ONE FIRM, l W 0 LABOR MARKETS: THE CASE OF

McDONALDS IN THE FAST-FOOD INDUSTRY

Toby L. Parcel*
Marie B. Sickmeier
The Ohio State University

Students of industrial sociology have noted theoretical and empirical inadequacies

in dual-economy and dual-labor market theories, and have called for revisions in
these perspectives. A single case, McDonalds in the fast-food industry, is analyzed
as a vehicle towards reformulation. It is argued that, as a center retailer, McDonalds
contains elements of both primary and secondary labor markets, and that this
dualism is a partial function of its economic structure that contains both core and
peripheral elements. The job hierarchies, hiring practices, compensation, training,
and control systems all evidence elements of both primary and secondary markets.
The external validity of these findings is explored, and implications for dualeconomy and dual-labor market theories and research are developed.

Dualeconomy and dual-labor market theories have provided a focal point for analyses
of both the structure of economic segmentation and effects of these structures on
individual work outcomes. Inspired by early theoretical and empirical efforts in
economics (Averitt 1968; Harrison 1972; Bluestone, Murphy and Stevenson 1973)
sociologists have debated the boundaries of the core and periphery of the economy
(Tolbert, Horan, and Beck 1980; Hodson and Kaufman 1981; Horan, Tolbert, and Beck
1981; Kaufman, Hodson, and Fligstein 1981), and have investigated the impact of
sectoral location on workers earnings (Beck, Horan, and Tolbert 1978; Kalleberg,
Wallace, and Althauser 1981), and on unemployment (Schervish 1983).
*Direct all correspondence to: Toby L. Parcel, Department of Sociology, The Ohio State
University, Columbus, OH 43210.

The Sociological Quarterly, Volume 29, Number 1, pages 29-46.

Copyright @ 1988 by JAI Press, Inc.
All rights of reproduction in any form reserved. ISSN: 0038-0253.

30

THE SOCIOLOGICAL QUARTERLY Vol. 29/No.1/1988

As earlier models and findings are evaluated and refined, questions have arisen
regarding the accuracy and usefulness of dualistic approaches. Zucker and Rosenstein
(198 1) have pointed to inconsistencies in assignment of industries to sectors across
several studies, and have demonstrated that analyses of worker outcomes differ
depending on which schema is adopted. They call for a theoretical reformulation of
these perspectives in order to reconcile such discrepancies. Parcel and Mueller (1983)
argue that because there is greater agreement on the dimensions underlying
segmentation than on schema of sectoral placement, research utilizing these dimensions
of structure as explanatory variables may proceed without reference to debates
regarding sectoral boundaries. Hodson and Kaufman (1982) point to theoretical
indeterminancies in dualist formulations, and offer the beginnings of an alternative
model focusing on workers resources derived from dimensions underlying dualist
models. Baron and Bielby (1980, 1984) argue for recognition of intraindustry
heterogeneity, thus rejecting schemes that place entire industries into either core or
periphery, whereas Hodson (1984) maintains that the choice of industry or firm as the
unit of analysis is problem dependent, i.e., that intraindustry homogeneity may be
assumed in some cases. Osterman (1982) argues that primary and secondary labor
market jobs can exist within one firm, although he does not ground his observations
in a specific case.
In this article we contribute to the emerging refinement and development of dualist
perspectives by conducting a case study of the leading firm in the fast-food industry,
McDonalds. Our argument is that this firm provides a case not wholly consistent with
stereotypes of either core/ primary or periphery/ secondary, and thus yields useful
insights into current economic and labor market structures. It is inappropriate to assume
that a core firm will necessarily contain only primary labor market positions, or that
an economic peripheral will rely solely on secondary labor market employment. We
argue that McDonalds is a core firm that contains both a primary and secondary labor
market. Using this example, we suggest directions along which dualist theories may
be reformulated in the face of prior criticisms and a changing economy. The title of
this article suggests an analogy between Finlays (1983) arguments regarding bifurcation
of the occupational market for longshore crane operators and fragmentation of the
labor market within the single firm we analyze. Whereas the origins of fragmentation
are distinct, each case calls into question overreliance on traditional dualist
formulations.
We focus on the fast-food industry, and McDonalds in particular, because of their
economic as well as their sociological significance. The role that this industry plays in
our nations economy is substantial and is expected to increase through the remainder
of this century as the shift of our economic base from an industrial to a service
orientation nears completion. The service sector is now two-thirds of the U.S. economy
and of the 2.3 million new jobs created between November 1982 and February 1984,
70% were added in the retail and fast-food industries (Fortune 1985a). Sociologically,
we believe that this firm/ industry constitutes an ambiguous case, the analysis of which
may yield especially clear insight into how dualist perspectives can best be reformulated.
Given that we reject assuming automatic correspondence between economic sectors and
labor markets, attention to cases showing elements of each type may be especially useful
in suggesting theoretical restructuring.

