Why Kicking Your Workers Is Bad for Business

McDonald's workers in 15 U.S. cities recently staged a weeklong strike demanding a $15 hourly wage for every McDonald's worker. McDonald's resisted, pledging only to raise average wages to $13 an hour.

In the meantime, the profits keep rolling in. The fast-food giant registered $4.7 billion in 2020 earnings. CEO Chris Kempczinski personally pocketed $10.8 million last year, 1,189 times more than the $9,124 that went to the company's median worker.

The fast-food giant registered $4.7 billion in 2020 earnings. CEO Chris Kempczinski personally pocketed $10.8 million last year, 1,189 times more than the $9,124 that went to the company's median worker.

Executives at McDonald's seem to think they can outlast the Fight for $15 campaign. More to the point, they think they know everything. Nothing happens at Mickey D's without incredibly intensive market research: "Plan, test, feedback, tweak, repeat." More hours may go into planning the launch of a new McDonald's menu item than Ike marshaled planning the D-Day invasion.

All this planning has McDonald's executives supremely confident about their business know-how. But, in fact, these execs do not know their business inside-out. They don't know their workers.

Workers remain, for McDonald's executive class, a disposable item. Why pay them decently? If some workers feel underpaid and overstressed, the McDonald's corporate attitude has historically been "good riddance to them." Turnover at McDonald's was running at an annual rate of 150 percent before the pandemic.

The entire fast-food industry rests on a low-wage, high-turnover foundation. And at those rare moments--like this spring--when new workers seem harder to find, the industry starts expecting its politician pals to cut away at jobless benefits and force workers to take positions that don't pay a living wage.

But if leaders were really doing their research, they'd learn very quickly that this makes no sense. Instead of treating workers as disposable and replaceable, businesses ought to be treating them as partners.

Who says? The Harvard Business Review, hardly a haven for anti-corporate sloganeering. Employee ownership, the journal concluded recently, "can reduce inequality and improve productivity."

Thomas Dudley and Ethan Rouen reviewed a host of studies on enterprises where employees hold at least 30 percent of their company's shares. These companies are more productive and grow faster than their counterparts, Dudley and Rouen found. Cooperatives are also less likely to go out of business.

Enterprises with at least a 30-percent employee ownership share currently employ about 1.5 million U.S. workers, just under 1 percent of the nation's total workforce. If we raise that number to 30 percent, Dudley and Rouen calculate, the bottom half of Americans would see their share of national wealth more than quadruple.

Elsewhere, enterprises with 100-percent employee ownership already exist. Spain's Mondragon cooperatives, the New York Times noted earlier this year, have flourished since the 1950s. They aim "not to lavish dividends on shareholders or shower stock options on executives, but to preserve paychecks."

At each of Mondragon's 96 cooperative enterprises, executives make no more than six times what workers in the network's Spanish co-ops make. In the United States, the typical rate runs well over 300 to 1.

We're not talking artsy-crafty boutiques here. Mondragon co-ops, including one of Spain's largest grocery chains, currently employ 70,000 people in the country.

Mondragon has had a particularly powerful impact on the Basque region in Spain, the network's home base. By one standard measure, the Basque region currently ranks as one of the most egalitarian political areas on Earth.

"We want to transform our society," Mondragon International president Josu Ugarte told me in a 2016 interview. "We want to have a more equal society."

So do workers at McDonald's.