hour in the fast-food industry. Backed by (SEIU), fast food workers in 150 cities are walked off the job and picking up picket signs to demand that they be paid no less than $15 per hour. This is the seventh strike organized by the Fast Food Forward campaign since November 2012, when the campaign began. The restaurant workers say anything less than $15 an hour is not a livable wage. However, the 2014 HHS POVERTY GUIDELINES FOR THE 48 CONTIGUOUS STATES AND THE DISTRICT OF COLUMBIA is $11,670 for a family of one, and $23,850 for a family of four. (7)The SEIU wants to do for the fast food workers, what they accomplished for the Federal, State, and City governments. Their only problem is that they’re are dealing with part-time workers, who work 20 hours a week or less, that does not quality for health insurance or retirement benefits. So, what does the SEIU really expect to accomplish for these workers. They’re not engaging in collective bargaining. It’s the government that is raising the minimum wage. So, how do they expect to justify union dues? ut business groups and franchises are arguing an increase in the minimum wage would be bad for the economy and ultimately hurt workers. SEIU and other labor groups were putting pressure on the corporations in a callous attempt to grow their membership to enrich themselves. Yet, The Chamber of Commerce, the nation’s most powerful business group, produced an analysis that says more than 40 of the full-time employees at SEIU headquarters make less than $15 per hour — the same amount that the union says should be the minimum for fast food workers. (8)
Why is the focus just on fast food workers, and not all industries? Many of the lowest-paying jobs were once seen as the domain of younger workers who were first starting out in the work world, as part time students, but increasingly these positions are survival jobs for midcareer folks who have been downsized due to the recession. (9)
In most unionization attempts, the union traditionally approaches workers and attempts to organize them directly with the stated purpose of organizing them into a union. Once they reach critical mass, they either demand the employer to voluntarily recognize the union (card check) or they ask the National Labor Relations Board (NLRB) to hold a vote. Now, it seems the SEIU is finding new ways to infiltrate employees without making it seem like they’re actually organizing. The SEIU is connected to many of the new “worker center” groups across the country, with names like “Fast Food Forward” that target different industries. Groups like these operate chiefly through Facebook, Twitter, and email/phone text campaigns that directly contact interested employees in various industries. Since the online presence doesn’t require a physical address, it’s much harder to prove a link between the union and the sham group. Workers Centers are preferred by unions specifically because of this separation, that operate outside of the parameters of the National Labor Relations Act (NLRA) (10)
The lowest paying jobs are Food preparation and serving workers, including fast food, dishwasher, cashier, host and hostess, amusement park attendants, movie theatre ushers and ticket takers, farm workers, and personal and home care aides. Most of these jobs require minimal education and many are part time. (9)
The fast food demonstrations could play into the hands of Democrats, who are pushing an increase in the minimum wage in their platform for the midterm elections. President Obama has thrown his support behind a bill that would raise the federal minimum wage to $10.10 an hour, from the current $7.25 minimum. Activists got a boost from a National Labor Relations Board (NLRB) ruling in July that found McDonald’s could be sued for labor violations at its franchisees. McDonald’s has long argued that its restaurants are run independently, that they do not determine or have anything to do with their franchisee wages. Ultimately, this could open the door for a nationwide unionization of all McDonald’s employees and possibly at other fast food chains. (8) The NLRB decision came after the SEIU brought several cases against the company, alleging it acted as an employer. The decision, is heavily being challenged by McDonald’s. The company insists that its franchisees, not the corporation, are responsible for determining its wages. (11)
On June 26, 2014, the Supreme Court delivers blow to Obama on NLRB appointments, that the president’s January 2012 installation of three members to the (NLRB) while proclaiming the U.S. Senate to be in “recess” was an unconstitutional usurpation of the Senate’s advice and consent duties. The NLRB will be forced to reevaluate decisions it made during the period for which it had no legal quorum. (12)
SEIU. Far from being the “fastest growing union, the SEIU is shrinking, even despite favorable treatment by the National Labor Relations Board (NLRB). Not even Obama’s unconstitutional appointees and regular rulings in favor of unions can improve their numbers. So the SEIU is forced to choose between making the union more competitive to workers or finding other illegal ways around the laws surrounding labor organizations. (10)
The SEIU is well known for using “paid outside agitators” with no direct ties to the restaurant industry and/or their employees, to artificially inflate their numbers, an intentional attempt by the union to increase tensions and create headlines grabbing lawlessness, when the real numbers of actual employees would only amount to a handful that is par for the course.
SEIU’s efforts may well undermine the very employees they say they want to help. An increase of wages to $15 is more likely to result in fewer jobs for workers, as companies like McDonalds and Burger King turn to automation to replace the handfuls of workers who leave their company to protest. (13)
These workers want a livable wage, for an industry that was intended to provide jobs to students with minimum or no skills, on a part time basis. It was never intended for the industry to provide wages to individuals supporting a family. No matter how you cut the mustard, $15 an hour in the fast food industry is a fantasy.
