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McDonald's is raising wages, but nearly 90 percent of its restaurants won't be affected

This woman just might get a raise soon.
This woman just might get a raise soon.
Getty Images
  1. McDonald's announced Wednesday that it would raise starting wages to $1 per hour over the local minimum wage.
  2. The company will also give some employees the opportunity to earn paid time off.
  3. McDonald's predicts that by the end of 2016, the average hourly rate at company-owned restaurants will be "in excess of $10."
  4. The announcement comes amid a wave of lower-wage employers announcing higher entry-level wages, including Walmart, Target, Ikea, and T.J. Maxx.

Only 10 percent of McDonald's stores are directly affected

McDonald's announced Wednesday that it would raise its entry-level wages at company-owned stores and allow workers with one year or more of tenure to earn paid time off, in a move that the company estimates will affect 90,000 workers at the roughly 1,500, or 10 percent, of its US stores that are company-owned. The move will raise average wages at McDonald's stores from $9.01 per hour now to $9.90 in July and to more than $10 in 2016, the Wall Street Journal reports.

The move comes as a slew of other massive, low-wage service-industry employers, most of them in retail, also announce their plans to raise wages. These companies' decisions to raise wages may be important signs that the job market is finally picking up steam and that employers have to compete for workers by offering higher pay. Higher wages have been a missing piece of the economic recovery until recently.

Higher wages can also be a good business decision, as it can mean lower turnover and higher productivity.

There's a big trend toward higher retail pay

McDonald's has been one of the chief targets of minimum wage activists in recent years. While McDonald's wages will be nowhere near the $15 per hour many of those activists want, the move could boost the company's image. And the company's image arguably needs a boost. CEO Don Thompson quit in January amid plummeting earnings, as fast-casual restaurants continue to eat into the company's customer base. The image problems extend into labor relations, as well. Just this week, National Labor Relations Board hearings started in which McDonald's is accused of retaliating against workers who organized for higher wages.

That hearing raises the question of whether McDonald's is a "joint employer" along with its franchisees and therefore is liable for its franchisees' actions. The wall between the parent company and franchises is intact in this decision to raise wages — the 90 percent of McDonald's stores that are operated by franchisees (and not the company itself) won't be affected by this decision.

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