May 13, 2021 - Economy

Companies turn to pay hikes to lure workers

A green dollar sign against a pink background

Illustration: Brendan Lynch/Axios

More hourly workers are getting a pay bump. Thank the new war for employees.

Why it matters: To meet the demand that's only expected to get more ferocious as reopening continues, companies are having to bid up to attract workers.

Driving the news:

  • McDonald's today said it will raise hourly wages — entry-level workers will be eligible for as much as $17 per hour — at corporate-owned restaurants.
  • Amazon says it will pay $17 per hour on average for 75,000 new workers it wants to hire, $2 more than its usual starting wage.
  • Chipotle restaurant workers will make an average of $15 per hour by the end of June, it said earlier this week.
  • Wendy's said it's bracing for higher labor costs during its earnings call.

The backdrop: Although millions are unemployed, businesses — especially restaurants — say workers are hard to come by.

  • Pandemic-era factors — lack of child care, fear of contracting the virus and more generous unemployment benefits — have been cited as the reason.
  • Food-service workers during the pandemic have amplified an ongoing call for better working conditions, ABC News reports.

The companies hope the pay hikes — or generous benefits or bonuses — help lure scores of new workers (and keep the ones they have) in preparation for a busy summer.

  • What to watch: The McDonald's wage hike won't affect the franchisees, who own 95% of its U.S. restaurants, but they'll likely feel pressure to follow suit, Axios' Felix Salmon notes.

The other side: "A lot of companies are wary of offering permanent measures like wage raises" and are opting for one-time incentives instead, James Knightley, ING's chief international economist, tells Axios.

  • The reason: A possibility that when pandemic quirks ease, there will be "a glut of labor," Knightley says.
Go deeper