Is the introduction of a standard minimum wage always bad for business? Studies can argue either way, but the long term social and cultural impact of a minimum hourly rate can be seen in nearly all developed countries. The teething pains can be acute, however, especially in the service sector.
On a global level, the right to be paid a minimum wage is less prevalent than you may think. There has only been a duty to pay a minimum wage in the UK since 1998 and significant players across Europe, including Italy and the Scandinavian countries of Denmark, Finland and Sweden do not have any equivalent legislation. The implementation of a higher ‘living wage’ is even more unusual and typically restricted to voluntary opt-in.
In the United States, the federal minimum wage stands at a low $7.25 and hasn’t increased since 2009, but each state is entitled to set its own rates locally, even if that is less than the federal minimum. All that is set to change, however, as President Barack Obama seeks to implement a higher minimum across the country and cities including Seattle, San Francisco and last week, Los Angeles plan to introduce a $15 hourly minimum by 2020.
Minimum wage protestors assembled outside the annual McDonalds Corp shareholders meeting on 21 May 2015. Amongst them were members of the Fightfor15 group, seeking a $15 minimum wage to be enforced in the next five years. One difficulty for the fast-food chain is that only 90,000 of the 750,000 McDonalds employees across America are employed by McDonalds directly, the remainder being employed by independent franchised companies.
I joined Sally Bundock and Ben Thompson on BBC Business Live on 21 May 2015 to discuss the impact of a minimum wage and the implications for McDonalds and its franchisees. Later the same day I also joined Michael Wilson for the Arise News Business Hour to consider the impact of the change on corporate America.