chapter  13
10 Pages

Global wages in industries with low entry barrier occupations: The case of quick service restaurants, call centers and hotels/motels


Andy Card, a recent White House Chief of Staff, made 85 cents an hour working at a McDonald’s in South Carolina. Jerry Newman, the senior author here, made $5.50-$6.50 an hour doing essentially the same jobs working at McDonald’s in New York and Michigan (Newman, 2007). It’s not too difficult to explain the difference in wages in these two situations. After all, we’re holding constant the type of job, the skill set of the crew members – ok, ok, I flatter myself – and the organization. Most of the almost four dollar difference can be explained by changes in minimum wage laws over the years, and labor market competition. What about a similar comparison, though, between Jerry Newman and a recent graduate of his who worked in a Korean McDonald’s just prior to entering the SUNY Buffalo MBA program. We can still hold constant the type of job, skill set (again the truth is stretched) and organization. But why were my wages almost twice as high? Now the explanation becomes more complex. Differences in labor markets, legislation, macro-cultures, McDonald’s strategic intent in Korea and Asia in general, individual expectations of crew members – all these factors and more may influence and explain wage differences. In fact, we chose Korea for this example to make the explanation more challenging. In general, compensation experts (Hansen, 2005) report that the Asian region is much more challenging to develop global compensation policies and practices (55 percent of multinationals classify this region as the toughest challenge). Western Europe (33 percent) and South America (24 percent) presented the next greatest challenges. In this chapter we look at compensation in global organizations where the majority of jobs have low barriers to entry (e.g. short training times to reach acceptable performance levels). Certainly this includes companies like McDonald’s in the quick service industry. But we also will punctuate our discussion with examples from call centers located in global markets and the hospitality industry.