A story has been making the rounds for about a month regarding McDonalds fast food restaurants in Oregon which are apparently outsourcing their order taking to North Dakota for some reason. The idea being that when you drive in and place an order at the microphone in Oregon, you’re actually talking to someone in North Dakota who takes your order and then sends the info to the pickup window by computer. There are currently only 14 McDonalds involved and the plan is to initially limit participation to 50 selected stores. This means that even if you’re in Oregon your chances of visiting the drive-through of one of the stores testing this system are relatively low. If the system succeeds it will presumably be expanded.
The coverage of this has ranged from skeptical to outraged. Some see this as a blatant attempt to outsource jobs from a state with an inflated minimum wage to a state with a very low minimum wage. It’s been latched onto by liberal bloggers and leftist media as an example of how rapacious businesses can be to save a couple of dollars.
There’s a particularly incensed article on MSNBC based on complaints from residents of Hermiston Oregon who are enraged over the implementation of this system. News coverage of this issue has died out in the last few weeks, perhaps because only a few McDonalds are participating or perhaps because the reality of the situation doesn’t quite match the alarmist expectations trumpeted in the MSNBC article and elsewhere.
As to the frequently heard complaint that this is a case of outsourcing within the country to save money and cut employees, that theory really doesn’t hold up on examination. The presumption is that because Oregon has a state mandated minimum wage of $7.25 and North Dakota uses the federal minimum wage of $5.15 an hour, the people taking the orders in North Dakota are being paid less than the employees in the actual stores in Oregon. The conclusion is that this is a way for the bastard managers of the McDonalds in Oregon to save money and fire employees.
There are a bunch of holes in this theory. Contrary to initial reports, the order taking is not being outsourced to other McDonalds. The orders are actually being taken in a call center run by a company called CCS-SEI. The calls are not being taken by minimum wage McDonalds employees at a store in another state, but by professional phone support staff in a calling center. The idea of this order taking alternative is not to save money so much as to make sure that the people taking the orders get them right – apparently complaints and replacing incorrect orders uses up a lot of staff time and materials. What savings there are to this system are in increased efficiency, not lower wages. If your order takers get the order right the first time then you don’t have to replace screwed up orders as much and less time is wasted asking questions and correcting the order. Really skilled order takers are faster and more accurate, and that means major savings for the restaurant.
Although CCS-SEI is not revealing exactly what they are paying their call center staff, based on Bureau of Labor Statistics salary figures for that type of work in the Fargo area they could be earning over $10 an hour. Even if they were actual McDonalds employees in North Dakota, despite the fact that the official minimum wage there is $5.15 per hour, McDonalds employees in the state still earn about $7 an hour, only a few cents less than their compatriots in Oregon. Assuming CCS-SEI hired the best McDonalds order takers in the area and moved them into their call center they’re probably paying them around $8-$9 per hour for the work.
In addition, according to The Oregonian, Lee Adams, who owns one of the McDonalds in question, has stated definitively that no jobs were lost in this process. The problem they were having was that taking orders and filling orders were done by the same person and they tended to get overwhelmed with the double duty. If the window worker doesn’t have to talk to the customers and enter the orders on screen they can concentrate on making sure that the right stuff goes in the bag and gets to the customer. That person is still employed, but now they can focus on doing just one job while someone else takes the orders and does the data entry. McDonalds wants to process orders as quickly as possible with a minimum of mistakes, and the less work they put on the person manning the window the better they can do their job.
The theory that this is outsourcing to save money on salaries seems pretty unlikely since no one is being fired and salaries for call center workers are probably actually higher than salaries in Oregon McDonalds. But it’s quite true that this is all about saving money, not by firing people or sending jobs off to be done at lower wages, but by making the operation more efficient and making fewer mistakes. Since they’re now paying the cost of a call center worker, McDonalds is actually employing more people than they were, but the cost is worth it because if they can avoid wasting a handful of miss-made meals an hour that covers the hourly wage of the call center worker as well as leading to greater customer satisfaction, which has a definite cash value in repeat business.
It seems that the complaints about this instance of ‘outsourcing’ are unfounded. This appears to be another case of outsourcing opponents knowing what they want to be true and trying to reinterpret reality to fit their assumptions. They want to believe that McDonalds is sacrificing jobs and paying people as little as possible, but since these McDonalds are actually effectively adding a new job, quite possibly at a higher wage, their complaints just don’t match what’s really going on here. Corporations aren’t evil. In this case McDonalds just wants to be more efficient and provide better service – that’s what ultimately makes a business more profitable, and that’s how capitalism is supposed to work.