How a New Bill Could Fix the Pay Gap Between Fast-Food CEOs and Workers

The disparity between executive and employee pay is higher in the service industry than in any other sector.

Happier days at the Golden Arches. (Photo: Creative Commons)

Apr 25, 2014· 2 MIN READ
Willy Blackmore is TakePart’s Food editor.

No less a capitalist than Henry Ford believed in paying his workforce enough so that the men who built his cars could buy his cars too. At McDonald’s, employees are encouraged to apply for food stamps if they aren’t making enough to eat.

French economist Thomas Piketty makes a convincing argument that the only way anyone gets ahead in the world is by being rich to start with—that “there is but one way, to get rich,” as Honoré de Balzac wrote in his 1835 novel Père Goriot. “Marry a woman who has money.” While Piketty’s Capital in the Twenty-First Century spends more than 1,000 pages proving that bit of jaded advice with economic theory, workers in the fast-food industry don’t need an academic tome to inform them of the futility of labor.

Not only has the fast-food workforce aged out of its pimply-high-school-kid cliché, but as workers have become older (the average age is 29), with more financial responsibilities and families to care for, wages have stagnated. The average pay for fast-food workers is $9.09, according to the Bureau of Labor Statistics, and has increased just 0.3 percent in real dollars since 2000. Furthermore, the bottom rung of the economy that is flipping burgers has become a perversely greased ladder—there’s simply no climbing it. An entry-level fast food job is more of a dead end than a gateway to more lucrative work, as evidenced in the National Employment Law Project’s aptly named report “Going Nowhere Fast: Limited Occupational Mobility in the Fast Food Industry.”

If income inequality is the defining issue of our time, as President Barack Obama has said, then the so-called accommodation and food service industry, which includes fast food, is the economic sector that shows in the starkest terms the growing gap dividing society. According to a new study from the public policy group Demos, the ratio of CEO and worker pay in accommodation and food service is 543 to 1.

Even after receiving a mega-raise last spring that nearly tripled his total compensation package to $13.75 million, McDonald’s CEO Don Thompson didn’t crack the New York Times’ list of the 50 highest paid CEOs in the country. But Oracle employees, who work for Lawrence Ellison, the highest-paid executive in the country, didn’t take to the streets last year to fight for a bump in their base pay that would take it out of minimum wage territory.

Like that of most economists who are regularly misidentified as Marxists, Piketty’s solution to income inequality is, in a word, taxes. There’s currently a bill making its way through the experimental progressive governance body otherwise known as the California legislature that would slap a punitive tax on companies with a gaping chasm between what the average worker earns and what the average CEO makes.

The bill, S.B. 1372, would raise the state corporate tax rate of 8.84 percent to as high as 13 percent for companies with a worker-executive pay disparity of more than 400 percent. According to the Demos report, fast-food executives earned 1,200 times more than their average worker in 2012.

On the flip side, companies with a ratio lower than 100 would have their corporate tax rate lowered to as little as 7 percent for firms that pay their CEO between zero and 25 percent more than the average employee. As an ammendment to the state constitution, the bill would require a two-thirds supermajority vote to pass.

“How do you run an economy where the middle class and the poor don’t have enough money to buy everything the economy is capable of producing?” former Labor Secretary Robert Reich said to The Associated Press’ Don Thompson (no relation to the McDonald’s CEO, I assume) about the bill. “That's one of the biggest reasons why this [economic] recovery has been so anemic.”

Fast food is famously recession-proof, and indeed, companies like McDonald’s fared better than other sectors in the years following 2008. With unemployment remaining high, and fast food managing, until very recently, to continue growing, these low-wage workers have become the largest percentage of the workforce. Employees of McDonald’s, Yum! Brands (which owns Taco Bell, KFC, and other fast-food restaurants), and Darden (Olive Garden, Red Lobster) account for 13 percent of Americans working in the private sector. Fixing the pay disparity they suffer from—whether by raising the minimum wage or through a tax measure like S.B. 1372—would surely benefit the economy as a whole.