Why Fast Food Strikes in US will not go away – and what McDonalds needs to do about it

Over the last 2 years the SEIU, the trade union that represents US service workers, has been running a campaign for a $15 minimum wage, holding at least seven strikes across the country. In the last week demonstrations across the country led to arrests, including 21 in New York, 50 in Chicago, 50 in Detroit and 27 in Wisconsin. This list goes on.

The strikes have sparked a series of bitter commentary with McDonalds accusing the SEIU of paying strikers. According to quotes in The Guardian a McDonald’s spokesperson stated “We reiterate that these are not ‘strikes’ but are staged demonstrations in which people are being transported to fast-food restaurants. And, we have received reports that some participants are being paid, up to $500, to protest and get arrested.” The Guardian quote the National Restaurant Association as stating the protests were nothing more than “orchestrated union PR events where the vast majority of participants are activists and paid demonstrators”.

Prior to moving into the responsible investment field I worked for trade unions in both Australia and the UK. I have a good understanding of the way trade unions work and the way they campaign. Whilst a trade union may at times run a campaign that is overtly political it cannot maintain a campaign unless there is a genuine issue. The ongoing duration of the campaign, and the depth of passion that is being generated suggests that there is more to these protests that ‘union orchestration.’

To understand what is going on it is necessary to understand the psychological relationship that an individual has with their employer and their trade union. In the main employees like their employers – particularly the people they work with at a local level. Employees will tolerate a lot from employers. They understand the need for businesses to restructure and to make decisions that ensure profitability. They will even accept lower pay increases when times are lean.

What workers want from their trade union can change according to the circumstances of their work. Sometimes they want their union to collaborate with the employer. Sometimes they want the union to stand up and ensure fairness.

There are however times when an employee’s general tolerance for their employer tips over into anger. When this happens history has shown that employees will go to extraordinary efforts to achieve change.

This is one of those moments. The fight for a minimum wage didn’t just appear over night. The trade union movement has been arguing about it for years. But what has changed is that workers have reached the point when they can no longer get by. This happens slowly. Initially workers absorb housing cost increases, food price increases and energy price increases. But over time anger at the fact that it is impossible to ‘get by’ no matter how hard a person works builds.

The SEIU fast food strikes are an example of this. They are not ultimately due to the strategy of a union official. If that was the case the actions would have petered out long ago.

Whilst the SEIU’s focus is on fast food, campaigns on minimum wages are popping up elsewhere across the globe – an example is Unite’s campaign for London hotel workers.

See: http://www.youtube.com/watch?v=tXSxOAba28U

The message for McDonalds, Burger King and other fast food chains is that the campaign for increases to the minimum wage won’t go away. Because it can’t go away.

What the fast food sector must do is something it has never wanted to do – and that is negotiate with trade unions.

But what will happen if it doesn’t? The answer is that the sector will still continue to operate and generate profits for investors, but it will not escape attention. Campaigns will continue, which will mean that the industry will stay in the public spotlight. The sector will also attract increased attention from politicians. Already President Obama has weighed in stating “all across the country right now there’s a national movement going on made up of fast-food workers organizing to lift wages so they can provide for their families with pride and dignity. There is no denying a simple truth. America deserves a raise.”

The impact of attention on the sector will flow to other issues including the sector’s impact on obesity and its carbon footprint.

There is however an alternative path for fast food companies that will in the long term build value. By focusing on engagement not opposition, fast food companies can embrace innovation. There is little benefit in the sector all sticking together in defending increasing minimum wages. Ultimately it will be consumers, who are socially conscious, and whose food habits are changing, that will determine the future winners and losers in the sector.

In simple terms the way that fast food companies react to strikes can be seen as a leading indicator for long term investment returns.

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