How the Restaurant Lobby Makes Sure Fast-Food Workers Get Poverty Wages

Fast-food workers feed their families on a pittance while the big corporations resist fair pay and sick leave.

While thousands of fast-food workers were preparing to walk off their jobs earlier this summer to seek raises to $15 an hour, the industry’s corporate lobbyist, the National Restaurant Association, was celebrating a string of political victories blocking state minimum wage increases and preempting local sick day laws.

In June, the NRA boasted that its lobbyists had stopped minimum wage increases in 27 out of 29 states in 2013. In Connecticut, which increased its state minimum wage, a raise in the base pay for tipped workers such as waitresses and bartenders vanished in the final bill. A similar scenario unfolded in New York State: It increased its minimum wage, but the NRA’s last-minute lobbying derailed raising the pre-tip wage at restaurants and bars. The deals came despite polls showing 80 percent support for raising the minimum wage.

The NRA’s lobbying didn’t stop there. It also told members that it blocked a dozen states this year from passing laws that would require earned paid sick leave, which is what New York City and Portland, Oregon adopted. Meanwhile, it boasted that six states, including Florida, passed NRA-backed laws that preemptively ban localities from granting earned and paid employee sick time.

“These are horrible things, but there are amazing things that are happening to change it,” said Saru Jayaraman, co-director and co-founder of the Restaurant Opportunities Centers United (ROC), which has been working a dozen years to slowly change the industry’s exploitive business model and labor practices. “And there will be increasingly important stuff coming up.”

As fast-food workers across the country prepare for a second nationwide walkout over wages on Thursday, most Americans have little idea how profitable and politically aggressive the corporate mainstays of America’s second biggest employer have become. While labor activists have had victories in 2013, such as New York and Portland passing sick leave laws, and New Jersey poised to raise its minimum wage via a ballot measure this fall, the restaurant industry’s lobbying powerhouse is at war with the industry’s workers.

“It’s an old-boy network. It’s very old-school thinking. It’s very, very conservative,” said Paul Saginaw, founder of Zingerman’s food companies in Michigan, which employes 600 people and unlike the NRA, supports better benefits for employees like healthcare. “There has to be some pressure put out to provide better lives for people.”

Most Americans are unaware that millions of people who work in the industry—especially the 2.5 million fast-food preparers and servers who earn an average of $8.74 an hour, according to federal labor statistics—are not just teens in their first job, but adults with families to support. They may not know there’s a separate minimum wage for tipped workers, $2.13 an hour, that hasn’t changed in 22 years—although 32 states have raised it slightly. They may not realize that they, as the restaurant-going public, subsidize owners via cash tips, even as the NRA routinely tells legislators its industry cannot afford to pay better wages or basic benefits.

Most Americans don’t know that restaurant salaries are so low that the industry’s 12.2 million workers use food stamps at twice the rate of the U.S. workforce, and are three times as likely to be below the poverty line. Or that women earn less than men in similar jobs. Or that restaurants are among the biggest low-wage employers of people of color. Or that virtually every chain—except for In and Out, according to ROC—don’t want to pay living wages and benefits or offer real opportunities for advancement.

Most tellingly, almost every national chain—from fast-food outfits such as Yum! Brands Inc. (Taco Bell, Pizza Hut, KFC) and McDonald’s to full-service dining such as Darden Restaurants Inc. (Olive Garden, Red Lobster, Capital Grille)—have reported higher revenues, profits, margins and cash holdings to Wall Street analysts despite the recession, according to the National Employment Law Project. Giants like McDonalds had 7.8 percent revenue growth over the past decade, according to Gurufocus.com, a financial reporting site. Yum had 10-year revenues of 8.7 percent, and Darden’s 10-year revenues grew 9.1 percent.

But last winter, as the NRA was fighting minimum wage increases and paid sick leave, it was telling lawmakers that the industry could not afford to pay employees more. Yet this August, the NRA’s newsletter was predicting another profitable year, where revenues would be up 4 percent compared to 2012. “Restaurant and foodservice sales are expected to reach a record high of $660.5 billion this year,” another 2013 revenue forecast on its website said.

“The NRA is the worst employer lobby in the U.S.,” Jayaraman said, speaking about its lobbying and PR operation that pretends it is not an industry dominated by Fortune 500 companies, but instead a rickety mom-and-pop operation teetering on the brink of ruin. “The [earnings] data does not bear any resemblance to what they say is true.”

There are many reasons why America’s restaurant industry, which employs nearly one in 10 Americans, gets away with underpaying its workers and blocking laws that would benefit employees. These reasons include the industry’s longtime low-wage business mode; its longstanding fear-based lobbying that any wage or benefit increase would kill jobs; and a sophisticated political operation that nurtures ties to both parties, encouraging lawmakers to adopt anti-worker laws.

