
$15 Minimum Wage Protests Could Spell Major Problem for Retailers
NEW YORK ( TheStreet) -- The widespread and intense protests on Wednesday for a $15-an-hour minimum wage at fast food restaurants and retailers could lead to pain for the bottom lines of companies such as McDonald's (MCD) - Get Report, Dunkin Donuts (DNKN) - Get Report and Wal-Mart (WMT) - Get Report.
Demonstrations began at 6 a.m. in New York City by workers calling for a "living wage" and the right to form a union without retaliation, and protests are planned in more than 230 cities and college campuses across the country. Protesters are also taking to social media, making #FightFor15 one of the top hashtags on Twitter.
The "Fight for $15" campaign began in late 2012 and is being spearheaded by the Service Employees International Union, SEIU. The latest rounds of protests follow high-profile announcements by McDonald's, Wal-Mart, Target and TJX that they would be increasing the wages of their lowest-paid workers. In hindsight, the efforts by these traditionally low-paying companies to up worker pay may have emboldened their employees to push for even higher paychecks.
Representatives for the SEIU could not be reached for comment.
McDonald's announced this month it would raise wages by about $1 per hour for roughly 90,000 of its lowest-paid workers starting on July 1. The pay hikes would be at company-operated locations, which are only a fraction of the Golden Arches' more than 14,000 stores franchised in the U.S. New McDonald's CEO Steve Easterbrook noted the moves were an "initial step." Any additional moves by Easterbook and his team on pay at corporate-owned stores, which could force franchisees to match the new hourly wages, would take a big chunk out of each restaurant's bottom line.
For McDonald's, a leap to significantly higher wages might mean the popular dollar menu would have to be scaled back to cut costs. Across-the-board price increases, especially during periods of beef, poultry or dairy inflation, would likely have to be implemented. A more drastic action might be McDonald's franchisees opting to reduce hours at the expense of customer service, sending people to competing fast food chains. In turn, that could hurt sales and trigger an adjustment in the number of employees.
Wal-Mart would also have to change how it approaches its business at a $15-an-hour minimum wage. One of those changes would likely be to jack up prices on fresh and packaged food, which as it stands, sell on razor-thin profit margins. The company could be forced to rely more heavily on its much-criticized computerized employee scheduling system. Doing so might impact the quality of Wal-Mart's customer service, sending more customers to Amazon (AMZN) - Get Report.
Wal-Mart began lifting the hourly wages for 500,000 of its employees in February to $9 an hour. By February 2016, the world's largest retailer plans to shell out $10 an hour to employees.
According to reports from Reuters and the Wall Street Journal in late March, Target will soon hike its minimum wage for all its workers to $9 an hour, above the federal minimum of $7.25 an hour. The reports came as little surprise based on recent comments by executives.
"Our goal has been and will be, we're going to be competitive on wages, whatever that means, wherever that means," said Target CFO John Mulligan at a March 4 investment bank conference. At the time, Mulligan sidestepped being locked into a specific nationwide hourly wage for its retail workforce, citing differences in each state's minimum wage laws and prevalent local economic conditions.
TheStreet gets a pulse on Wednesday's protests by America's low-income workers by scouring Vine.
1. New York City
Workers demonstrate in front of a Subway in Manhattan. According to Glassdoor, a "sandwich artist" at Subway makes $8.36 an hour.
2. North Philadelphia
Dunkin Donuts (DNKN) - Get Report customers here were greeted by chanting protesters. Dunkin Donuts U.S. has more than 8,000 mostly franchisee-owned restaurants. According to Glassdoor, a Dunkin Donuts crew member makes $8.37 an hour, while a store manager earns $11.58 an hour.
3. Richmond, Va.
Customers waiting for drive-thru orders at this McDonald's were greeted by calls for "more green."
4. Boston
A McDonald's entrance is completely blocked by protesters.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.








