"The greatness and the genuine trait of your thought and writings lie on the fact that you positively and interestingly make use of philosophical thoughts and thoughtfulness in order to deeply and concretely cogitate about America's social issues. . . . This does not mean that your thought is reducible to your era: your thought, being inspired by issues characterizing your era . . . , overcomes your era and will still likely be up to date even after your era, for future generations." Bruno Valentin

Friday, May 30, 2014

McDonalds and Income Inequality: The Role of Opportunity

In his text, Capital in the Twenty-First Century, Thomas Piketty claims that economic inequality increases societally when the rate of return on capital exceeds the growth rate in national income or GNP. Rather than being an aberration, this condition tends to be the case, the economist contends. To be sure, expanding opportunity can mitigate the increasing inequality, but the “floorboard” is slanted and thus is bound to favor capital over labor. Whereas Marx thought the tendency is unlimited in extent, Piketty argues that at some point the inequality of wealth will stop worsening. This idea seems like Einstein’s thesis that nothing can go faster than the speed of light.  In the light of Piketty’s theory, we can perhaps read more into Don Thompson’s response as workers were protesting the company’s shareholder meeting on May 22, 2014. In short, the CEO illustrates not only a preference for capital over labor in line with ROI>income-increase, but also the weakness in increased opportunity as a mitigating factor.

Thomas Piketty, a European economist specializing on inequality 
(Image Source: The Guardian)

With 800 protesters outside vocalizing their $15-per-hour proposal (“demand” is too strong, and, frankly, rather presumptuous), Thompson told the shareholders, “We respect the fact that they want to challenge us relative to wages.”[1] This rather odd statement essentially relativizes the pressure as “challenging.” In other words, the language is euphemistic. Similarly, it could be said that the CEO is challenged by the English language. Consider, for example, “relative to wages.” How about: “We respect the fact that our hard-working workers want a raise.” Instead, Thompson tried to make the issue about opportunity, as if that effectively counters the inequality. Again being challenged by English, the native speaker told stockholders, “We pay fair and competitive wages and we provide opportunity, and we provide job opportunities and training for those entering the workforce.”[2] McDonalds provides opportunity and job opportunities. How much is Thompson’s total annual compensation?

Even if opening the labor-force up were a sufficient justification for paying $7.25 an hour, only one-third of the company’s non-supervisory employees were on their first job.[3] As one of the protesting workers put it, “McDonalds can keep on saying that we are teenagers, but saying it over and over again doesn’t make it true.”[4] The patina of rhetoric is a rather pallid recipe for reputational capital, particularly if the words run up against the brick wall of actual circumstance. That worker had been working at a McDonald’s restaurant for 10 years at $7.25 per hour. The matter of opportunity was exogenous to her case. Ironically, expanding opportunity could actually be expected to put downward pressure on her wage, or at least keep it from increasing even with experience. That is, even a real push for greater opportunity in terms of opening up the job-force to new aspirants could increase the economic inequality between the corporate managers at the headquarters and the workers in the restaurants.

Put in terms of Piketty’s theory, might it be that greater opportunity might increase the economic inequality in some unforeseen ways? At the very least, Thompson’s attempted pivot to opportunity suggests that it may actually be in line with the interests of capital over labor. The fact that an employee had been kept at $7.25 for ten years even as the company enabled teenagers to enter the workforce hints of the underlying existence of a slanted relationship between capital and labor wherein the rate of return can be expected to exceed the rate of increase in income generally and especially at the non-supervisory levels. Leveling the playing field may be more difficult than Piketty supposes.

[1] Bruce Horovitz, “McDonalds Plays Offense on Wages,” USA Today, May 23, 2014.
[2] Ibid.
[3] Ibid.
[4] Ibid.