Which Firms Offer Better Jobs for Low-Wage Service Workers? Evidence from Fast-Food Franchising

Abstract

A central question in the debate over low-wage service work concerns whether and how the quality of jobs can be improved. As employers have increasingly reduced labor costs by dismantling internal labor markets and adopting networked forms of organization, such as subcontracting or franchising, a growing proportion of workers are now employed by secondary firms—a process known as “fragmenting” or “fissuring” of workplaces. Although existing research shows that primary firms generally offer better wages and working conditions than secondary firms, much less is known about variation in job quality among secondary firms. This study examines two potential sources of that variation: firm characteristics and minimum wage laws. Drawing on a stratified national random survey of fast-food franchisees matched to brand-level archival data and relevant minimum wage rates, the authors’ findings provide mixed support for the conventional wisdom that larger and more experienced firms offer better jobs. While these firms are more selective in hiring and offer more training and benefits, they also limit work discretion, employ fewer full-time workers, and offer lower weekly wages—the latter due to reduced work hours not lower hourly rates. By contrast, the legal minimum wage is the most important determinant of hourly wage rates.