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OM in the News: Burger King–A Tale of Two Countries

November 1, 2014
Anthony Moore, at Tampa Burger King, calls his wage "very inadequate"

Anthony Moore, at Tampa Burger King, calls his wage “very inadequate”

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?

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2 Comments leave one →
  1. terry boardman permalink
    November 2, 2014 11:26 pm

    Be fair- lets have comparable numbers in the article , then we can do an effective discussion.

    Example from article:”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.”

    Thats $20.00 per hour before high Danish taxes- gross pay!

    Now the comparison:
    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”-

    If he is paying no taxes , his gross- not his taking home as the article says – is $ 315, so there is a problem with the numbers.

    I teach my students to be skeptical of these articles that have sloppy reporting as this one has- its making a political point , not an economic point

  2. November 3, 2014 2:21 pm

    Terry,
    You make some excellent points. Indeed, we often select topics that will be controversial (eg, child labor in Bangladesh, abuse of migrant Nepali workers in Malaysia, etc.) so that students can see and argue various views.

    The blog also is forced to simplify longer and complex articles (our editors claim no one wants to read more than 300 words!) so many of the finer points are lost. In the case of the NYT article, I think the main point was that the European system is quite different than that in the US. Workers have a social contract that pays them more, but provides a high level of support. This applies not only in fast food, but in retail stores as well. German department store workers, for example, have a similar situation vis a vis their US counterparts.

    But this European approach does impact profits, as the article points out– and discourages growth. Which is better? Do your students pick up on the facts you mention? What do they think when you share the article with them?

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