“The question is where is it coming from and who benefits,” said Ben Goldfarb, executive director of Wellstone Action, a group that trains progressive activists. “We know who benefits. It’s the Restaurant Association members and the electeds [legislators] who do their bidding… It’s not about what’s good or bad for the economy.”

Exploitive Roots, Exploitive Lobbying

The business model—where almost everyone except for top management earns an average of slightly more than $11 per hour—is premised on paying workers the lowest legal salary and has not changed in decades. As The New Yorker’s James Surowiecki recently explained, many of today’s largest service-sector companies, particularly restaurants and big-box retailers, were founded decades ago and sought to hire young people and housewives as low-wage, part-time employees, to give them work experience and spending money. “The reason this has become a big political issue is not that the jobs have changed; it’s that the people doing the jobs have.”

This summer’s fast food walk-outs—which will continue this fall—are part of a campaign to challenge and change that status quo, particularly as the media is discovering that the largely non-unionized restaurant workforce is filled with people with families. One consequence of the Great Recession is that millions of middle-class jobs have been replaced by lower-paying service jobs—food sector jobs that are now filled by adults with children, and jobs that offer little opportunity for advancement.

“On what I’m earning right now you have to choose between paying your rent and eating the next day,” Christopher Drumgold, a 32-year-old father of two from Detroit who earns $7.40 an hour after a year at McDonald’s, told reporters during July’s fast-food worker walk-out. “Fifteen dollars an hour would be great. We’d be able to pay our living costs.”

This kind of working-class struggle prompted President Obama to call for raising the federal minimum wage from $7.25 an hour to $9 in his 2013 State of the Union speech. Some Democrats in Congress quickly responded by going higher, proposing it be raised to $10.10, and that the minimum cash wage for tipped workers be 70 percent of the federal (or higher state) minimum wage.

While polls consistently find that 80 percent of Americans, including majorities of Republicans and people earning more than $100,000 a year, support a $10.10 wage, the industry’s national and state-level lobbyists went to work to kill any increase at the state or federal levels. And if that didn’t work, they sought exemptions for tipped workers in states where the increase was seen as passing.

What unfolded in New York, which raised its minimum wage but not for tipped restaurant workers, and in Maryland, where the NRA stopped a minimum wage increase in a legislative committee, shows just how the NRA wields its power and influence.

“The NRA is a very conservative organization… my values are so different,” said Saginaw, who has been in the restaurant business for 31 years and was a former member. “They certainly weren’t representing my interests. They talk the small business owner game a lot but their lobbying efforts are dictated by the large corporate chains. I’m a small businessman.”

New York State: A Cautionary Tale

Many Americans are not aware that there is more than one minimum wage. There’s the federal wage for non-tipped workers, which is $7.25 an hour or $15,080 a year and took effect in July 2009. Nineteen states and the District of Columbia have raised that rate. A few states, such as New Mexico and California, allow jurisdictions to set locally higher minimums.

Then there’s the tipped wage, for jobs where the public tips workers. The federal tip wage, which is $2.13 an hour, was last raised in 1991. Thirty-two states have raised it slightly. Employers are supposed to pay the difference between that base and other state or federal minimum. But, as ROC United said, that doesn’t always happen. And then there are other minimum wages for immigrants, minors and people with disabilities.

In New York, the minimum wage increase in 2013 fell prey to partisan games. “It could be seen as good intentions gone awry,” said Frank Sobrino, press secretary for New York State Democratic Sen. Jose Peralta, explaining what happened as his state legislature raised the state’s minimum wage this year from $7.25 an hour to $9 an hour by 2016.

New York’s Senate is controlled by an odd majority of Republicans and so-called independent Democrats—not his boss, Sobrino said. When the GOP agreed to raise the wage in secret last-minute negotiations—after blocking it for years — the final bill did not include a tip wage increase for waiters and bartenders, which is what the industry wanted. Tipped workers at car washes and airports will get a raise, said Working Families spokesman Joe Dinkin. “But hotel and restaurant waiters and bartenders, which are the largest group of tipped workers, do not get an automatic increase. Rather, the tipped minimum wage will go to the Wage Board, which is controlled by Gov. [Andrew] Cuomo, to do what he wants with it. And yes, this is because of the National Restaurant Association.”

The bill also contained an unprecedented and alarming payoff to fast-food chains and big retailers: a tax credit offsetting the cost of hiring teenagers, but only for minimum wage. That subsidy drew the media’s attention. AWall Street Journal editorial, “Minimum Intelligence,” said it provided an incentive to fire workers 20 years and older and replace them with teens. “For a teen working full time, the annual subsidy could be worth as much as $2,800 per worker by 2016,” theBuffalo News editorial said.

Sen. Peralta, the Queens Democrat, has since proposed a bill to nullify the tax break that analysts say will be worth millions to big employers.

