Tags: Wal-Mart | McDonalds | Ethan Harris | pay

BofA: Wage 'Supersizing' at McDonald's, Wal-Mart Isn't So Impressive

By    |   Friday, 03 April 2015 10:14 AM

Wal-Mart Stores and McDonald’s are among the companies that plan to raise minimum pay this year, but those hikes don’t necessarily reflect a broader trend, according to Bank of America Merrill Lynch.

McDonald’s is raising minimum wage by about 10 percent at the 1,500 restaurants directly owned by the parent company. Those outlets employ about 90,000 workers, while the 750,000 people who work for franchises aren’t included in the pay hike.

“Unfortunately, this wage ‘supersizing’ looks a lot less impressive on closer inspection,” Ethan Harris, global economist at Bank of America Merrill Lynch, said in an April 2 report obtained by Newsmax Finance. “Clearly the direct impact on average wages is low.”

The wage hikes at McDonald’s and Wal-Mart need to be understood in the context of a broader trend in the retail and leisure industries, whose pay growth exceeds the 2 percent gain for the overall economy. Assuming all 90,000 McDonald’s employees get a raise and no one else, the average increase for all workers only comes to 1.1 percent, Harris said.

He said the best measure of broader wage trends is the employment cost index, which is now rising 2.3 a year. That’s better than the 2 percent average for the past five years.

Goods-producing industries are weighing on growth in pay, Harris said. The mining industry, which includes oil drilling, is being pressured by the crash in oil prices since last summer. The strong dollar may be taking a toll on the manufacturing industry as U.S. goods become more expensive for foreign buyers.

“History shows that wages respond very slowly to a tight labor market,” Harris said. “In the last three periods of tight labor markets, wage growth accelerated only a few tenths [of a percent] per year.”

Employers added only 126,000 jobs in March, the fewest since December 2013, according to the Associated Press. That reading snapped a streak of 12 straight months of gains above 200,000.

The Labor Department said the unemployment rate held steady at 5.5 percent, according to the newswire.

Factories cut 1,000 workers, ending a 19-month hiring streak, while construction jobs fell by 1,000, the first drop in 15 months. The mining industry shed 11,000 jobs as energy companies cut back on drilling.

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Wal-Mart Stores and McDonald's are among the companies that plan to raise minimum pay this year, but those hikes don't necessarily reflect a broader trend, according to Bank of America Merrill Lynch.
Wal-Mart, McDonalds, Ethan Harris, pay
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2015-14-03
Friday, 03 April 2015 10:14 AM
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