The move follows similar efforts by other major U.S.

employers including Wal-Mart

Stores Inc., which is raising hourly pay for 500,000 workers to at least $10 next year, and reflects
wider public pressures over income inequality as well as intensifying competition for low-skilled
workers.
The increase doesnt apply to employees of franchisees, which operate nearly 90% of the 14,350
U.S. McDonalds storesa fact critics seized on. But it applies to some 90,000 workers at all
levels of experience and rank at company-owned restaurants and it will lift the average hourly
rate to $9.90 on July 1 and more than $10 by the end of 2016, from $9.01 currently.
McDonalds Chief Executive Steve Easterbrook, who took over on March 1, said the policy is a
response to employee surveys and is central to his plans to revive sales after more than two years
of declines.
Motivated teams deliver better customer service, he said in an interview, and delivering better
customer service in our restaurants is clearly going to be a vital part of our turnaround.
Labor groups have grown increasingly vocal in their criticism of wages and conditions at
McDonalds and other fast-food chains, but the company said recent protests werent a factor in
its decision.
Average hourly earnings for nonmanager employees at limited-service restaurants like
McDonalds rose to $9.54 an hour in January, up 3.5% from a year earlier, according to Labor
Department data, well above the 2.2% pace for all private-sector workers.
Historically, stronger pay increases are somewhat unusual at this stage in the business cycle for
lower-skilled workers, who typically are the last to see better wage gains.
The increases could reflect some payback after several years of wages barely keeping pace with
inflation, or could indicate that skilled-workers who resorted to restaurant jobs in the economic
downturn are now seeking better-paying work.

Better pay among lower-skilled workers has the potential to bubble up through the economy,
said Patrick OKeefe, an economist at CohnReznick LLP. Raising the starting wage will likely
boost wages of others within a given company. Also, more money in workers pockets should
provide a boost to consumer spending and aid overall economic expansion.
The underlying motivation is a response to market conditions, said Mr. OKeefe, a former
Labor Department official. The firms that have announced very publicly that theyre raising
their entry wage are signaling that to attract the quality of labor theyre looking for, they have to
be more competitive.
McDonalds said the move is its first unilateral, across-the-board pay increase for restaurant
workers. Some other restaurant chains have said they are paying more, but havent provided
details. Starbucks Corp., long a champion of health care and other benefits for hourly workers,
increased pay for baristas in January, but didnt say by how much.