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McDonald’s Corp raising average worker wage to around $10

LOS ANGELES (Reuters) – McDonald’s Corp plans to raise the average pay of about 90,000 U.S. workers to around $10, the fast-food giant said on Wednesday, but the move will not affect workers at the vast majority of the restaurants, which are operated by franchisees.

The move by McDonald’s, which is also adding benefits like paid vacations, follows entry-level wage hikes by Wal-Mart Stores Inc and other chain stores in response to frequent worker protests calling for higher pay and better working conditions.

McDonald’s has been fighting weak traffic and slumping sales in the United States.

The 10 percent pay hike for workers at roughly 1,500 company-operated U.S. restaurants will roll in on July 1.

Starting wages at the restaurants will move to $1 above the locally mandated minimum wage. The increase will take the average hourly rate those workers to $9.90 on July 1, up from $9.01 currently, McDonald’s said.

By the end of 2016, McDonald’s projects that the average hourly wage rate for McDonald’s employees at those restaurants will be above $10.

Almost 90 percent of McDonald’s more than 14,000 U.S. restaurants are operated by franchisees who set pay and benefits for their own workers.

McDonald’s also said that full- and part-time crew employees at company-operated restaurants, with at least one year of service, will begin to accrue personal paid time off. Beyond that, some employees at both company- and franchise-run stores will be eligible for education assistance.

“We know that a motivated workforce leads to better customer service, so we believe this initial step not only benefits our employees, it will improve the McDonald’s restaurant experience,” Steve Easterbrook, who became McDonald’s chief executive on March 1, said in a statement.

While the immediate impact of the wage move will be limited, it quickly drew criticism from some camps.

“This is too little to make a real difference, and covers only a fraction of workers,” Kwanza Brooks, a McDonald’s worker from Charlotte, North Carolina, who earns $7.25 per hour, said in a statement.

Brooks is part of the union-supported “Fight for $15” movement that is calling on employers to more than double wages above the federal minimum wage of $7.25.

Shares in McDonald’s, which saw both annual profit and revenue fall last year, were essentially flat at $96.29 in extended trading.

The wage increase at McDonald’s company-run restaurants could force franchisees to follow. That could force those franchisees to raise food prices in an effort to cover additional labor costs.

That could benefit McDonald’s because it collects royalties from franchisees based on sales. But, it also could squeeze franchisee profits and threaten the company’s Dollar Menu, which is popular with the chain’s core base of lower-income diners.

Increased sales due to price increases means more revenue to McDonald’s Corp, which could solve some of the company’s problems and make Easterbook look like he’s fixing things, said Richard Adams, a former McDonald’s franchisee who now consults for current ones.

“They’ll try to paint this as altruistic,” said Adams. “It’s not as nice as it sounds.” (additional reporting by Edwin Chan in San Francisco)

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