My radical plan for McDonald’s

1272056932627So I like McDonald’s. Really, I do. The fries. The coffee. Even the (850 calorie for a large!) strawberry McCafe Shake. The clean bathrooms, too. It’s my default place to stop when driving more than a few hours.

I also like the people I know who work at McDonald’s. Bob Langert, the company’s sustainability chief, is a great guy. Their PR folk are unfailingly gracious. And I’m told by a friend of the CEO, Don Thompson, that he’s a terrific person, too.

But–and you knew there was a “but,” didn’t you?–McDonald’s has a big problem. Actually, a couple.

The company wants to sell the world as many hamburgers as it possibly can. Beef, when produced at an industrial scale, is a terribly inefficient way to deliver protein to people. The production of beef requires more water and more land, and generates more greenhouse gas emissions, than the production of chicken or pork or, goodness knows, vegetable protein. Maybe the easiest way for any of us to do our part to deal with the climate crisis is to eat less beef. So long as McDonald’s is pushing burgers, it is, in effect, pushing climate change and deforestation, not to mention obesity and heart disease, at least for those consumers who do want the company wants them to do and eat more burgers. McDonald’s response to this is to join in the Global Coalition for Sustainable Beef–a laudable idea, and one that could reduce the environmental impacts of beef. But I’m skeptical about how far and how fast coalitions like this will take us. (See my 2012 story for YaleEnvironment360, Should Environmentalists Just Say No To Eating Beef?) The evidence, when you look at similar efforts to produce “sustainable” palm oil or fish, is decidedly mixed.

Then there’s the inequality problem, which is all over the news lately, and for good reason. CEO Thompson made $13 million or so in 2012. The front-line McDonald’s worker makes less than $20,000 a year. Many rely on government assistance to get by. I don’t begrudge Thompson his paycheck, but something’s amiss when the people who work for him need help from the government to feed their families.

What should McDonald’s do? I tried to address that question in a story today for Guardian Sustainable Business.

Here’s how it begins:

Promoting its Dollar Menu and More, McDonald’s says: “An empty stomach shouldn’t mean emptying your wallet, too.” A Bacon McDouble – beef patties topped with bacon, American cheese, pickles and onions – costs just $2. A bargain, no?

Alas, the price of a burger does not reflect its full cost. The environmental impact of beef is staggering: on average, 6.5 kilograms of grain, 36 kilograms of roughage and 15,500 cubic meters of water are required to produce one kilogram of beef, according to the new Meat Atlas from the Heinrich Boll Foundation, an environmental non-profit. What’s more, beef generates more greenhouse gas emissions than cheese, pork, turkey, chicken, eggs or vegetable protein.

Then there are the costs of supporting those who cook and serve burgers: More than half (52%) of the families of front-line fast-foodworkers are enrolled in at least one government-funded safety net program, according to a 2013 UC Berkeley Labor Center study titled“Fast Food, Poverty Wages”. The research estimates the industry-wide cost to these programs, very roughly, at about $7bn. Median pay for front-line fast-food workers is about $8.69 per hour, which comes to a bit more than $18,000 per year. And we won’t even consider the costs of treating the health problems that are caused by consuming too much processed food.

All of which raises a question: how can a company that depends on cheap meat and cheap labor become sustainable, responsible and even admirable?

You’ll have to read the rest of the story to see the full answer, but, in essence, I argue that McDonald’s should do three things.

(1) Nudge its customers to eat less beef.

(2) Raise the wages of its workers, publicly and proudly.

(3) Become an advocate for a price on carbon.

Will this happen? Probably not. Could it happen? I’m curious to know what you think.

Comments

  1. (1) Nudge its customers to eat less beef.

    McDonald’s already offers a variety of chicken and fish meals and a selection of salads, which is arguably why McDonald’s menu is as large as it is. McDonald’s does not need to reinvent KFC, Chick-fil-A, Long John Silver’s, etc. since they already exist. I seriously doubt that a veggie burger offering would be a big hit.

    (2) Raise the wages of its workers, publicly and proudly.

    More than 80% of McDonald’s restaurants worldwide are owned and operated by franchisees, rather than corporate. Some of the restaurants operate in cities and states which have higher minimum wage rates than the federal minimum; and, they pay the higher minimum. Others operate in areas where they must pay more than the minimum to fill the available positions. Wages represent ~25% of the price of food items at McDonald’s. Increased wages would be reflected either in increased menu prices, smaller portions or lower profits.

    Minimum wage jobs are typically entry-level positions, which have been the point of labor force entry for unskilled and low skilled young people. The jobs were designed for such entry-level employees. McDonald’s and other employers of minimum wage workers are not responsible for the fact that these positions are now being sought by heads of households who would otherwise be unemployed. McDonald’s is also not responsible for the high costs of real estate and the high costs of living in many of the cities in which they operate.