One Firm, Two labor Markets: The Case of McDonalds in the Fast Food Industry

31

How is the ambiguity manifest in the case of fast-food in general and McDonalds
in particular? Work by several researchers suggests a clear categorization of retail trade
(of which fast-food is one type) into the periphery of the economy (see Zucker and
Rosenstein 1981, Appendix.) Ambiguity is introduced, however, because the production
of food products is placed in either the core or the periphery depending on which stage
of the process is being analyzed. For example, one schema places wholesale trade of
food into the core of the economy, whereas the schemas are evenly divided concerning
whether the manufacturing of food belongs in the core or the periphery (Zucker and
Rosenstein 1981).
In addition, Averitt (1968) argues that size renders firms from distinct industries
comparable. He suggests that retail firms such as Sears or Penneys share similarities
with certain key manufacturing firms in terms of magnitude of economic operations,
remuneration of chief executive officers, and organizational structure. These firms are
termed center retailers. In the fast-food industry, McDonalds is the largest firm in
terms of number of establishments, employees, and profits, thus potentially qualifying
it for center retailing. However, the image of retail trade that persists is that of peripheral
firms, secondary labor markets, and workers who are disproportionately minority,
female, or young. One key exception is provided by Bluestone, Hanna, Kuhn and Moore
(1981) who look at retail selling in New England. Their study clearly showed that firms
with core characteristics often organize work using the secondary labor market model,
a combination we expect to find in our analysis of McDonalds.
DUAL ECONOMY, DUAL-LABOR MARKET, A N D PARALLELISM OF STRUCTURES

At the heart of dual economy theory rests a distinction between the core (or center)
and periphery of the economy. Averitt (1968) argued that core firms employ large
numbers of individuals, accrue large profits, generate large sales, and have a high degree
of capitalization. Such firms sell to international markets, operate as price setters,
employ advanced technology and experience high rates of unionization. Peripheral
firms fall at the opposite end of the continua implied by these dimensions. They are
described as small, less profitable, labor intensive, have lower levels of technology, are
price takers, sell to more geographically limited markets, and experience low rates of
unionization. EXXON and GM serve as examples of core firms, while a variety of
privately owned and operated firms such as the corner grocery store and small
manufacturing firms like those that constitute the tool and die industry illustrate the
periphery. Such manufacturing firms are generally dependent on core firms for
contracts.
Dual-labor market theory, as conceptualized by Doeringer and Piore (1971), posits
the existence of two labor markets. The primary labor market consists of jobs with
good wages, safe working conditions, opportunities for advancement via internal labor
markets, stability of employment, i.e., unlikely termination as a function of a decrease
in product demand, and due process in the enforcement of work rules. Piore (1975)
further divided the primary labor market into upper- and lower-tier jobs. The uppertier positions are those professional and managerial jobs with the highest status and
pay, the longest job ladders, and the greatest autonomy in work, i.e., work is performed
according to internalized standards of performance. Educational credentials are

