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September 16, 2013 8:29 AM What Rich People Would Pay for Wendy’s Coffee Doesn’t Matter

By Keith Humphreys

Labor protests were recently held in front of more than 1,000 fast food restaurants around the country. As a result of our job-killing recession and subsequent job-lite recovery, the fast food workforce is no longer composed mainly of teenagers. It now comprises many adults who are raising families, which is pretty hard to do on eight or nine bucks an hour and no health insurance benefits. Hence the protesters’ call for unionization and higher wages.

Many members of the San Francisco Bay Area Starbucks-going crowd (of which I am one) responded to the protests by lambasting Wendy’s, McDonald’s, Burger King et al., e.g., “Starbucks charges more for coffee so that it can give its staff good wages and benefits. Wendy’s is just too stupid or too cheap to do the same thing”. When I hear comments like this from my fellow well-intentioned members of the upper-middle class, they make surface sense to me for a few seconds. But then I remember my experience working in a fast food restaurant.

I flipped burgers for Wendy’s to support myself in college (and I don’t mean in the Romney-esque way of supporting those expenses that selling my stock portfolio didn’t cover, I mean I worked there so that I could eat and pay the rent). It was a thoroughly unpleasant job and I both admire and feel sympathy for people who are doing it 40-60 hours a week with no end in sight.

In my days working for the freckled little girl with the red pigtails, I was struck by the similarity of the customers and the staff. Both included some college students and senior citizens just scraping by, many working class adults and some people in the middle class. We certainly had customers who made more money than the two guys who co-owned and managed the restaurant, but not many of them. Later research has shown that my casual observations were roughly in keeping with national trends: Once their household income breaks $60,000, families start choosing to eat in sit-down restaurants rather than order a burger and fries at the counter.

That’s why the San Francisco Starbucksians’ critique of Wendy’s business practices is irrelevant: The people advancing it are above the income level of the people who typically eat at Wendy’s. That affluent people who never eat fast food express hypothetical willingness to pay Starbucks-level prices for Wendy’s coffee doesn’t persuade the management to raise prices and therefore doesn’t help the fast food workers either.

Not every business can make its living by selling things to the declining proportion of the population that is doing well financially. Fast food is one example of an industry where a majority of both the workers and the customers simply don’t have that much money. There may not therefore be a way for Wendy’s et al. to raise wages without losing a significant chunk of their customer base, which in turn would probably lead to employee layoffs (Megan McArdle argues that Wal-Mart is in the same boat).

The solution to the misery of parents trying to raise families on Wendy’s wages will therefore likely have to come from outside the fast food industry. We need a much stronger economy that increases the number of people in the population who can afford to pay high prices, moves the current fast food workforce into better jobs and returns burger flipping to young short-timers who are on their way to something better.

[Cross-posted at The Reality-based Community]

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Keith Humphreys is a professor of psychiatry and behavioral medicine at the Stanford University School of Medicine.
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