Why fast food strikes and proposed wage increases don't matter (Part 8 of 10)
High employee turnover
The restaurant industry’s high employee turnover also makes it harder for fast food companies to unionize. Even within the restaurant industry, quick service shows the highest turnover.
Highest employee turnover among restaurant groups
While most restaurant groups—like casual dining, fast casual or family dining, and upscale or fine dining—saw employee turnover rates of below 80% for employees working on an hourly basis, quick service restaurants’ turnover stood above 80% during the first quarter of 2011. In the first quarter of 2009, hourly crew turnover was as high as 120%, which means if there were 100 active workers working at a restaurant on average, there would have been 120 people who were laid off or had quit during the year.
Similar case for managers
Employee turnover among managers in quick service restaurants is also the highest, showing above 25% turnover compared to below 25% for the other restaurant types. What’s interesting from the chart is that quick service turnover actually increased from the first quarter of 2009 to 2011, unlike the overall declines we saw for hourly wage employees. This likely reflects the difference that managers tend to be more experienced and educated, so as the economy improves and more job openings arise, many are jumping towards jobs with better pay, which are more attractive and possibly more demanding and challenging. On the other hand, as long as unskilled unemployment remains elevated, turnover will remain low because there’s less probability of hourly workers finding alternative jobs.
Unemployment rate remains high
Although the overall unemployment rate has gradually fallen from 2011, thanks to continuous quantitative easing in the United States by the Central Bank, the past few quarters of performance haven’t been as fruitful for workers age 16 to 19 and 20 to 24, who make up 60% of fast food workers. From the first quarter of 2011, overall unemployment has fallen from 9% to 7.5% as of the second quarter of 2013. But the unemployment rate for workers aged 16 to 19 only improved from 24.6% to 24.2%—a decline of 1.63%. Rates for 20-to-24-year-olds have done better, falling from 15.2% to just 13.3%—a decline of 1.9%.
Time favors fast food business owners
Because these workers are easily replaced, it will be hard for strike organizers to create a large impact—especially when they’re targeting the general fast-food industry (even though McDonald’s has been the primary target due to its large size and well-known brand). Even if strike organizers do target specific companies, restaurant owners aren’t likely to concede because doing so would create a precedent for possible further wage increases, and they would lose competitive edge to other fast food shops. As a result, restaurants weren’t shut down for more than a few hours. Given their low wages and likely limited cushion, these workers can’t continue striking for long. So time favors restaurant and business owners.
Browse this series on Market Realist:
- Part 1 - Walkouts and strikes are gaining momentum beyond McDonald’s (MCD)
- Part 2 - Must-know: Minimum wage of $7.25 isn’t as low as people may think
- Part 3 - Why hiking minimum wage to $15 will mean faster technology changes
- Consumer Discretionary
- fast food
- employee turnover