32

THE SOCIOLOGICAL QUARTERLY Vol. 291No.111988

required for entry and advancement in these upper-tier positions. Lower-tier jobs are
those of relatively high pay, but clearly the status is lower than many professional
positions. Job ladders are moderate in length, work is performed according to
formalized, although not internalized, work rules, and specific skills, as opposed to
credentials, are required for employment. Craft jobs are often cited as examples of lowertier primary jobs. Positions in secondary labor markets are low paying and low in status
with work often performed under unpleasant and possibly unsafe working conditions.
Job ladders are short or nonexistent, with employment duration a function of product
demand, and little or no due process in the enforcement of work rules. Some scholars
argue that workers are confined to secondary markets because there is no upward
mobility to the primary market; this confinement results in a pattern of instability
involving movement among jobs, and between jobs and unemployment.
We are also fundamentally concerned with the assumption of parallelism between
economic sectors and the labor markets that operate within them. Some proponents
of the theories argue that core firms will organize employment of workers around
primary labor markets whereas peripheral firms organize work via secondary labor
markets. For example, Edwards (1975, 1979) argued that outcomes observed in the
labor market, or the sphere of circulation, reflect more fundamental processes of
production itself. Core firms use bureaucratic and technical methods of control and
evolve occupational hierarchies that are highly differentiated in status, earnings, and
occupational complexity. Increasing industrial concentration increases the relative
proportion of a firms effort devoted to long-range planning, market manipulation,
advertising, and sales relative to production. The work activities and administrative
operations necessary for performing these functions are more complex than direct
production tasks. Thus, job categories and hierarchies associated with these
nonproduction activities proliferate, leading to greater wage differentiation, greater
status differentation and greater authority differentiation among occupations and their
incumbents (Edwards 1975, p. 6; 1979, p. 85). In contrast, peripheral firms relatively
greater concentration on production minimizes variation in market outcomes such as
wages and status.
Other proponents of the parallelism hypothesis argue that firms in the core are
oligopolistic and often in a position to shape demand; thus workers can be assured
job stability, a characteristic of primary labor market jobs. The higher rates of
profitability characteristic of core firms mean that jobs have higher rates of
compensation, again a characteristic of good jobs. In addition, the theory leads us
to expect internal labor markets to be present in core firms and absent in peripheral
firms. Early analyses tended to assume correspondence between these dimensions of
economic segmentation (Beck et al. 1978; Edwards 1975). Even when empirical analyses
suggested that this overlap between core/primary and periphery/ secondary is not strong
(Wallace and Kalleberg 198 1; Hodson 1978), the hypothesis remained a compelling one.
However, the growing understanding of the complexity of industrial and work
organization demands more specific information regarding the ways the assumption
of parallelism is supported and what ways it is not.

One Firm, Two Labor Markets: The Case of McDonalds in the Fast Food Industry

33

METHOD

To conduct this case study we used data from informants in management within
McDonalds as well as published sources. One informant was a store manager who
had been with the firm for four years. She/he has a college degree and some post
baccalaureate education, and had received signals suggesting his/ her positive potential
for promotion to the market level of the firm. She/ he described to us the internal labor
market of the firm and differing employment conditions of each position we analyze.
The second informant was a regional-level personnel manager who verified information
from the first informant regarding the structure of the internal labor market within
the firm and personnel practices regarding promotions. Key documents came from
publicly available sources and included Annual Reports and material in standard
business outlets; these documents provided information regarding where McDonalds
falls on various characteristics differentiating core from peripheral firms.
THE FIRM OF McDONALDS: CORE OR PERIPHERY?

