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The Fast-Food Fine Print That Could Explain America’s Stagnant Wages

The "no-hire" rule, explained

Why wages are stagnant across the country
NEW YORK CITY - APRIL 15 2015: Fast food workers marched in Manhattan's Upper West Side to demand a $15 per hour federal minimum wage.

Cheap chicken nuggets and burgers keep Americans hooked on fast food, but those drive-thru bargains are built on the back of cheap labor — and economists believe efforts to keep fast-food wages low are contributing to stagnated wages across the U.S. economy, the New York Times reports.

One factor keeping fast-food pay low is something called a “no-hire” clause. As the Times explains, “Some of fast-food’s biggest names, including Burger King, Carl’s Jr., Pizza Hut and, until recently, McDonald’s, prohibited franchisees from hiring workers away from one another, preventing, for example, one Pizza Hut from hiring employees from another.” That means a cook at say, Burger King can’t go take a job at another BK location across town to make 50 cents more an hour, nor can they use that prospect as a bargaining chip to get a raise.

Such no-hire rules affect “more than a quarter of the fast-food outlets in the United States.” (These are different from standard no-compete clauses which could prohibit employees of Domino’s from going to work at Pizza Hut, for example.)

As if the idea of being forced to sign such an agreement for a $9-an-hour job weren’t infuriating enough, workers likely don’t even realize they’re doing so. That’s because, as the Times points out, these stipulations usually can’t be found in anything workers sign during the hiring process; rather, they “are typically included in a paragraph buried in lengthy contracts that owners of fast-food outlets sign with corporate headquarters.”

Based on data gathered by Alan B. Krueger, an economist at Princeton University, the Times estimates that the regulations affect more than 70,000 restaurants in the U.S.

While supporters say that these restrictions are simply a way for restaurants to protect the investments they’ve made in training workers by limiting staff turnover, opponents argue that they violate labor laws, and multiple lawsuits have recently been filed against companies like McDonald’s and Carl’s Jr. claiming just that. (McDonald’s has since eliminated the clause from its contracts, but denies any wrongdoing.)

On average, fast-food workers make just $300 per week before taxes, according to the Times, “about a third of what the average private sector worker earns.” It’s why many have taken to the streets in recent years to march in Fight for $15 protests aimed at raising awareness, putting pressure on fast-food giants like McDonald’s, and pushing Washington to increase the federal minimum wage — which has been set at $7.25 since 2009. With restaurant jobs now dominating the U.S. workforce and more than four million people currently working in the fast-food industry, restrictions that keep cashiers and fry cooks from earning higher wages affect every aspect of the U.S. economy.

Why Aren’t Paychecks Growing? A Burger-Joint Clause Offers a Clue [NY Times]
Restaurant Jobs Now Dominate the Workforce. That's a Bad Thing [E]
More Labor Coverage on Eater [E]