The Big Tip that America’s Servers Never See

The CEOs of America’s 20 largest restaurant chains must be providing diners some mighty fine service. Their ‘performance’ is costing Uncle Sam nearly a quarter-billion dollars a year.

By Sam Pizzigati

America’s food-service giants, this new study documents, are growing the gap between the nation’s rich and everyone else.

A good many Americans now know the high-finance games that JPMorgan Chase and other big banks like to play — at our expense. And big oil giants like ExxonMobil have been outraging Americans for years.

But plenty of other corporate giants that inflate our inequality have been flying under the radar screen. Who, for instance, has ever heard of Darden? Or Yum! Brands?

These little-known outfits just happen to rate as two of the biggest corporate behemoths in the restaurant industry. They’ve been squeezing workers — and soaking taxpayers — as relentlessly as any enterprises in America. Yet they barely have any national profile at all.

That may be about to change.

Last week, on the eve of the National Restaurant Association annual meeting, two top think tanks — the Institute for Policy Studies in Washington and Demos in New York— released new studies that detail how America’s food-service giants are growing the gap between the nation’s rich and everyone else.

This week protesting restaurant workers will be taking that message to the streets. Many of these workers are currently laboring at the $2.13 hourly federal minimum wage for tipped workers, a base that hasn’t budged since 1991.

Restaurant workers nationwide take home so little pay, notes the new Institute for Policy Studies Restaurant Industry Pay study, that over half of them have to depend on food stamps and other taxpayer-subsidized safety net programs.[pullquote]Over half of restaurant workers have to depend on food stamps and other taxpayer-subsidized safety net programs.[/pullquote]

But the subsidies that taxpayers are laying out for the food-service industry actually go far beyond these federal safety net outlays. The tax dollars of average Americans are also subsidizing the sky-high pay that goes to the restaurant industry’s top executives.

Under current tax law, corporations can essentially deduct off their taxes whatever many millions they pour into top executive pockets, so long as they define those millions as “pay for performance.”

In 2012 and 2013, this loophole saved the restaurant industry’s 20 top corporations — and cost the federal treasury — $232 million, enough, notes the Institute for Policy Studies, “to cover the cost of food stamps for more than 145,000 households for a year.”

Darden, the restaurant industry heavyweight that runs national chains like Red Lobster and Olive Garden, picked up $3 million in these tax savings. Yum! Brands, the corporate home of Taco Bell, KFC, and Pizza Hut, grabbed another $23 million.

And the top execs at Darden and Yum! Brands did plenty of personal grabbing of their own. In 2012 and 2013, Darden CEO Clarence Otis walked off with nearly $9 million in “performance-based” compensation, on top of over $3 million in routine salary and perks. The chief exec at Yum! Brands, David Novak, pocketed $67 million in “performance pay” for the two years.

Other top food-service industry executive players actually pulled in considerably higher sums. The industry’s king of the hill, Starbucks CEO Howard Schultz, cashed in an amazing $230 million worth of stock options in 2012 and 2013, a windfall totally claimed as “performance-based.”[pullquote]Fast-food CEO pay has quadrupled since 2000.[/pullquote]

Overall, fast-food industry CEOs averaged $23.8 million in 2013, more than quadruple, notes the new restaurant industry report from Demos, what the industry’s top execs averaged in 2000. Average wages for fast-food workers, by contrast, have inched up a miniscule 0.3 percent since then.

The fast-food industry, the new Demos Fast Food Failure study goes on to observe, now sports America’s widest corporate pay gap between CEO and workers. Fast-food chief execs in 2012 took home over 1,200 times the pay of average fast-food workers. In 2013, calculates study author Catherine Ruetschlin, the ratio once again topped over 1,000 times.

Restaurant industry movers and shakers have essentially hit upon the perfect formula for executive success: Pay your workers close to as little as the law allows — and make sure that no one changes the law. The National Restaurant Association has emerged as the leading corporate lobby powerhouse against raising the federal minimum wage.

The NRA’s lobbying lets image-conscious food-service industry CEOs have their cake and eat it, too. Case in point: Nigel Travis, the top exec at Dunkin’ Brands, the corporate front for Dunkin’ Donuts and Baskin Robbins. Travis told an interviewer recently that he believed “the minimum wage will go up.” Added the exec: “So there’s no point fighting that.”

“Maybe there’s no point for Travis,” quips the Institute for Policy Studies study co-author Sarah Anderson. “He’s got the NRA to do that job.”

The National Restaurant Association, adds IPS study co-author Marjorie Elizabeth Wood, currently boasts a $65 million budget. Those millions don’t just go to blocking minimum wage hikes. The NRA is also pushing against legislation that would guarantee American workers paid sick leave.

[toomuch_promo]

Pushing back this week — against the NRA — will be activists from the Restaurant Opportunities Centers United, the National Domestic Workers Alliance, and National People’s Action. They’ll be staging a national march to “kick corporate cash out of Congress.”

This growing worker challenge to the restaurant industry status quo has industry powerhouses more than a little bit spooked. In its 2014 Securities and Exchange Commission filings, McDonald’s even cites as one of its new “risk” factors the “increasing focus on workplace practices and conditions” that “may intensify with increasing public focus of matters of income inequality.”

The suits at McDonald’s can’t seem to figure out how to ease this risk. Last week’s think tank reports on the restaurant industry suggest a simple solution: Just stop manufacturing more inequality.

Labor journalist Sam Pizzigati, an Institute for Policy Studies associate fellow, writes widely about inequality. His latest book: The Rich Don’t Always Win: The Forgotten Triumph over Plutocracy that Created the American Middle Class, 1900-1970.