Once upon a time in America, if worse came to worst, a hungry citizen without much money could fill up on fast food. Those days are gone. Now, even McDonald's is a luxury some families cannot afford. It's not that Americans as a whole don't have cash. It's that people with the least money are seeing their share of the pie decline. The top 10% have seen their wealth compound. The bottom 50% is seeing nothing but a slight increase in its crumbs.
Last week, McDonald's CEO Christopher Kempczinski told investors that prices have risen so high at the fast-food chain that sales to one of its core customer bases, low-income households, have dropped by double digits. Meanwhile, traffic from higher earners increased by nearly as much.
He added that higher beef and labor costs have increased prices and driven away lower-income customers already squeezed by the rising costs of groceries, clothes, rent, and child care.
The sanctimonious will look at this statistic and declare that the poor should forego restaurants altogether and learn to cook. This dismissal is easy if you assume that people with little money are lazy bastards who don't deserve any sunshine in their lives. But is that the case?
Hardly. There are many 'working poor'. They put in full-time hours, but their wages have lagged. And infamously, the federal minimum wage hasn't increased in 16 years.
Note: Defenders of the status quo say increased wages will bankrupt businesses. Yet when local laws mandated higher minimum wages, company failures have not increased. And workers came out ahead even after their scheduled hours declined in some cases. In addition, saying that increased wages are a death knell ignores what's happening to executive pay.
In the economy as a whole, CEO compensation has increased exponentially, but for the average worker, wages have lagged even the rise in worker productivity. Is there evidence that executives are more productive than their predecessors? No. But that hasn't stopped wage wealth from flowing upward.
CEO compensation grew by 1,094% from 1978 to 2024, while typical worker compensation grew just 26%. This increase occurred despite productivity growing by over 80% during this time. And it has led to average CEO compensation increasing from 21 times the average worker's salary in 1965 to 281 times in 2024.
The fast food industry provides a glaring example of this disparity. Wendy's CEO, Kirk Tanner, earns 604 times the median worker's pay. And that's the 'best' score. Starbucks CEO, Brian Niccol, takes the cake with a ratio of 6,666 to 1. While McDonald's CEO, the aforementioned Christopher Kempczinski, scrapes by with 1,014 times the average McDonald's employee's salary.
Meanwhile, thanks to the wealth-friendly tax policies of Ronald Reagan, George W. Bush, and Trump, America's wealthiest pay a far lower tax rate today than during the years of America's best GDP growth. Yet apologists for the already-have-a-lot demographic justify tax cuts as GDP boosters, despite having no evidence for the claim.
But back to the consumer.
McDonald's is not the only business that has seen a shift in sales from the have-nots to the haves. The LA Times reports that:
A recent earnings report from Delta offers yet another illustration. While Delta's main cabin revenue fell 5% for the June quarter compared to a year ago, premium ticket sales rose 5%, highlighting the divide between affluent customers and those forced to be more economical.
At hotel chains, luxury brands are holding up better than low budget options. Revenue at brands including Four Seasons, Ritz-Carlton and St. Regis is up 2.9% so far this year, while economy hotels saw a 3.1% decline for the same period, according to industry tracker CoStar.
The continued pressure on real wages for those at the bottom has led to financial and credit catastrophe for many. The Times further reports:
Consumer credit delinquency rates show just how much low-income households are hurting, with households that make less than $45,000 annually seeing "huge year-over-year increases," even as delinquency rates for high- and middle-income households have flattened and stabilized, said Rikard Bandebo, chief strategy officer and chief economist at VantageScore.
Again, many blame the victim. But how much can you blame people for living beyond their means when their means have stagnated while the price of everything has increased? American conservative folklore celebrates Horatio Alger's Ragged Dick and others, both fictional and non-fictional, who have clawed their way from penury to prosperity. But that ignores two factors.
One, society is a pyramid. There are many at the bottom. There are few at the top. Imagine a child with the ambition to be a judge. There are more than 1.3 million lawyers in the US. Fewer than 32,000 judges, including 1,770 federal judges. And only 9 Supreme Court Justices. For every Clarence Thomas (credit where credit is due, he parlayed poverty in coastal Georgia to a catbird seat at the bribery high table), there are 1,000s who, despite hard work, drive, and aptitude, have to settle for less.
Two, the American Dream is a fantasy. The US prides itself on being a meritocracy. But the facts are otherwise. Today, a child born at the bottom has a greater likelihood of improving their circumstances in most European countries than they do in the US.
The wealthy have rigged the game. Now, the US is a great place to make a billion. It is a shite place to make a living.
