Fast-food workers and labor groups agitating on their behalf may have just won a minor battle in the war for higher wages.
The National Labor Relations Board ruled on Tuesday that McDonald's (MCD) could be held jointly liable for labor and wage violations by its franchises.
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According to The Wall Street Journal, this move makes companies like McDonald's more vulnerable to campaigns by labor groups and workers for higher wages and improved conditions. We've seen ongoing fast-food worker protests where activists have called for a $15 wage. The national minimum wage is currently $7.25.
The impact could go beyond McDonald's (where franchises account for 90% of the company's 14,000 U.S. restaurants) and affect fast-food chains like Wendy's (WEN) and Burger King (BKW), which have been selling their restaurants to franchise owners.
In the accompanying video, Yahoo Finance contributor Henry Blodget says companies like McDonald's need to start paying workers more and sharing the value these corporations create.
"In the U.S. we are starving the middle class, because we have given all of the power of capitalism to shareholders who are trying to drive profits as high as they absolutely can," he says.
The result, Blodget notes, is record high profit margins for corporations, but the consumers are strapped. "Nobody has any money," Blodget notes.
Meanwhile, he thinks if "fantastically rich corporations" started paying "better than subsistence wages" to their employees, that would help the entire economy because as customers, the workers can purchase more.
But even if employees could buy more food from McDonald's or products from Walmart (WMT), would consumers more broadly see the prices of these goods rise if the restaurants and retailers did raise wages, as the argument is often made?
Blodget says only if the company chooses to.
"Corporations do not need to make as much money as they are making, period," he argues. "If you [as a company] decide, 'we just have to keep raising our profit every year to please Wall Street' ... then you are going to have to pass through the increases [to customers] and sales will drop."
But the idea that this has to be put on the consumers, he says, is false. He says companies can choose to dig into their "massive profit pool" to share a little bit more with their employees.
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- Consumer Discretionary
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