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.

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

[2] Ibid.

[3] Ibid.

[4] Ibid.

Google in the E.U. and U.S: Privacy Rights and Obligations

The European Court of Justice, the E.U. Supreme Court, ruled on May 13, 2014 that Google must defer to the right of users to have links about themselves deleted. Google’s management had sought to obviate any obligation to act on such requests. The New York Times points out that the decision indicates “that such companies must operate in a fundamentally different way than they do in the United States.”[1] The ring of fundamentality has implications for the international strategies of internet companies and affords us a better look at how business plays out in society differently in different societies.

Depending on the impact of cultural differences between a given company’s home and host markets impact the management of the company as a whole, either a global (i.e., one-size-fits-all) or multidomestic (culture-specific managements) international-business strategy is optimal. Although it might seem that a “market-making” function like providing a search engine or social-media medium would naturally fit the global approach to international strategy, the impact of differing societal values bearing on relevant rights and obligations can render the multi-domestic approach superior. The ECJ’s decision may push Google’s management further in this direction—the root cause being the differing power and attitude toward business in the E.U. and U.S.

Mina Andreeva, a spokesperson for the E.U. Government’s executive branch, noted that the court’s decision switches the obligation from users to the internet companies like Google and Facebook to prove that user-data is still needed to be kept online. “Today, it’s up to consumers to prove this, but this is not very easy or effective,” she said. “We have reversed the burden of proof.”[2] Put another way, consumers face the uphill battle in the U.S. whereas managers do in the E.U. This difference reflects a basic, or fundamental, difference societally in terms of how much business is valued in society.

Put in terms of a theorem, the more societal values reflect or value the values that are held in the business sector, the more likely it is that societal institutions place obligations on customers (or the general public) and rights on companies. The case of Google suggests that the E.U. and U.S. societies differ fundamentally in the extent to which business values have stature as societal values.

1. James Kanter and Mark Scott, “Google Must Honor Requests to Delete Some Links, E.U. Court Says,” The New York Times, May 13, 2014.

2. Ibid.

Who Won the Kentucky Derby?

This might seem like a simple question. California Chrome won the race in 2014. That is to say, the horse by that name won. As the Derby is a race, a jockey would have played a decisive part in the win. The aptitude may well be in the horse, but the racing skill lies with the person perched on the animal. So the jockey, Victor Espinoza, won the race. If his role was essentially that of coaching or directing the horse, which unlike a racing car is a living creature with a brain to boot, then could the argument be made that the horse’s trainer—in this case Art Sherman—also won? Although Sherman quipped during a post-race interview that he had felt like he was on the horse for the last 75 years, surely a distinction can be drawn between a player and a coach. After all, Babe Ruth hit all those homeruns—not his coach. To win a race, the winner must presumably be in the race—and not vicariously. Least of all can it be said that the “horse’s owner”—an expression like “slave owner” in that a living being is “owned”—won the race. Otherwise, a person could simply wave money around in lieu of actually running to qualify for an Olympic context in track and field. To give wealth such power—coming at the expense of reason itself—would surely point to a rather distorted set of societal values. I contend that both NBC Sports’ post-race coverage and the Derby’s trophy ceremony reflect and in fact affirm the hegemony of business values in American society.

Just before interviewing the jockey, a NBC Sports journalist prefaced, “We interviewed the owner, then the trainer, and now the jockey.” Lest it be pointed out that the jockey had been busy, the trophy ceremony followed the same pattern. Kentucky’s head of state handed to trophy to Steve Coburn, who with the other owner, Perry Martin, were all too pleased to speak on their win. In fact, the governor made it quite explicit by announcing, “To the Martins, to the Coburns, our victor.” The horse and jockey were not even in the camera shot. Wealth had won the race without breaking a sweat. Next came the trainer’s turn, and then, last and apparently least, the jockey.

Imagine running a race, and winning it only to watch the metal being given to your sponsor. “To Coke, our victor.” In enabling a runner, horse, or jockey to train, a sponsor is not the winner (for otherwise the sponsor would be enabling itself). While it is understandable that wealth is highly esteemed in the business sector, the imposing of this “top dog” in society itself distorts non-business activities into the prism of commerce. In the context of managerial capitalism, particularly where managers style themselves as “coaches,” it is no accident that coaches and trainers in sports come to be treated  as ends rather than means—as the winners rather than as facilitators on the sideline. It is important to remember that Art Sherman was not on the horse that won the Derby in 2014.  

In short, the priorities evinced by NBC Sports and the Derby reflect those in the business world at the expense of the world of sports; overreach can thus be seen rather clearly. Put another way, the horse race provides us with a snapshot of just how much American society has formed around the ideological crucible of Wall Street. At least from the jockey’s standpoint, the over-reach both in terms of ownership and managerialism violates the ethical principle of fairness (i.e., the trophy should have gone to the jockey, as he is the person who actually raced). Sadly, the exaggeration or over-reach was already so engrained in American society even before the race that I bet few if any Americans even noticed how very odd the trophy sequence is.