When Chipotle stopped selling carnitas in some locations last year because a pork supplier wasn’t meeting its ethical standards, it was sad news for customers. Really sad news. The blog Eater declared it the “Great Chipotle Carnitas Famine of 2015.” In April, when Chipotle planned to increase supply again, news reports heralded their return. When, as a way to start a discussion about climate change, the company warned last year that it might stop serving guacamole due to potential future avocado shortages, another small media frenzy ensued.
This is the genius of Chipotle’s “Food With Integrity” motto at work. The chain’s devotion to sustainable, ethical, higher-quality ingredients consistently wins it amazing publicity and customer loyalty, even when things go wrong. The company–a darling of Wall Street over the last decade–famously has a minimal advertising budget, yet it receives a “considerable” stream of favorable media coverage, according to its own assessment. By producing viral films that lift up the heroic organic farmer, decry factory farms, and lament the general evils of corporate greed, Chipotle also creates an emotional and authentic connection with its often young, liberal-minded customers.
The social psychologist Adam Corner calls the strategy one of “cultivating empathy through shared cynicism.” And it’s all worked exceptionally well, to the point that it’s a signifier of national political significance: Hillary Clinton isn’t generating good press for being folksy by casually stopping at Taco Bell on the campaign trail.
Much of this reputation is well-deserved. For such a large chain, Chipotle goes to incredible lengths to deliver on its promises of a menu that minimizes artificial ingredients, pesticides, synthetic hormones, antibiotics, and even GMOs (though that decision generated criticism for being more marketing than reality). Its ingredient sourcing seeks to maximize animal welfare, environmentally-friendly farming practices, and, of course, a fresh taste. Just one small example among many: Every single year, Chipotle’s says either its animal welfare team or outside auditors visit its dairy farms to confirm the cows have unfettered access to pasture and receive no antibiotics. All of its sour cream and 85% of its cheese come from dairy farms that meet these standards, according to Chipotle’s ingredients statement.
But there’s an area where it falls short of its consistent leadership, and that’s in how its humans fare. Traditional fast food chains like McDonald’s and KFC get lots of flack for their low pay, but the truth is that the so-called “fast-casual” industry that Chipotle pioneered is often only slightly better. According to Chipotle spokesman Chris Arnold, Chipotle’s average crew member makes more than $10 an hour, a figure that would equate to about $21,000 to $22,000 annually for someone who works 40 hours a week (this figure is more than the average pay of $18,235 listed on Chipotle’s website, which Arnold says is outdated). But imagine trying to live off either salary in a city like Boston, New York, or Los Angeles. Even in the poorest county in the nation, in McCreary County, Kentucky, MIT’s living wage calculator estimates a single adult working full-time needs to make very near that figure, at $9.52 an hour.
Chipotle is far from the only of the new, hipper fast food joints to not pay a living wage; no major chain does. Rather, it’s paying around the prevailing wage. In-N-Out, often cited as the highest-paying major chain, starts employees at $10.50. Boloco, a Boston burrito chain that competes with Chipotle, pays entry-level workers from $9 to $11. Shake Shack starts workers at $9.50 to $10 (and gives them a share of monthly sales). Even McDonald’s plans to raise the pay for the 90,000 hourly workers employed directly by the company, so that average wages are more than $10 an hour by the end of 2016.
But given its broad ideology, labor advocates believe Chipotle could be a good company to adopt the kind of wages that push the whole industry forward. “They could choose to be a leader, and to come out in front. It would have an impact on the industry, if Chipotle if were to come out and make an announcement that they were going to raise their wages for workers and that it was because they see themselves as a progressive company that cares about the integrity of where their food comes from, as well as their own workers,” says Irene Tung, a senior policy researcher with the National Employment Law Project.
That, however, isn’t likely given the company’s current position. “We have never taken a position on the minimum wage and believe that a minimum wage or starting wage tells only part of the story,” says Arnold in an email. “We already pay above minimum wage and offer benefits that are more than competitive.” Chipotle does indeed give its hourly workers some important benefits, some of which were announced recently in June including paid sick and vacation days and tuition reimbursement. But while pay isn’t the whole story and these announcements were applauded by labor advocates, benefits don’t replace higher wages–especially for a workforce that is often juggling more than one job anyway to make ends meet. And no customers wants workers sneezing in their burrito.
