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Feb, 21 2015

McDonald\'s under pressure to hike wages amid lacklustre sale

McDonald\'s and its roughly 3,000 US franchisees are fighting to break a long streak of lackluster sales that has made it virtually impossible to boost prices.

With lackluster sales, falling profit and its share price lagging the market, world's largest chain of fast food restaurants McDonald's Corp is facing heat on numerous fronts like domestic woes, low-wages to hourly workers, factory farming and childhood obesity.

The problems for the retailer doesn't end here. With improving US economy and post Wal-Mart Stores setting a higher bar on pay, the company is likely to face stiff competition. Wal-Mart on Thursday said it would increase entry-level pay to $9 an hour. The move may pressurise McDonald's to consider raising workers' wages. McDonald’s will likely be fearful of legal ramifications associated with any labor directive, perceived or otherwise.  

According to a recent Reuters report, McDonald's and its franchisees may have few options but to begin raising hourly wages. McDonald's and its roughly 3,000 US franchisees are fighting to break a long streak of lackluster sales that has made it virtually impossible to boost prices on its famous hamburgers and french fries to cover higher labor costs.

"They are going to have to raise their wages. They cannot afford to be unstaffed," said Gary Chaison, Professor of Industrial Relations, Clark University, Massachusetts.

In past, McDonald's has faced frequent protests by union-supported hourly workers demanding their pay to be increased to $15 per hour from an average that is closer to the federal minimum wage of $7.25 per hour.

Further, according to the report, McDonald's refrained itself from commenting on these issues, but the company referred reporters to an earlier December statement pointing that franchisees set wages for roughly 90 per cent of the chain's more than 14,000 US restaurants, and McDonald's can increase pay only in the small number of restaurants it operates.

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