Watch CBS News

Critics see McDonald's pay hike as "McRaise"

McDonald's plan to raise the wages of its low-paid employees and give paid time off is prompting critics to ask, "Where's the beef?"

The fast-food giant's plan is getting pounded for providing wage gains to only 10 percent of its restaurant workers and for continuing to fall short of a livable wage. McDonald's (MCD) yesterday said it would boost pay at its company-owned U.S. restaurants, bringing the average hourly wage for 90,000 workers to more than $10 an hour by the end of 2016. Workers will also receive paid time off.

The McRaise comes amid a growing labor movement that's pressuring large low-wage employers like McDonald's to pay a livable wage, given that many currently rely on government aid to make ends meet. But the pay hike is only a partial victory for those labor advocates, given that the higher wages leave behind the 90 percent of employees who work for franchisees -- and that $10 per hour is only $20,800 on an annual, full-time basis, still below the poverty line for a family of four.

McDonald's CEO on raising employee hourly wages, company's identity 06:03

"This is a step too small for a company that's quite large and can easily afford to do more and whose employees desperately need more," Ellen Bravo, executive director of Family Values @ Work, told CBS MoneyWatch. "It's hard not to see it at as a PR move that won't help most workers cover the cost of basic necessities."

Bravo noted that McDonald's has influence on its franchisees, especially as the National Labor Relations Board, an independent federal agency, ruled in December that the company "engages in sufficient control over its franchisees' operations, beyond protection of the brand, to make it a putative joint employer with its franchisees." As a joint employer, Bravo said, McDonald's could set standards of employment for the franchisees.

Asked on CBS This Morning on Thursday about why the franchisee workers weren't included in the wage hike and paid time off, McDonald's Chief Executive Steve Easterbrook said, "We have a very different sort of business model here. So the franchisees are independent, owner-operated, and they are absolutely expert -- they are community leaders, they are expert at understanding the communities in which they operate."

He added that the franchisees will "set the pay to attract the talent" and that some of them are already paying more.

How McDonald's plans to recover from its slump 02:48

While McDonald's is thinking about how to retain employees, the bigger issue is simply that it's failing to retain customers. Its sales have been disappointing for several quarters, and Consumer Reports recently ranked its iconic meal as the worst burger in America. The chain has also received poor ratings for customer service, with complaints abounding about rude or unprofessional employees.

One problem with paying bare-bones wages is that workers haven't had much of an incentive to feel happy about being behind the counter, leading to poor service that has tarnished the Golden Arches. That's not lost on Easterbrook, who told CBS This Morning that one reason for the pay hike is to reenergize the workforce.

"This morning, 90,000 hardworking men and women got up feeling more energized and more confident about their future opportunities as a result," said Easterbrook, who called the decision "not a PR exercise."

Whether McDonald's can live up to Easterbrook's assertion that it's a "modern and progressive burger company" may depend on whether the company takes additional steps to ensure all its workers are treated equally. After all, customers typically don't distinguish between a franchisee and a company-owned store. If a franchisee's workers are poorly paid and offer subpar service, that's going to reflect back on the national brand and larger corporation.

Given the rise of healthier dining options such as Chipotle (CMG) and smaller burger chains such as Shake Shack (SHAK), customers have plenty of opportunities to take their money elsewhere.

Other rivals are also making a point of paying their employees more, seeking to gain an edge when it comes to happier workers and a better image with consumers. California chain In-N-Out Burger, for one, pays a baseline wage of $10.50 per hour, which may help explain why the chain ranked among the top 10 best places to work in a Glassdoor survey, placing it higher than Facebook (FB) and Procter & Gamble (PG).

Still, Family Values @ Work's Bravo noted that McDonald's raise is a "heartening" move that's come after more than two years of strikes and protests from fast-food workers for higher pay. Said Bravo: "Big companies realize they look bad if they don't do it."

View CBS News In
CBS News App Open
Chrome Safari Continue
Be the first to know
Get browser notifications for breaking news, live events, and exclusive reporting.