US fast food workers have taken to the streets over the last week to protest against low pay. This has received little attention – certainly in comparison with the Occupy protests. Yet, it is far more significant. We’ve allowed an unbalanced economy and society to society to develop. At last the pressure is becoming too much – something has to give.
In a brilliant piece in yesterday’s FT, Adam Posen argues we are approaching an ‘old normal’ – a Victorian-style multipolar world, characterised by volatility, intense national competition, the capture of political systems by the upper-middle classes and protest movements from down below. He cites Occupy as an example but I think that slightly misunderstands the lifestyle nature of Occupy. These low-pay worker protests, however, are a far more interesting a canary in the coal mine.
One of the astonishing features of recent decades in the US and UK has been institutional decay: firms with values, unions, labour market regulation, and vocational institutions such as apprenticeship have all been eroded. The genius of the post-war economy was that it provided middle-class lifestyles for working-class jobs. The modern economy places that in reverse. The loss of institutional support creates a burden on the majority. The art of the collective action needs to be re-learnt.
And that is precisely what these protests constitute: a re-ignition of collective action. As James Surowiecki explains in the New Yorker, the value of the minimum wage has declined in the US and, yet, there has been a ferocious rear-guard action from those firms that benefit from the prices low, wages low, profit maximisation approach.
Led by a tobacco, alcohol, and cigarettes lobbyist, the response from big fast food et al has been ferocious. The corporate financed, Employment Policy Institute, shot back that an increase in the minimum to a living wage level would lead to disaster and destruction – the ‘$1 menu would become a $5 menu.’ This is complete rubbish of course. The independent University of Kansas calculated that paying workers the living wage would push up a $1 burger to $1.17 – hardly the end of the world.
It’s not a cost-free option. Increased prices would, in part at least depending on the competitive environment, be passed onto to consumers. Firms would have an incentive to invest in labour saving technology. Some workers would lose their jobs.
However, most of these impacts are exaggerated. Such analysis fails to appreciate that we are dealing with a dynamic situation here. Higher paid workers increase the incentive of the employer to improve their productivity. Fast food firms and most retailers are stuck with industrial age notions of productivity. For example, customer service is at a premium in a service economy. As long as your competitors can’t undercut you by worsening their workers’ pay and conditions, you can invest in a more skilled workforce with greater confidence. That takes your product up the value chain. Involuntary zero-hours contracts should also be challenged here. As workers are paid more and have more security, they are in a position to buy higher value products. If you introduce technology to save labour, well that creates jobs in design, software, sales, servicing, support elsewhere – not all of these jobs will be offshore.
Finally, your workers will show you more commitment and loyalty if you invest in them; they will be nicer to your customers and take pride in their work as well as showing initiative. They will create real value in other words. All of these positive personal, economic and social effects are unlocked by building decent labour market institutions. There will be transition costs but these are nowhere near as significant as bargain basement economics pretends. The benefits will be huge.
We’ve concentrated in recent years on the health impact of fast food - rightly. But now it’s time to focus on the social and economic impacts. Those fast food workers in American cities have shown the way forward. Good luck to them and I hope they manage to get further collective action going. We can and should do better – and a politics of social justice would rally to their cause.
Anthony Painter is Director, Independent review of the Police Federation. His new book ‘Left without a future? Social Justice in Anxious Times’ is now available.
* Following the publication of this piece my attention was drawn by Daniel Elton to LAANE which has successfully unionised hotel workers near to LA airport and pushed the living wage successfully at a municipal level. They have been featured in Prospect.