Originally places to stop for a quick lunch or snack, fast-food establishments now
provide all three meals for millions of people. McDonalds alone serves one-fourth of
all breakfasts eaten away from home (Annual Report, 1985, p. 4). Standard and Poors
(1985) predicts that the industry will continue to grow through the end of the century,
with the aging baby-boom cohort influencing its well-being. They argue that fast-food
restaurants should experience rising traffic trends and increased spending per visit from
the expanding adult and senior citizen segments of the population. Because the original
babyboomers were raised on fastfood, as this group bears children the outlook for fastfood outlets remains bright.
Hamburgers are the largest segment of the fast-food industry, accounting for $21
billion of the $38 billion in sales in 1984 (Restaurant Business Magazine 1985). In this
segment, and in the industry as a whole, McDonalds stands out as the undisputed leader
in size and in sales volume. Business Week (1984, p. 44) states that from the time that
the late Ray Kroc took over and began expanding the two McDonald brothers stand
in 1955, the company has both dominated and defined the fast-food industry. It is
important to recognize that McDonalds was the firm that demonstrated the utility of
the system approach to producing and marketing fast food. Prior to the growth and
development of the system, the fast-food industry was in fledgling form; McDonalds
has been a major factor in the growth of this industry.
Table 1 allows us to evaluate McDonalds in terms of dualeconomy theory. Clearly,
McDonalds meets the size requirement for core firms. The 1985 corporate reports
published by McDonalds states that it is the largest food service organization in the
world, both in the number of restaurants and in volume of sales, with approximately
6% of the U.S. population visiting McDonalds every day and 18 million customers
served daily worldwide. McDonalds Corporation views itself as a system that
includes extensive real estate holdings, sale of franchise operations, ownership and
management of 2165 restaurants, operation of Hamburger University, and operation
of a film production studio. In 1985, McDonalds employed 148,000 individuals to
maintain and operate the system (Annual Report, 1986, p. 4). Among U.S.

THE SOCIOLOGICAL QUARTERLY Vol. 29iNo.l I1 988

34

Table I
Comparison of McDonalds Characteristics with Core/ Periphery Typology
Dimension

Core

Periphery

Size

Large

Small

Large Sales
Concentration
Large Profits

Yes
Yes
Yes

No
No

Geographic Dispersion
Existence of Satellites
Vertical Integration
Advanced Technology
Competitive
Unionization
High Capitalization

International
Yes
Yes
Yes
No
Yes
Yes

No

Regional/
Local
No
No
No
Yes
No
No

McDonalds
Core 148,000 employees
2,165 company-owned stores
8,901 systemwide
Core $ I 1 billion systemwide
Coreb50%share
Core Return on equity equals 20%
Proj.d 1990 cash flow equals $1 billion
Core Stores in 40 foreign countries
Core
Core
Mixed
Periphery
Periphery
Core

Sources: aAnnual Report (1985, p. 4).

bBlackwellet al. (1984, p. 115).
Annual Report (1984, p. 5).
dBusiness Week (1984, p. 46).

nonindustrial corporations in 1984, McDonalds ranks as the thirtieth largest retail

company by sales, ninth in assets, fourth in net income, and ffith in stockholdersequity
(Fortune 1985b, p. 190).
A core firm will enjoy large sales. Of the system reported $11 billion in sales in
1985, over $2.5 billion came from the company owned and operated sales (Annual
Report 1986, p. 7). Regarding concentration, McDonalds sells close to 50% of the
hamburgers provided in the fast-food market (Blackwell, Engel, and Talarzyk 1984,
p. 115). Along the profit dimension, McDonalds Corporation is expected to have an
excess cash flow of $1 billion by the year 1990 (Business Week 1984, p. 46). The firm
also reports a healthy 21% return on equity (Annual Report 1985, p. 5). The
corporations 2165 company-owned stores are presently dispersed throughout 40
countries and territories outside the United States with 500 new units planned for 1986,
thus meeting the geographic dispersion requirement (Annual Report 1986, p. 2). In
addition to geographic expansion, site selection is expanding to nontraditional areas
including military installations, hospitals, museums, office buildings, and turnpikes.
The presence of satellites and vertical integration are also indicators of a core firm.
The McDonalds policy of standardization throughout the system is dependent on the
usage of satellite firms. The corporate policy that a customer be able to walk into any
store in any location and find the same menu and the same standards of cleanliness
is strictly enforced. Such uniformity in products is maintained by enforcing rigorous
standards on suppliers. McDonalds has a handshake agreement with its suppliers
who in some cases have McDonalds as their sole customer. Love (1986) documents