There were two features of this deal that exempifly how the NRA operates, ROC’s Jayaraman said. First, NRA lobbyists keep telling lawmakers that their industry primarily employs teenagers and young people who don’t need higher wages and benefits. Their PR shop has even absurdly claimed that raising minimum wages would kill entry-level jobs. That line apparently was bought by the New York State Republican senator who inserted the tax subsidy at the last minute.

But the brouhaha over the tax subsidy also helped the NRA keep its last-minute deal on excluding the minimum wage for food servers somewhat hidden. “They are worried about public outrage,” Jayaraman said, noting that the same kind of secret last-minute deal excluding tip wages emerged in Connecticut when it raised its minimum wage. “That happened at the last minute with legislators and lobbyists for the NRA,” she said. “Everyone who had been working on this was blindsided. Typically, they don’t bring it [excluding tip wages] up at hearings.”

Maryland: Sowing Fear Not Hope

But in Maryland, the NRA’s lobbyists were more brazen. They did bring up excluding tipped workers and they trashed them—but only after waiting six hours to testify, long after most labor activists had testified and the hearing room was almost empty.

First came Carville Collins, representing a regional Wendy’s chain with 108 stores and 3,100 employees. He rolled out the NRA’s standard “job killer” speech, which was also presented by NRA lobbyists in Congress this spring. Carville said that raising wages “imposes costs we cannot pass onto consumers.” He said a proposed three-step increase to $10 an hour would cause “five to eight” stores to close, putting as many as 300 people out of work. Moreover, if Maryland’s minimum wage was higher than nearby states, it would attract out-of-staters who would “come and displace Maryland workers.” Carville then cited research from the NRA-funded Employment Policy Institute, projecting that a national $9.80 minimum wage would kill “256,000 to 768,000 jobs,” including thousands of jobs in Maryland.

Melvin Thompson, senior vice president of the NRA’s state affiliate, the Restaurant Association of Maryland, immediately followed, and opposed raising minimum wages “for all the reasons you have heard already.” But then he attacked, claiming that servers often stole tips—saying they didn’t need an increase. He said restaurant workers made two to three times the minimum wage and some waiters earned more money than owners. He concluded, “the tip portion doesn’t need to be included in this bill.”

Needless to say, progressive restaurant owners, activists and economists have thoroughly debunked each of these claims. As Zingerman’s Saginaw said, “The workforce has changed. It’s not just students and people out of college. It’s much more diverse than that.” Economists have pointed out that at McDonald’s, for example, half of the cost of raising its minimum hourly pay to $10.50 could come by adding a nickel to the price of a $4 Big Mac. Other studies by ROC have found that a dime increase in daily food prices could support a 33 percent raise for minimum wage workers and a doubling of the base tip wage.

But, as the Wellstone Institute’s Ben Goldfarb explained, NRA lobbyists seek to sow just enough doubt and gray areas that it becomes easy for legislators to vote against proposed wage-increase bills, or just exempt their industry entirely.

These fear-based scripts—which have been studied and rebutted by the National Employment Law Project (NELP)—prompted legislators, including a handful of Democrats, to vote against the Maryland bill in committee. The local advocates, Raise Maryland, are not giving up. They have analyzed how much Maryland gave away in business subsidies this year and written memos rebutting the NRA’s testimony. Raise Maryland volunteers have been knocking on thousands of doors this summer to generate support and get people to write to lawmakers to change their minds and reconsider the issue, campaign coordinator Matt Hanson said.

Suppressing Wages Isn’t Enough

The NRA did not respond to a list of questions from AlterNet beyond an initial phone call where a spokeswoman emphasized that the industry’s profit margins are so slim—3 or 4 percent—it can’t afford to do more. Yet the industry is America’s largest low-wage sector and is filled with corporations that have been consistently profitable despite the sluggish economy, according to NELP’s analyses of Wall Street earnings reports. Yet the NRA not only opposes raising wages and linking wages to inflation, it has another draconian priority: opposing local laws granting earned sick leave.

Despite protests by workers who have publicly explained what it’s like to have to go to work sick, the NRA has been lobbying in statehouses to preempt cities and counties from passing local laws that would require employers to grant earned paid sick leave. ROC notes that 90 percent of restaurant workers don’t have paid sick days, and “two-thirds report cooking, preparing and serving food while sick.” That reality, captured in videos by sick workers, helped a coalition led by Working Families in New York City and Connecticut to adopt local sick leave laws. These were significant victories. The New York City law will affect a million workers. (San Francisco, Seattle, Portland, Oregon, and the District of Columbia also require earned sick time.)

