U.S. Companies, Try This: Raise Your Minimum Pay

And protests like this might disappear.  Photographer: Cem Ozdel/Anadolu Agency/Getty Images
And protests like this might disappear. Photographer: Cem Ozdel/Anadolu Agency/Getty Images

By Noah Smith

Recently, McDonald’s decided to raise wages for many of its hourly restaurant workers. The rise is modest, from about $9 to about $10, but already the company’s executives claim that they are seeing improvements in service quality:

“It has done what we expected it to — 90 day turnover rates are down, our survey scores are up—we have more staff in restaurants,” McDonald’s U.S. president Mike Andres told analysts at a UBS conference… “So far we’re pleased with it.”

So far the company’s financial results haven’t suffered — just the opposite; sales are rising.

With stagnant wages one of the hottest topics these days, and calls to raise minimum wages resounding across the country, stories like this one are obviously eye-catching. If raising wages improves worker performance enough to help the bottom line, then there’s no tradeoff between how much companies can afford to pay workers — at least within reason — and how many workers they can afford to employ. Obviously if you raise wages high enough — imagine mandating $1,000 an hour! — a lot of people will be put out of work. But it could be that most American companies are in a safe zone where hiking wages modestly makes economic sense.

Bloomberg View

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