One Firm, Two Labor Markets: The Case of McDonalds in the Fast Food Industry

35

that McDonalds suppliers who began as small firms and have continued to meet
McDonalds requirements for quality have often experienced dramatic growth as a
function of the systems expansion. As further testament to the size of McDonalds,
and by implication of the satellites, we can say that they are the largest purchasers of
beef and potatoes in the United States, and that their recent decision to use sliced
tomatoes instead of cherry tomatoes in salads was based on the finding that their
demand for cherry tomatoes was depleting the United States supply of this commodity.
Does McDonaldsuse advanced technology? Within individual stores, the production
process is labor intensive and thus contrasts with an industrial setting where workers
operate costly equipment. However, the McDonalds system not only uses advanced
technology but also has developed new technology that, at times, has diffused across
the industry. Love (1986) argues that technological advances were responsible for the
change from use of fresh potatoes for french fries to frozen french fries, for eliminating
the firms reliance on fresh hamburger in favor of frozen, and for making possible the
mass marketing of chicken nuggets. Each of these innovations enabled the firm to
maintain or improve product quality while increasing the uniformity of products and
reducing the number of suppliers to the system. These innovations often required
substantial capital investments. Once the technology to produce frozen french fries of
high quality was developed, a supplier invested $3.5 million to put the idea into
production (Love 1986, p. 334). The strong success of this venture led to additional
capital investment in order to keep up with demand for the new product. In the case
of the frozen hamburger, capital investment provided by suppliers enabled them to
develop a mixing and freezing process for hamburger that resulted in a better product
than McDonalds had produced using fresh meat. On balance, then, we classify
McDonalds as a mixed case in usage of advanced technology. Whereas such usage
is apparent, the work remains highly labor intensive. We also recognize that substantial
technological innovation was introduced by McDonalds suppliers, not by the firm itself,
and that the complex interrelationships between the firm and its suppliers are beyond
the scope of this analysis.
The remaining dimensions of competition and unionization are two where the firm/
industry clearly fails to meet core requirements. McDonalds has a well known antiunion policy and has successfully resisted attempts to unionize stores. Competition is
an inherent element of most retail sales environments, even for large firms. We return
to this contradiction following completion of our analysis.
We have argued that McDonalds is a center retailer and, as such, should be viewed
as part of the core. Table 2 provides a comparison of McDonalds economic
characteristics with those of three manufacturing firms generally regarded as core firms.
Of the seven dimensions along which the firms were ranked, McDonalds is ranked
highest on four: (1) market value, (2) net profit, (3) number of employees, and (4)
productivity. On the remaining three dimensions, McDonalds ranks lowest only on
the sales dimension. It is interesting to notice that there is inconsistency among the
rankings of the characteristics for the four companies. For example, Caterpillar has
the second highest cash flow but the lowest net profit, whereas Goodyear has the highest
sales but the second lowest market value. Although these data are only illustrative and
the cases themselves not representative, they underscore the complexity of our economic
system, one which is not well-represented by simplistic notions of core and

THE SOCIOLOGICAL QUARTERLY Vol. 29/No.l/1988

36

Table 2
Comparison of Dual Economy Theory Characteristics and Rankings* Across Firms

Assets (millions)
(Rank)
Sales (millions)
(Rank)
Market Value (millions)
(Rank)
Net Profits (millions)
(Rank)
Number Employed
(not ranked)
Cash Flow (millions)
Productivity Rank
(out of 798 companies)