New York’s passage of sick leave legislation grabbed headlines, especially as it became law when the city council overrode Mayor Michael Bloomberg’s veto. But in the past two years, NRA lobbyists have pushed eight states to preempt or repeal local labor laws that include requiring paid sick leave. The industry—helped by prominent Democrats such as Colorado Gov. John Hickenlooper and Philadelphia Mayor Michael Nutter—also beat proposed sick leave laws in Denver and Philadelphia.

This trend started in Wisconsin and shows how right-wing alliances spread anti-labor legislation. In 2011, Wisconsin’s Republican Gov. Scott Walker backed an industry-led effort to ban paid sick leave laws, like the one Milwaukee’s voters adopted as a ballot measure in 2008 while Walker was county executive — its top elected official. Seventy percent of voters had backed paid sick leave. That spring, the passage of Wisconsin’s bill preempting local laws was touted as a model by the NRA at meetings of the American Legislative Exchange Council, the pro-corporate lobbying mill. ALEC members, almost all Republicans, introduced copycat bills in their states, Wellstone Action’s Goldfarb said, saying this was how the NRA’s priority spread and “scaled.” These were passed by GOP-majority statehouses, sometimes using strongarm tactics that dismayed labor organizers.

This summer, for example, Republicans in Florida’s Orange County—near Walt Disney World—were lobbied by fast-food giants, including Darden, which owns Red Lobster, Olive Garden and Capital Grille, and Disney, and intentionally delayed acting on another sick leave ballot measure that had 80 percent support in polls. That tactic gave the restaurant lobby time to push its preemption bill through its legislature, which GOP Gov. Rick Scott signed into law in July. Arizona, Mississippi, Louisiana, Kansas, Indiana and Tennessee have all passed bans on local sick leave laws. Michigan, Alabama, Oklahoma and South Carolina are considering it.

The Arizona Restaurant Association lobbyist said last March that no one was proposing a sick leave law in her state, but “we’re fortunate to get out in front of it.” In Memphis, Tennessee, the prospect that Shelby County was considering a wage theft ordinance—because restaurants there hadn’t paid $270,000 in back wages to workers that a coalition of lawyers and churches recovered in court—prompted its GOP-majority state legislature to act and preempt local labor laws. “That [wage-theft law]… would have been very harmful to local businesses,” the Tennessee Hospitality Association told its members.

Public Health vs. Private Profits

In all these political fights, the question of who is being harmed is the critical question. The NRA is touting an old anti-regulatory script—trotted out by state chambers of commerce for years—that any cost that cuts into profits is a job killer and must be stopped. But advocates like ROC and Working Families say that argument is upside down. Low pay and no benefits not only hurts worker productivity, it also hurts families and undercuts local consumer spending.

“It’s an old-school chamber of commerce attitude—it’s anti regulation,” Zingerman’s Saginaw said. “We believe that by paying higher wages and benefits we will get better productivity from our staff and have more satisfied customers.”

And when it comes to sick leave, there is another dimension: the public is at risk when food is prepared by workers who can’t afford to take a day or a few hours off to visit a doctor. ROC’s 2012 report on Darden described a North Carolina Olive Garden worker who came to work in 2011 with Hepatitis A, prompting the county to vaccinate thousands of people and a class-action lawsuit.

“Almost no laws anywhere in the country require restaurants to provide paid sick leave for employees who come down with anything from the sniffles to a norovirus,” noted Grubstreet.com. “On the other hand, pretty much every single municipal health department in the country has a rule or law requiring employers to keep sick employees away from food and out of the restaurants, and that’s where things get problematic.”

Problematic is not exactly the correct word. When it comes to the NRA and its state affiliates, greedy and shamelessly political are more accurate. And that is why thousands of fast-food workers across the country plan to walk out of their jobs on Thursday, in what organizers says will be months of continuing labor actions—including a focus in September on raising tip wages.

“The NRA is a lobbying machine—it is for the owners of restaurants and restaurant chains that are turning a profit off the backs of workers,” said Shannon Liss-Riordan, a labor lawyer and owner of Just Crust, a pizza restaurant in Harvard Square in Cambridge, Massachusetts. “It doesn’t have to be that way.”

High Road Employers

Meanwhile, advocates like ROC have formed a progressive restaurant trade association, RAISE, and are encouraging people to sign petitions to raise minimum wages and benefits, as well as use its new National Diners’ Guide identifying which restaurants treat employees fairly. They’re also encouraging people dining out to ask owners about paying fair wages, just as the public asked about organic and local foodstuffs and gradually changed menu offerings.

“We try to encourage that kind of economic inquiry,” said Liss-Riordan, a RAISE member. “A few years ago, it was pretty revolutionary to ask, ‘How fresh is your arugula?’ Now we want people to ask, ‘Are you paying fair wages?’ It’s just getting started. We are hoping that it’s a powerful idea that will take off.”

Read more about “the other NRA” on the National Restaurant Association’s Sourcewatch page.