Tag Archives: McWages

US needs to create good middle-class jobs

Fast food strikeIn early August this year fast-food workers across the US staged a walkout in protest about their levels of pay – they were demanding an increase from $7.25 (Federal Minimum Wage) to $15 an hour. Under the current minimum wage a worker’s income is $15,000 per annum which is below poverty level pay. Although the minimum wage has increased it is still below its peak in 1968 when it was worth approximately $10.70 an hour in today’s dollars. As well as the low pay, workers in the fast food industry get few benefits and also prospects for full-time work are limited. Add to that a weak job market and ultimately bargaining position, the prospects for these workers look bleak. Although this low pay has been prevalent for many years why is it that is has become such a political issue?

Why are older workers in fast-food and retail jobs?

Historically these part-time jobs have been filled by students or parents looking for work to supplement the family income. However with the downturn in the US economy and increasing unemployment, many in the labour force have had no choice but to try and pick-up any available work. This includes major income earners for families and today low-wage workers provide up to 46% of their family’s income. This is in contrast to forty years ago where there was no expectation that fast-food or retail jobs would provide the living wage as they were not the jobs that the main breadwinner in the household was employed in. In the 1980s profitable companies like Ford, General Motors and other manufacturing industries were big employers in the US economy. Workers were well paid and also had the benefit of pension plans and medical cover. However globalisation and the drive for lower costs have seen a number of US firms looking to locate overseas in countries such as Mexico and China.
The above is a brief extract from an article published in this month’s econoMAX – click below to subscribe to econoMAX the online magazine of Tutor2u. Each month there are 8 articles of around 600 words on current economic issues.


McWages – minutes to earn a Big Mac

You will have heard to the Big Mac index which was developed by The Economist magazine. It shows the purchasing power parity (PPP) between two currencies and provides a test of the extent to which market exchange rates result in goods costing the same in different countries. Reading the WSJ, Orley C. Ashenfelter of Princeton University has come up with McWages which shows the number of minutes a McDonald’s employee needs to work in each country to buy a Big Mac. Ashenfelter states that McDonald’s workers in most countries perform similar tasks to produce an homogeneous product – the Big Mac. So by calculating the amount of time an employee needs to work to afford a Big Mac you can show how wages differ across countries. Poorer countries tend to have McDonald’s employees working longer than their counterparts in the developed world. In China you would have to work 85 minutes as compared to 27 minutes in the US. Workers in India and China saw improvements between 2000 and 2007. While the real wage — or Big Macs per hour worked — was virtually unchanged in developed countries during the period, China’s and India’s real wages grew 9% and 8% per year, respectively.

Ashenfelter also notes a worrying effect of the financial crisis. Between 2007 and 2011, the growth of real wages slowed in China, while Indian workers actually lost ground — going from 168 minutes in 2007 to about 195 in 2011. The U.S. and Western Europe lost ground during the period as well.