According to Chipotle and others, like Saru Jayaraman, co-director of Restaurant Opportunities Centers United (ROC), the biggest feather in the company’s cap is its internal promotion strategy that bestows the American dream of upward mobility upon some of its best workers (and, of course, creates an overall more loyal, motivated workforce for Chipotle). “We believe that it’s the nature of opportunity we provide that is so motivating for our employees. Right now, more than 95% of our managers come from within the ranks of our crews; last year, we promoted more than 10,500 people who started as crew into management positions,” says Arnold. But even its hourly managers only make only $23,775 in pay, according to what’s posted on its website (Arnold says this may also be somewhat outdated). Far fewer will make it to Chipotle’s salaried ranks–only 4,590 of its 53,090 employees, or 9%, are salaried.
While Chipotle’s two co-CEOs have been silent on the wage issue, like many of competitors, Chipotle
is a was, until last year, member of the National Restaurant Association, an industry group that has vigorously fought against federal and state increases to minimum wages (Update: Chipotle says “our membership in the NRA has lapsed and has not been renewed” but would not answer questions about why it made this decision). And if Chipotle hasn’t made any statement to support better worker pay, in one location, it has worked against it: This year, the National Labor Relations Board ruled that a Chipotle in St. Louis illegally fired a long-time worker, Patrick Leeper, for taking part in the protests and discussing his wages with others. Leeper says he had been making “$8 and some change an hour” after three years, struggling to get by while he only received a 10-cent raise every six months. (Chipotle also currently faces allegations of wage theft–making employees work off the clock–in Colorado and Minnesota lawsuits. The company doesn’t comment on pending litigation but says an allegation is proof of nothing.)
There are other contradictions in Chipotle’s employment practices. Its co-CEOs, Steve Ells and Monty Moran, are the highest paid in the fast food industry, making between $28 and $29 million each in salary, bonuses, and stock awards and options last year–sums high even by standards of other industries (
Morgan Stanley JPMorgan’s CEO Jamie Dimon, for instance, made $20 million last year). For each CEO, that’s the equivalent to pay of more than $13,000 an hour, or some 1,300 times what their crew workers earn.
Chipotle, of course, is a target because it puts its values so front and center. “Why we’re holding Chipotle to a standard that a lot aren’t meeting is that Chipotle tells us about how they great they are,” says Adam Kanzer, managing director at Domini Social Investments, a Chipotle investor that has filed shareholder resolutions asking the company to improve its sustainability and labor reporting practices.
But what would it actually take for Chipotle to pay its workers $15 an hour and be more in line with its proclaimed values? Reducing the CEO’s paychecks wouldn’t be enough: Even if they each took the proverbial $1 salary, dividing up the value of their compensation packages among 48,500 hourly workers would yield a raise of about $22 per week per worker or $0.55 an hour (assuming each worker works 40 hours a week). Rather, a very rough back-of-the-envelope calculation, just to get a sense of the scale, suggests it would cost Chipotle anywhere from $500 million to far more than $1 billion a year to raise the wage of all its hourly workers to $15 an hour. If it’s anywhere near this range, that seems unacceptable at first glance. The company only made $445 million in profit last year, on relatively healthy 11% profit margins.
But a few cities have passed $15 minimum wage laws to will be phased-in over the next several years, and they offer a glimpse of what it would look like for a company to actually pay enough money for its employees to live. Jayaraman, co-director of Restaurant Opportunities Centers United (ROC) and director of University of California, Berkeley’s Food Lab Research Center, notes that most cities and companies that are considering wage increases are phasing them in over several years, so businesses can adapt gradually. And, she says, a company like Chipotle doesn’t have to solely cut into its profits to absorb increased wages–it could also raise its prices, reduce employee turnover, and improve efficiency, among other options. A recent study from the University of Massachusetts shows adaptation without job losses is very possible.
In fact, in San Francisco, where minimum wage increased to $12.25 this year and will reach $15 by 2018, Chipotle is doing exactly this. According to Entrepreneur, Chipotle raised its menu prices in the city by 10% recently, in part to absorb increased labor costs. It helps that Chipotle is not raising wages unilaterally, so local competitors will face the same cost increases. But the move also shows that for national chains operating in many markets, job or profit cuts aren’t the only ways to accommodate higher worker wages, as the fast food industry as a whole often claims. In other words, customers need to also take some responsibility for low wages: anyone who can afford an $11 burrito can probably afford a $12 burrito, too. More generally, ROC’s studies have found that even when employers pass on 100% of minimum wage increases to customers, the impact can be minimal. In 2012, for example, one study showed that U.S. households would only pay 10 cents a day more for food if the minimum wage went to $9.80 across the nation, over three years.
“If employers work it into their business model,” says Jayaraman, “the cost is never as great.”