In fast food, CEO pay rises far above all

A new study says that top bosses in the sector make 1,200 times as much as the average worker.

By MSN Money Partner Apr 23, 2014 1:51PM
By Eric Reed, MainStreet

The news has not been kind to the fast-food industry over the past few years. 


From labor strikes to claims of wage theft, companies like McDonald's (MCD) and Burger King (BKW) have taken increasing criticism for treatment of workers and their low-wage jobs. 

Now, a new report from New York-based think tank Demos has added fuel to the fire.


The study charts inequality between executive and worker pay across multiple industries, and finds that fast food overwhelmingly leads the nation. According to the Demos study, the average pay ratio between CEOs and employees working in "accommodation and food services" is 332-to-1, about 44 percent higher than retail, the next most unequal industry.


Most of this disparity comes from the fast-food industry, where in 2012 CEOs made 1,200 times as much as the average worker.


Catherine Ruetschlin, the author of the study, took care to note that her work tracked the relationship between executives and average, non-supervisory employees. Not only are fast food CEOs some of the highest paid in America, but their typical workers receive "stagnant poverty-level wages."A McDonald's employee prepares an order at a McDonald's restaurant on April 19, 2011 in San Francisco, Calif. (© Justin Sullivan/Getty Images)


Fast-food workers are among the lowest paid in America, taking home an average $9.09 per hour. In real dollars, their wages have increased by 0.3 percent since year 2000, while CEO salaries in the fast-food industry have increased by 400 percent.


According to Ruetschlin, it's the relationship between these two findings, not just one, that drives the study's results. The study emphasized that growing inequality has repercussions for the economy overall, as the most unequal sectors are providing most of the new jobs at the expense of more equal ones.


"The kinds of problems that we're seeing in fast food are really a critical sign of how inequality can undermine the fundamentals of the firm," Ruetschlin said. "Things like declining customer satisfaction, litigation, and the class action lawsuits actually have associated costs . . . This research really does suggest that there is a payoff to investing in wages at the bottom when it mitigates the risks associated with that growing disparity."


That payoff may be harder to realize than equality advocates hope, however. Although Ruetschlin identified real challenges associated with long-term inequality, high-turnover shareholders often emphasize short-term profits over structural issues. Low wages and high corporate pay lead to immediate profits and the associated risks may not manifest until long after current decision makers have left.


"I think that the turn to increasingly short-term shareholding is one of the forces that are the undercurrent of this growing disparity," Ruetschlin said. "It's a question of how the firm allocates the resources that they have on hand, and we see these resources going to the executives at the top and less and less going to maintain the basic labor force and services."


Progress, even if slow, is being made, however. Ruetschlin cited examples like Whole Foods Market (WFM), which has a fixed worker-to-executive pay ratio, and programs by McDonald's to try and improve customer satisfaction.

 

Opponents argue that this week's report is simply propaganda in favor of a higher minimum wage. Labor unions have contributed heavily to Demos, donating over $200,000 to the group in 2013 alone, although the group does announce its alliances with the slogan "an equal say and an equal chance for all."


Regardless of Demos's partisan leanings, however, even the study's opponents don't argue the accuracy of its findings. The core result that fast food CEOs take home 1,200 times the pay of their average worker remains true.

More from MainStreet


63Comments
Apr 23, 2014 2:33PM
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Let's compare a CEO's salary in the banking and newspaper industry to those on the frontlines.  I know CEO's of banks rake in 100's of millions while they pay their tellers $10 per hour and treat them like dirt.  Let's do an article on Wells Fargo and the New York Times!  McDonald's and Burger King are entry level jobs.  Let's look at something more career orientated.
Apr 23, 2014 3:10PM
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People spend so much time complaining about their business practices yet they will fill out that job application and then make a stop at the drive-thru. The consumer action is more powerful than any legislation.
Apr 23, 2014 4:08PM
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This is absolutely a "swat" at the fast food industry because of their much politicized hourly wage structure.  In this industry's defense, and I'm not a fast-food advocate by any means, I don't eat the stuff, but the fast-food industry business model was "never" designed to provide a middle income wage for its hourly employees; it never was, isn't now, and never will be.  Just because this economic sector employs the largest number of our citizens, doesn't mean it becomes mandatory for it to support and float our ridiculous U.S. economy.  The vast majority of middle-income producing jobs that these fast food employees could have, are now deployed somewhere outside the U.S. to other countries.  The corporations did it, and the government allowed it, and now we are paying the price for it.  STOP ALLOWING U.S. JOBS TO GO OTHER COUNTRIES.
Apr 23, 2014 2:51PM
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Why does this not surprise why should they give the workers more money when the government is subsidizing the workers with food stamps ,EBT cards and welfare money and housing and much more. This way they don't have to give raises and more money to share holders. 
Apr 23, 2014 4:15PM
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Just don't look at the pay of the union executives.
Apr 23, 2014 5:25PM
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Class warfare, nothing more, nothing less.  Why didn't they point out that the head of NBC made almost $30 Million last year?
Apr 23, 2014 4:04PM
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Many of you have no problem with a movie star, athlete or pop singer who makes 25 to 100 million per year - they do not run anything or create any jobs - BUT a CEO who makes 10 million per year and runs a company with 50,000 employee's is immoral in your world.  The CEO is paid what the market says they should be paid.  About 10 -15 years ago during the Clinton era people like you complained about  executive salaries, so Clinton changed the tax law that capped the deductibility of CEO wages ( for the low information voter, wages are a legally deductable cost of doing business) as a result ( the left always forgets that there is cause and effect or consequences to their emotional policies  that are not based on logic).  The result was that there are only 500 people in the world who can run a Fortune 500 company - that is a pretty exclusive group of people with exceptional skills - so stock options were offered in place of salary - this means if the company prospers ALL employee's and shareholders ( the owners)  and the CEO will prosper if the stock goes up.  Our President was a community organizer ( activist) who has never managed or run anything - unbelievable.

