OM in the News: Burger King–A Tale of Two Countries
Hampus Elofsson, ending his 40-hour workweek at Burger King, had paid his rent and all his bills, stashed away some savings, yet still had money for nights out. That is because he earns $20/hour — the base wage for fast-food workers throughout Denmark and 2.5 times what many fast-food workers earn in the U.S. “You can make a decent living here working in fast food,” he says. “You don’t have to struggle.”
In Denmark, fast-food workers are guaranteed benefits their American counterparts could only dream of, writes The New York Times (Oct.28, 2014). There are 5 weeks’ paid vacation, paid maternity and paternity leave and a pension plan. Workers must be paid overtime for working after 6 p.m. and on Sundays, and they often get their work schedules a month in advance.
In contrast, fast-food wages in the U.S. are so low that half of the nation’s fast-food workers rely on some form of public assistance: they earn an average of $8.90 an hour. As a shift manager at a Burger King near Tampa, Anthony Moore earns $9 an hour, typically working 35 hours a week and taking home around $300 weekly. Not surprisingly, turnover rates differ significantly: Danish estimates are that 70% of Burger King and Starbucks workers stay for more than a year. By contrast, McDonald’s found its workers’ average tenure in the U.S. was 8 months.
So if Danish chains can pay $20 an hour, why can’t those in the U.S. pay the $15 an hour that many activists and fast-food workers have been clamoring for? Economists say the comparison is “apples to autos” because of fundamental differences between Denmark and the U.S., including Denmark’s high living costs and taxes and a generous social safety net. The Danish fast-food restaurants are also less profitable than their American counterparts. The higher wages and the higher menu prices help explain why there are 16 McDonald’s per million inhabitants in Denmark, but 45 McDonald’s per million in the U.S.
Classroom discussion questions:
1. Why does the U.S. restaurant industry predict “a wave of woe if pay were to jump toward Denmark’s levels?”
2. What are the advantages and disadvantages of each system?