Fast-food strike: How strong is the case for a big wage hike?

Fast-food workers and labor organizers are planning a strike of global proportions Thursday, based on the premise that low-wage occupations should still be “living wage” occupations.

In the US, Thursday’s date – May 15 – carries numerical significance, as actions in as many as 150 cities aim to win a pay raise to at least $15-an-hour from restaurant chains in the industry, as they also push to unionize the companies.

Backers have also sought to make their push against income inequality global. Events outside the US – from Argentina to Hong Kong – have goals related to wage or worker-rights issues in those places.

The labor push coincides with rising public attention given to wages and inequality. Higher minimum wages have gone into effect this year in a number of states and cities, President Obama is pushing for a national minimum wage of $10.10 an hour, and a French economist has topped bestseller charts with a book arguing that a rich-get-richer bias in capitalism needs to be addressed with new policies.

But beyond the signs of political momentum, how strong is the case for a wage hike?

Economists in recent years have begun to take a more favorable view toward minimum wage hikes, so there’s also some momentum of expert opinion. And a case can be made that fast-food workers in particular – with some of the lowest wages and with recent pay increases that haven’t kept up with inflation – do, in fact, “deserve a break today” (in the words of a classic McDonald's jingle).

At the same time, old arguments against raising the minimum wage haven’t gone away. Some economists say the labor agenda could backfire by slowing job growth and reducing opportunities for teenagers and other low-skill workers.

And some labor experts take a middle ground between “pro” and “con,” supporting a jump to $9 or $10 per hour but arguing that bumping the minimum all the way to $15 would impose too big a jolt on employers in a job market where the current national minimum is just $7.25 per hour.

As the strike organizers focus on wages in the fast-food industry, including companies like Wendy’s or Taco Bell, some of the workers involved in the campaign also support parallel efforts to raise wages by changing local laws. 

Few labor experts quibble with the notion that the current economic recovery has been hard on ordinary workers. Five years after the end of a deep recession, unemployment remains high. Lower-wage industries, meanwhile, “accounted for 22 percent of job losses during the recession, but 44 percent of employment growth over the past four years,” the National Employment Law Project found in a recent analysis of US Labor Department numbers.

The fast-food industry has become a poster child for many of the challenges because it blends rock-bottom wages with massive scale – it’s one of the largest industries in the nation.

“Fast food workers earn the lowest average wage of all occupations, with the average worker in the industry earning $9.09 per hour according to the Bureau of Labor Statistics Current Employment Statistics data,” the liberal group Demos finds.

Advocates for a higher minimum wage say the boost will help address the persistent challenge of weak job and income growth for middle- and working-class families.

Many economists say a hike in the base wage rate would help the economy overall, improving worker paychecks more than it harms job growth.

That conclusion was evident in a survey last year, sponsored by the University of Chicago, of several dozen prominent economists. The predominant view was that boosting the minimum wage to $9 an hour would have some negative effect on hiring.

But 47 percent said the benefits of the income boost would outweigh the costs, while only 11 percent argued against the hike. Many were uncertain whether it was better to raise the wage or not. They weren’t asked about the idea of a more aggressive boost to $15 per hour.

Economists can point to dueling studies on both sides of the debate, some showing meaningful effects on hiring when the minimum is raised, others showing negligible effects.

Conservative economists Kevin Hassett and Michael Strain of the American Enterprise Institute recently summed up the case against a minimum wage hike thus: “Why not support increasing the minimum wage? Because it will make it more expensive for businesses to hire young and low-skill workers at a time of crisis-level unemployment. Because it will not alleviate poverty. Because there are much better alternatives to help poor families.”

The earned-income tax credit, they note, is targeted at households based on need, they noted, whereas many people working at or near the minimum wage are not poor.

Economists who support a wage hike to $9 or $10.10 per hour generally agree that the earned-income tax credit is well targeted to help alleviate poverty. But they argue the help to worker paychecks from a wage boost would also help the economy and many lower-income families – whether the workers are officially poor or not – without a big adverse effect on hiring.

[Editor's note: This story has been corrected in two places because the original version inaccurately characterized the goal of the strike organizers.]