    Raising the minimum wage, whether done by government or by employers, would also likely accelerate the introduction of robotics into workplaces which employ such workers, thus reducing the number of positions available. Tablet-based order entry has already begun to penetrate the restaurant industry, including the fast food sector. It is particularly useful for restaurants offering extensive and flexible menus.

    (3) Become an advocate for a price on carbon.

    If “carbon” is a problem, it is a global problem; and, thus, it would require a global solution. The most attractive approach to dealing with such a “problem”, from the perspective of government, is a “price” (tax), since it produces a revenue stream for government. However, it is arguably the least effective approach to actually “solving the problem”. I cannot conceive that the “problem” could be “solved” by McDonald’s mounting Rochinante and riding off to “tilt at windmills”.

    “Don’t begin vast programs with half-vast ideas.”

  2. This isn’t really about McD’s, more my reaction to what I suspect may be an un-examined assumption on your part.

    Is it automatically bad that people who work are also enrolled in government assistance? I think you need to drill down farther. It makes sense for the earned income tax credit to apply to lower wage workers- that’s what it’s for.

    I’m not saying that all low wage workers are paid enough. My point is that someone who is not very productive due to a disability or because they can only work a limited number of hours per week should still have a job- and be paid no more than their value to the company. Such people should still be eligible for government support AND wages- to have them not work would be a waste of resources, and to remove them from government support would be inhumane.

    Back to McDonalds- you say “The front-line McDonald’s worker makes less than $20,000 a year. Many rely on government assistance to get by.” If you make $20K a year, you’ll probably need more to get buy (unless you are single, healthy, and live in a cheap part of the country.) But if McD’s raises the average wage to $30K, the price of the Big Mac will go up, they will probably sell less, and have less employees. I think selling less Big Macs would probably be a good thing given the beef and the effects transfats on health- but if that is our goal, should we really be dressing it up as concern for the working poor?

    If our goal is to help the working poor, a much more economically efficient way would be to Universal Basic Income – see the 3 part post here: http://www.economonitor.com/dolanecon/2014/01/27/a-universal-basic-income-conservative-progressive-and-libertarian-perspectives-part-3-of-a-series/?utm_source=rss&utm_medium=rss&utm_campaign=a-universal-basic-income-conservative-progressive-and-libertarian-perspectives-part-3-of-a-series&utm_reader=feedly (Link to part 3, which includes links to 1 and 2 in first couple paras.)

  3. Marc Gunther says:

    These are both really useful comments, so thanks.

    Ed, you’re right (and I should have noted) that most McDonald’s are independently owned, so the parent company isn’t directly responsible for the low wages. But McDonald’s HQ has a lot of influence over the owners, and it seems to me that what Zeynep Ton calls a “good wage” strategy could work for McDonald’s both directly (better service, more engaged employees) and as a reputation-booster. As far as McD’s support for a carbon tax, no, that won’t solve the problem, nor would a US carbon tax, but we’ve got to start somewhere when it comes to climate change. One route to a global solution is a series of carbon prices in the EU, US, Japan accompanied by import duties on goods from companies that do not price carbon. I’m just thinking out loud here.

    Tom, that was a long but fascinating blogpost from Ed Dolan. Thanks for sharing it. And you’re right, there is nothing inherently wrong with providing government support to the working poor; it’s the purpose of the Earned Income Tax Credit, which may be the most appealing form of poverty alleviation that the govt delivers. I like the idea of a Universal Basic Income, too, but the devil is in the details.

    My fundamental point is that the costs of a cheap burger at McDonald’s are being externalized, i.e., being paid by all of us, and McD’s pursuit of “sustainable beef” won’t fix that, by itself.

  4. Marc,

    Here’s another interesting, though long, blog post FYI.
    http://www.masterresource.org/2014/01/freedom-sotu-address/

    Enjoy.

  5. Chuck Palmer says:

    Back in 1914 Henry Ford stunned the world by offering his workers $5/day to work in the auto plants. That spurred auto production because the workers also became consumers of the vehicles and started the development of the manufacturing middle class workers.
    I wouldn’t expect MacDonalds to raise wages unless they have to. But the minimum wage has not kept up with inflation, and real wages have continued to decline in the last 25 years. So the answer is to either raise minimum wages or have another income transfer program like an earned income credit that allows low-wage workers to keep more of their income.
    Yes, there are a lot of young students who work at MacDonalds. But there also are a lot of single parents who are trying to support themselves and their families while working at a minimum wage job. Fast food workers deserve a living wage and I would favor raising the minimum wage, especially for tip workers like waiters and waitresses.

    Chuck

  6. “Fast food workers deserve a living wage…”

    Why do they deserve a “living wage”? Check the “living wage” for single parents in DC. http://livingwage.mit.edu/counties/11001

    A wage of $52,000 for a single mother with one child, or $66,000 for a single mother with 2 children, taking orders or dropping fries at McDonald’s?

    There goes the “Dollar Menu”!

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