Apr 23, 2014 4:00PM
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"New York based think tank DEMOS" ?  I'm going to have to call Capt. Obvious on this one.

Apr 23, 2014 2:46PM
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All CEO's make tremendous amounts, why pick on fast-food companies?  Could it possibly be politically motivated?  YES!

 

Apr 23, 2014 3:34PM
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I think we can all agree CEO's are extremely overpaid as you could probably divide up their millions in salary & assemble a team of highly qualified individuals to run a company probably far more efficiently & have multiple inputs to keep the company headed in the right direction instead of 1 CEO (dictator).  Most CEO's last only a short time & either move on to something better or sink the company they were hired to run.
On the flip side I do not think a fast food employee at McDonald's or Burger King should be getting $15 an hour to push a button for a Happy Meal & place it on my tray.  This is a minimum wage job with about an 8th grade diploma required.  These basic idiots with no education want to make as much as someone who spent thousands on College or a Trade school education.  NO WAY!!!
Apr 23, 2014 4:21PM
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Let's see......the CEO is responsible for the financial vitality of a multi-billion dollar company that is supposed to provide a good return for stockholders and the average employee is responsible for their lone job and doing it correctly.  How many people are qualified to be a CEO and how many are qualified to be an average employee?  Everyone should be respected for the job they do but let's be realistic when we talk about compensation for abilities.
Apr 23, 2014 3:46PM
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Who cares about the others, it is all about the people making big money..... 
Apr 23, 2014 5:26PM
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A bloody war is coming to the streets of American  fueled by greed, and liberal stupidly.

Your ignorant replies will not stop it, It is what it is.

Apr 23, 2014 5:50PM
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When I graduated from high school, I went to work at MickeyD's for $1.65 an hour.  I was new to the work world and gained valuable experience in how to treat customers, punctuality, how to handle money...at that time we had to count change for $1.65 an hour. We kept the restrooms so clean you could eat off the floor, there was one person who had to bus tables constantly, we washed down the walls every day with CO2 water to keep them shining....what does an employee at McDonald's have to do today.  You are lucky if anyone even says "thank you" today.   So, tell me again why these people deserve $10.00 an hour???
Apr 23, 2014 6:26PM
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another hit post by the left - SEIU inspired.
Apr 23, 2014 5:08PM
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Here is an idea for all the "management gets paid too much" crowd. Come up with an idea, take your own money and open your own business. Instead of whining about a 'problem' open a business and pay your managers and workers what ever you want.


Another progressive left/democratic party class warfare study - Us verses Them - There must be another election coming up.

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High pay for poisoning its citizens in the disguise of food service......................smh..................The Founding fathers amerikkka is done....
Apr 23, 2014 7:38PM
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 Warren Buffet is not a greedy pig now back to work Dairy Queen peasants you are of no political use unlike his poor little secretary. Now continue on with your brainwashing drooling stupid democrats record poverty and debt is good for you. Hope and change yeah rich evil abortion is health care guns are bad record cold is directly related to global warming...........Detroit is a paradise.
Apr 23, 2014 2:59PM
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Before I accepted the validity of the findings that were posted in this article I would want to see more of the assumptions and restrictions of the study as the easiest way to lie is by manipulating what you accept as part of your controls. An example would be: did they separate out the low pay workers working for the corporate stores (the only ones that should be included in the comparison as the franchise owners sure don't make 1200 times as the low wage earners in their stores. But I will have to agree that the article itself is very much biased to direct attention towards the low skill positions and away from the higher paying ones.
Apr 23, 2014 5:19PM
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But, they work so much harder, right?
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