Goodyear
McDonald5 Tire & Rubber

Pittsburgh
Plate Glass
Industries

Caterpillar
Tractor

5,043
248
3,695
194
6,925
44
433
70
145,000

6,954
180
9,585
56
3,378
115
412.4
74
134,100

4,084
298
4,346
165
3,023
136
302.7
109
37,500

6,016
210
6,725
91
4,132
92
.I98
165
55,800

667.3

712.9

521.7

674

18

21

157

99

Nore: *Unless otherwise noted, data refer to 1985 rankings among the 500 largest firms. Data
from Forbes (April 1986, pp. 223, 216, 226, 206 respectively; productivity data, pp.
160, 166, 162 respectively).

periphery.They also suggest that McDonalds should be viewed as a core firm. Indeed,
Barry Bluestones recent arguments are consistent with the view when he states:
Your industry is becoming not only an important one from a consumer point of view,
but you are becoming in many ways part of the core, part of the center of the American
economy (Restaurants and Institutions 1985, p. 126)

MCDONALDS JOBSTRUCTURE AND DUAL-LABOR MARKET THEORY

HOW CLOSE A FIT?

Figure 1 provides an organizational chart of the job structure at company-owned stores.

The data used in this section came primarily from the store manager and personnel
manager within the firm. As the figure shows, the McDonalds System is comprised
of five levels that include corporate headquarters, zone, regional, market, and store/
unit levels. The intermediate levels between the corporate headquarters and the unit
are geographically determined and the structure at each level reflects that of corporate
headquarters. McDonalds is a hierarchial organization in that policy flows down from
the top and as is the case with their product, standardization is the rule. These
intermediate levels include six zones that implement and oversee corporate policy for
the regions under their authority. The 30 regions are likewise responsible for the markets
beneath them. Finally, the market-level personnel are responsible for the stores/ units
under their authority.

One Firm, Two Labor Markets: The Case of McDonalds in the fast Food Industry

37

CORPORATE HEADQUARTERS
ZONE

LEVEL (6)

REGIONAL

MARKET

CONSULTANT

LEVEL (30)

LEVEL (80)
OPERATIONS

TRAINING

STORE/ UNIT
MANAGER

STORE/ UNIT
LEVEL (2053)

IST ASSISTANT
MANAGER

2 N D ASSISTANT
MANAGER

MANAGER
TRAINEE

SWING
MANAGER

EXTERNAL
MARKET
~

Figure I
McDonalds Organizational Structure

38

THE SOCIOLOGICAL QUARTERLY Vol. 29/No.l/1988

Candidates for career/ nonexempt positions in the upper levels of the corporate
structure are frequently drawn from the unit level. The regional-level personnel manager
also acknowledged that upward mobility within the firm is not limited to those who
began careers in individual stores; professionals in marketing, financial analysis, and
so forth also rise within the corporate hierarchy. Successful unit managers are assured
positions in the corporate hierarchy, however, because the nature of the business dictates
operations knowledge of a depth that cannot be obtained in brief training programs.
The personnel manager we spoke with used the phrase getting ketchup in your blood
and suggested that this remains an important litmus test of promotability.
The bottom level, the company-owned store/ unit level, is the one pertinent to our
discussion of internal labor markets. We recognize that analysis is confined to only
the company owned stores. These comprised approximately 25% of the total 8901 units
in the system during 1985. This 25% share has remained relatively stable over the past
twenty years and evidence suggests that this will remain the case (Annual Report 1986,
p. 7). This 2595, however, contributes 75% of the systems revenues, whereas the
franchised stores contribute 24% and 1% comes from other investments. The labor
market practices used within company-owned stores are therefore of clear economic
importance to the firm. These processes also serve as a model to franchised stores that
are not required to construct indentical job ladders, but often adopt similar practices.2
The wage and employment mechanisms that comprise the job structure operate
differently for the three categories of employees that the organization hires at the store
level. Crewpersons prepare, package, and sell the food items and to maintain store
premises. The number of crew per unit varies seasonally within a range of 60-85. Swing
managers oversee the day-today operations of the unit for a particular shift or portion
of the workday. Each unit employs 6 or 7 swing managers. The salaried/career managers
are responsible for the overall operation of the unit. Each unit employs 4 or 5 salaried
managers. Their duties include employment decisions regarding crew and swing
managers, purchasing decisions, as well as marketing decisions.
Our analysis of the job structure at McDonalds suggests that it contains upper- and
lower-tier primary labor market jobs as well as those in the secondary market. Table
3 outlines the dimensions along which these jobs vary, and suggests how three key jobs
at McDonalds, crewperson, swing manager, and salaried manager, compared to dualist
tYPologY*
The entry and advancement criteria reveal distinct differences among the three
categories. The secondary nature of the hiring process for crewpersons is perhaps most
clearly evidenced by the firms use of mini-applications. Mini-applications are
dispensed to customers via the disposable paper lining on the food trays in the stores.
The applications state that neither skills nor credentials nor experience are required
for employment. Hiring decisions at this level are made by the store manager and often
are based solely on the willingness and flexibility of the individual to work part-time
during periods where the store is short handed. Proven skills are a criteria for entry
into the swing manager positions. These positions are fulltime, requiring a 40-hour
workweek, and are filled from the ranks of the crew. Our store manager informant
indicated that the grooming of crewpersons for these positions is crucial and that
failure to do so often severely limits managerial success. Advancement beyond this level
without formal education beyond the high school level is entirely possible, although