• All fast food workers would be required to join a union, where dues would automatically be withheld from their paycheck based on their total wages, not just the increase portion in the minimum wage at 5% pr $.75 an hour.
• Each worker would be required to pay on the increase 6.2% Federal Insurance Contributions Act (FICA) tax and 1% for State Disability Insurance (SDI).
• Some individuals will be subject to and liable for federal and State income tax withholding having been classified in a higher bracket due to the higher minimum wages.
• Many workers should expect to replaced by automation. There won’t be cashiers at the counter. Customers will select their own meals electronically.
• Other part time workers can expect to work even less hours.
Well, so much for earning a livable wage.
How Much Fast-Food Prices Would Rise If Employers Paid $15 an Hour . In a statement, McDonald’s said, “We believe that any minimum wage increase should be implemented over time so that the impact on owners and small- and medium-sized businesses — like the ones who own and operate the majority of our restaurants — is manageable.” (14) Activists behind a grass-roots campaign to boost L.A.’s minimum wage argue that a new plan touted by Mayor Eric Garcetti does not go far enough. Garcetti wants lawmakers to gradually hike the citywide minimum wage, to $10.25 in 2015, $11.75 in 2016 and $13.25 in 2017, with future increases tied to an inflation index. The mayor argues his plan would aid poor workers and their families without dealing a blow to L.A.’s recovering economy. (15)
Fast-food restaurants operate on very small profit margins; they could only afford such wages by raising prices—significantly. Higher prices would, in turn, drive customers away, forcing even larger price increases to cover costs. Ultimately, the average fast-food restaurant would have to raise prices by nearly two-fifths. This would cause sales to drop by more than one-third, and profits to fall by more than three-quarters. Fast-food restaurants could not pay this additional amount out of their profits. The typical restaurant has a profit margin of just 3 percent before taxes. That works out to approximately $27,000 a year—less than the annual cost of hiring one full-time employee at $15 an hour. In order to raise wages, fast-food restaurants must raise prices. (16)
Most Americans eat fast food because they want a quick and inexpensive meal. If fast-food restaurants raised their prices, many of their customers would either eat at home or go to more expensive restaurants. The loss of sales would force fast-food establishments to raise prices even more to cover fixed costs like rent, insurance, and marketing. further eroding sales, necessitating more price increases.
If fast food’s biggest restaurants decide to raise their wages to $15 an hour, here’s how some of your favorite meals would fare: 1) McDonald’s Big Mac Meal from $5.69 to $7.82; 2) Chipotle Steal Burrito Grill from $6.65 to $9.14; 3) Wendy’s Son of a Baconator combo from $6.49 to $8.92; 4) Del Taco 3 Crunchy Taco Combo from $4.59 to $6.31; 5) Burger King Whopper Meal from $6.15 to $8.46; 6) Subway Turkey breast foot long from $6.50 to $8.94 (17)
• The average fast food restaurant to have to raise prices by 38 percent to cover labor cost after a $15 per hour minimum wage, per James Sherk, Senior Policy Analysis in labor Economics, The Heritage Foundation. Such an increase, Sherk said, would drive away about one-third of these restaurants’ customers.
The SEIU proposal would raise hourly fast food labor costs by 71 percent. The higher labor costs would force “fast food” restaurants to raise prices, pushing sales down further. The average fast-food restaurant would have to raise prices 38 percent that would result in a 77 percent reduction in profits in order to stay in business—leaving them with an average profit of just $6,100 a year per store. Otherwise they would have to raise prices to an extent that would drive away their customer base. Many owners would find that taking on the risk of operating a fast food restaurant—and potentially losing money—is not worth a profit margins of less than 1 percent. Many fast-food restaurants would respond by restructuring dramatically in order to use less labor. Fast-food restaurants could reduce labor costs by (a) substituting entry-level workers for more skilled and more productive workers and (b) replacing human workers with machines. Fast-food jobs involve many routine tasks that are susceptible to automation and Fewer Entry-Level Jobs that would less-skilled workers. This would cause many restaurants to close and many others to make extensive use of labor-saving technology—eliminating many of the entry-level jobs that inexperienced workers need to get ahead. (18)
Fast-food restaurants generally employ younger and less-experienced workers. In the limited time they work in the fast-food industry, they gain basic employment skills. Once they gain these skills, they quickly move on to higher-level jobs. McDonald’s estimates that its franchisees see average annual turnover of 150 percent—the average employee stays for just 8 months. When employees leave, they quickly find higher-paying jobs. Two-thirds of minimum-wage workers earn a raise within a year. By eliminating entry-level jobs, makes it harder for workers to advance into higher-paying positions. Congress should not facilitate the SEIU’s attempt to inflate fast-food wages. (18)