Portside Date: October 28, 2014

Author: Liz Alderman and Steven Greenhouse

Date of source: October 28, 2014

The New York Times

COPENHAGEN — On a recent afternoon, Hampus Elofsson ended his 40-hour workweek at a Burger King and prepared for a movie and beer with friends. He had paid his rent and all his bills, stashed away some savings, yet still had money for nights out.

That is because he earns the equivalent of $20 an hour — the base wage for fast-food workers throughout Denmark and two and a half times what many fast-food workers earn in the United States.

“You can make a decent living here working in fast food,” said Mr. Elofsson, 24. “You don’t have to struggle to get by.”

With an eye to workers like Mr. Elofsson, some American labor activists and liberal scholars are posing a provocative question: If Danish chains can pay $20 an hour, why can’t those in the United States pay the $15 an hour that many fast-food workers have been clamoring for?

“We see from Denmark that it’s possible to run a profitable fast-food business while paying workers these kinds of wages,” said John Schmitt, an economist at the Center for Economic Policy Research, a liberal think tank in Washington.

Many American economists and business groups say the comparison is deeply flawed because of fundamental differences between Denmark and the United States, including Denmark’s high living costs and taxes, a generous social safety net that includes universal health care and a collective bargaining system in which employer associations and unions work together. The fast-food restaurants here are also less profitable than their American counterparts.

“Trying to compare the business and labor practices in Denmark and the U.S. is like comparing apples to autos,” said Steve Caldeira, president of the International Franchise Association, a group based in Washington that promotes franchising and has many fast-food companies as members.

“Denmark is a small country” with a far higher cost of living, Mr. Caldeira said. “Unions dominate, and the employment system revolves around that fact.”

But as Denmark illustrates, companies have managed to adapt in countries that demand a living wage, and economists like Mr. Schmitt see it as a possible model.

Denmark has no minimum-wage law. But Mr. Elofsson’s $20 an hour is the lowest the fast-food industry can pay under an agreement between Denmark’s 3F union, the nation’s largest, and the Danish employers group Horesta, which includes Burger King, McDonald’s, Starbucks and other restaurant and hotel companies.

By contrast, fast-food wages in the United States are so low that half of the nation’s fast-food workers rely on some form of public assistance, a study from the University of California, Berkeley found. American fast-food workers earn an average of $8.90 an hour.

As a shift manager at a Burger King near Tampa, Fla., Anthony Moore earns $9 an hour, typically working 35 hours a week and taking home around $300 weekly.

To pay fast food restaurant workers a living wage would entail more than raising prices. We would need a national shift in priorities. 1208 COMMENTS “It’s very inadequate,” said Mr. Moore, 26, who supervises 10 workers. His rent is $600 a month, and he often falls behind on his lighting and water bills. A single father, he receives $164 a month in food stamps for his daughters, 5 and 2.

“Sometimes I ask, ‘Do I buy food or do I buy them clothes?’ ” Mr. Moore said. “If I made $20 an hour, I could actually live, instead of dreaming about living.”

Mr. Moore’s daughters receive health care through Medicaid, while he is uninsured because he cannot afford Burger King’s coverage, he said.

“I skip the doctor,” he said, adding that he sometimes goes to work sick because “I can’t miss the money.”

Burger King declined to discuss wages or benefits, saying those decisions were made by its franchise operators. The company said that its “restaurants have provided an entry point into the work force for millions of Americans,” and that the Burger King McLamore Foundation gave some employees emergency financial assistance and college scholarships.

Mr. Schmitt, the economist, acknowledged that it would take some time for the American fast-food industry to adjust to higher wages.

“We would need to phase this in,” said Mr. Schmitt, who is co-editor of the book “Low-Wage Work in the Wealthy World.” “We’ve created a low-road economy, and it’s going to take us some time to build up the speed to get onto the high road.”

In Denmark, fast-food workers are guaranteed benefits their American counterparts could only dream of. Under the industry’s collective agreement, there are five 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.

Unlike most American fast-food workers, the Danes often get their work schedules four weeks in advance, and employees cannot be sent home early without pay just because business slows.

Given the benefits available, Mr. Elofsson, the Burger King employee in Copenhagen, said he hoped to make his career with the company and work his way up to restaurant manager. While the Danish industry does not keep data on worker retention, HMSHost Denmark, which runs the fast-food operations at Copenhagen Airport, estimates that 70 percent of the workers at its Burger King and Starbucks franchises stay for more than a year.

By contrast, an internal study done several years ago by McDonald’s found that workers’ average tenure at the company in the United States was nearly eight months, although the National Restaurant Association said American fast-food workers averaged 20 months on the job.

Danish law does not require fast-food companies or their franchisees to adhere to the wages required by the agreement with the 3F union. But they do, because employees and unions pledge in exchange not to engage in strikes, demonstrations or boycotts. “What employers get is peace,” said Peter Lykke Nielsen, the 3F union’s chief negotiator with McDonald’s.

McDonald’s learned this the hard way. When it came to Denmark in the 1980s, it refused to join the employers association or adopt any collectively bargained agreements. Only after nearly a year of raucous, union-led protests did McDonald’s relent.

In interviews, Danish employees of McDonald’s, Burger King and Starbucks said that even though Denmark had one of the world’s highest costs of living — about 30 percent higher than in the United States — their $20 wage made life affordable.

True, a Big Mac here costs more — $5.60, compared with $4.80 in the United States. But that is a price Danes are willing to pay. “We Danes accept that a burger is expensive, but we also know that working conditions and wages are decent when we eat that burger,” said Soren Kaj Andersen, a University of Copenhagen professor who specializes in labor issues.

Measured in Big Macs, McDonald’s workers in Denmark earn the equivalent of 3.4 Big Macs an hour, while their American counterparts earn 1.8, according to a study by Orley C. Ashenfelter, a Princeton economics professor, and Stepan Jurajda, an economics professor at Charles University in Prague.

And the Danish restaurants are less profitable. With fast-food wages in the United States so much lower than in Denmark, and the price of Big Macs in the two countries similar, Mr. Ashenfelter said, “It must be that U.S. McDonald’s are far more profitable.” 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 United States, Mr. Jurajda said.

McDonald’s declined requests for detailed financial data for its restaurants. But it said in a statement that the countries where it operates “have significantly different cost structures, economic environments and competitive frameworks.” The company added that it and its franchise operators “support paying valued employees fair wages aligned with a competitive marketplace.”

America’s restaurant industry predicts a wave of woe if pay were to jump toward Denmark’s levels. An increase to $15 would “limit employment opportunities” by making fast-food restaurants reluctant to hire, said Scott DeFife, an executive vice president at the National Restaurant Association. “More than doubling the starting wage will dramatically increase costs in an industry that exists on very narrow margins.”

Denmark’s high wages make it hard, though not impossible, to maintain profitability at his restaurants, said Martin Drescher, the general manager of HMSHost Denmark, the airport restaurants operator.

“We have to acknowledge it’s more expensive to operate,” said Mr. Drescher. “But we can still make money out of it — and McDonald’s does, too. Otherwise, it wouldn’t be in Denmark.”

He noted proudly that a full-time Burger King employee made enough to live on. “The company doesn’t get as much profit, but the profit is shared a little differently,” he said.

“We don’t want there to be a big difference between the richest and poorest, because poor people would just get really poor,” Mr. Drescher added. “We don’t want people living on the streets. If that happens, we consider that we as a society have failed.”

Liz Alderman reported from Copenhagen and Steven Greenhouse from New York. Anna-Katarina Gravgaard contributed reporting from Copenhagen.