Musing on Fast Food Low Wages

December 8, 2013 at 2:27 am Leave a comment

Democracy Now reports (http://www.democracynow.org/2013/12/5/as_workers_strike_against_low_wages)

“JUAN GONZÁLEZ: Across the country, fast-food workers in about 150 cities are walking off the job in their largest effort yet to push for higher wages. All of this comes as a new report exposes how fast-food CEOs have not just saved money by paying workers low wages, they’ve also used the government to subsidize their own million-dollar salaries with taxpayer dollars. That’s because a loophole in the tax code lets companies deduct the costs of performance-based executive pay.

AMY GOODMAN: For more, we go to Washington, D.C., where we’re joined by Sarah Anderson. She wrote the report, “Fast Food CEOs Rake In Taxpayer-Subsidized Pay.” She’s with the Institute for Policy Studies. Sarah, how does it work?

SARAH ANDERSON: Well, this is a perverse loophole in our tax code that essentially means that the more corporations pay their CEO, the less they pay in taxes. And that’s because there is this loophole that allows companies to deduct unlimited amounts from their corporate income taxes for the expense of executive pay, as long as it’s so-called performance pay—so, stock options and other bonuses that are configured in a way to qualify for this tax loophole. And what it means essentially is that ordinary taxpayers are subsidizing excessive CEO pay”

In reality, this is huge reason why these corporations are getting away with murder because only the wealthy top-rung executives make a good living. Go ask any middle-level district manager or store manager, you will find their wages to be in the $40,000 to $70,000 range. The riches in the company are not going to the middle management. Instead, it goes all to the franchise owners and wealthy top-rung executives.

However, there is a caveat that Amy Goodman forgets. Price-senstive consumers like me shop at McDonalds because we want to buy food from the $1.00 menu. If the workers get paid more, then I will go to another place to eat because the price of my food goes up.

People who work in other low-wages jobs buy food at McDonalds off the value menu because it is cheap and they are very price-senstive. Until our consumer behavior changes away from the selfish price-sensitive behavior that I exhibit towards a customer who willing pay $.30 to $.60 more cents on hamburger so the worker gets a decent wage, things are not change.

Business have a profit motive and the businesses like McDonalds make razor-thin margins because customers like me have a massive demand for cheap food because of limited financial resources or low wages. Therefore, since the customer is often pressed with low wages himself, this starts a downward spiral that forces market pressure to ensure that McDonalds’s does not incentive to raise its price to cover the cost of increased employee costs. Government-mandated minimum wages are one part of the solution, but they will really do not address the global sitituation of income inequality. Until business is forced through the tax code not to incentivize the CEOs massive pay, then you will not see change on the workers wages.

This is a perserve problem that will require sacrifices on all parts of society: both the rich and the upper middle class should be willing to have higher prices tolerance so big corporate business can have the incentive to raise wages and make ample profit to sastify the Wall Street. Wall Street needs to incentiveize corporations by placing higher value in companies that strive to reduce the income inequality. And it requires the government to make changes to the tax code as well to reduce the tax incentive for allowing corporations to pay CEOs such excessive wages in stock options.

 

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