One of the keys to McDonald’s Corp.’s (NYSE: MCD) profits is its ability to pay its store workers are little as legally possible — sometimes not much better than the federal minimum wage of $7.25. It has been under pressure to move that floor to $10, or even $15. So far it has succeeded in virtually ignoring the pressure. As public opinion swings toward a higher federal minimum wage, McDonald’s faces paying tens of thousands of workers more than a $1 an hour more than they make now — cutting McDonald’s profits by tens of millions of dollars each year.
According to a new Gallup poll on attitudes about raising the minimum wage:
With momentum building at the federal and state level to increase hourly base pay, more than three-quarters of Americans (76%) say they would vote for raising the minimum wage to $9 per hour (it is currently $7.25) in a hypothetical national referendum, a five-percentage-point increase since March. About one-fifth (22%) would vote against this.
There is already some support in Washington for an increase in the minimum wage to $10.10. The White House has thrown its support behind a bill introduced by Senator Tom Harkin of Iowa and House member George Miller of California called the Fair Minimum Wage Act. The bill could still be blocked in Congress. Some people who are opposed to the bill have argued that when the margins at fast-food companies and large retailers are squeezed by the wage increase, they will cut their work force to make up for the expense.
Part of the push to raise the minimum wage is to use some of McDonald’s practices against it. The fast-food chain has a “McResource” help line that can aid workers in the process of getting food stamps. Advocates of raising the minimum wage hope public sentiment over the system will rally support for higher pay for fast-food workers.
But rallies in the streets for a higher minimum wage and against McDonald’s practices mean very little if the general public does not support them. Gallup’s data show that the tide has turned against the low-wage practices of companies with large low-paid workforces. McDonald’s profit margins are likely to get smaller.
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