Obama Order Will Kill Fast-Food Jobs on Military Bases
Fast-food restaurants operating on military bases are in a bind: Due to an executive order signed by President Obama, they are being forced to raise worker's compensation, but they can't raise prices to compensate.
As a result, hundreds of fast-food outlets could close, eliminating thousands of jobs, the Washington Examiner reported.
Obama on Feb. 12 signed the executive order raising the minimum wage for employees of federal contractors from $7.25 to $10.10 an hour. That's higher than the state minimum wage in the two highest states, Washington ($9.32 an hour) and Oregon ($9.10).
The order doesn't take effect until January 2015. But it is already having an impact. Military Times reported in late March that three McDonald's restaurants and another food outlet will soon close on Navy bases, while other national-name chains have "asked to be released from their Army and Air Force Exchange Service contracts to operate fast-food restaurants at two other installations."
In addition to the increased minimum wage, fast-food employers must also pay a "health and welfare" payment that the administration has now raised from $2.56 to $3.81 an hour.
Fast-food operators in the past did not have to make the health and welfare payment, but the Obama Labor Department ruled last fall that they must.
So between the increase of $2.85 an hour in the minimum wage and the health and welfare payment, employers must pay $6.66 more per hour to each employee.
But "military contracting laws do not allow businesses to raise their prices above the level prevailing in the local community," the Examiner's Byron York noted. "The fast-food operators can't charge more to make up their losses."
Russell Beland, deputy assistant secretary of the Navy for military manpower and personnel, has written a letter to the Labor Department about the increased costs.
"The increased labor burden resulting from the new [wage structure] eliminates any profit the operator might otherwise realize and puts him in an impossible business dilemma," he wrote.
According to Beland, Navy officials estimate that 390 fast-food restaurants on bases will close, costing nearly 5,750 jobs. Closings on Army and Air Force bases could affect up to 10,000 jobs.
The Labor Department recently said it would "re-evaluate" some of the new costs, but the executive order is still scheduled to go into effect in January.
Ed & Joan