One Firm, Two Labor Markets: The Case of McDonalds in the Fast Food Industry

39

Table 3
Comaprison of Dual Labor Market Theory and McDonalds Job Characteristics

Dimension

UpperTier

Labor Market
LowerTier
Secondary

Crew

McDonalds
Swing
Salaried
Manager Manager

none

lowersecondary tier

upperor lowertier

high

low

secondary secondary

uppertier

Yes

no

lowersecondary tier

uppertier

moderate

low

lowersecondary tier

uppertier

high

moderate

low

uppersecondary secondary tier

6. Pleasant work
conditions

high

moderate

low

lower tier

lowertier

uppertier

7. Amount of
due process

high

moderate

low

lower tier

lowertier

uppertier

8. Status

high

moderate

low

lowersecondary tier

lowertier

9. Control System

bureaucratic technical

simple

mixed

mixed

uppertier

1. Entry and

advancement
criteria
2. Wages

credentials
(often)

skills

high

3. Presence of ILM yes

4. Degree of
autonomy
high
5. Employment

stability

many managers at higher levels do have formal educational credentials. For career/
salaried managers entry criteria include a college education or equivalent experience
and successful completion of a 3-stage hiring process. Successful candidates are hired
into an entry level position as manager trainee. It should be noted that the position
of manager trainee is the only port of entry to this ladder. Even managers from other
restaurants with proven experience must enter at the trainee level; however, their
progress up the ladder is accelerated beyond that of candidates without such experience.
Another dimension along which the positions exhibit distinct differences is the wage
dimension. Crewpersons are compensated on an hourly basis beginning at federally
mandated minimum levels and extendingbeyond that within a limited range. Additional
compensation is offered via profit-sharing opportunities, free food, and provision of
uniforms. Clearly, this category warrants inclusion in the secondary market on this
dimension, although most secondary labor market positions do not have opportunities
for profit sharing. Swing managers are compensated at a rate of $5.00 an hour for a
40-hour week; swing managers could arguably be placed into the secondary market.
Salaried/ career managers are compensated at rates that are competitive both within
and outside the industry. The salary range for the four positions that comprise this
category is in excess of $10,000 and tops out at $36,000 for store managers excluding

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THE SOCIOLOGICAL QUARTERLY Vol. 29/No.l/1988

benefits. These rates of compensation are within the range for managers found in the
upper tier of the primary market, although probably still at the lower end of the
managerial salary continuum.
The presence of an internal labor is a primary market characteristic along which firms
can be evaluated. For career/salaried managers there exists a distinct job ladder, the
progress through which prepares individuals for positions in the highest levels of the
corporate structure. For swing managers, the opportunity to step onto the job ladder
exists but the position does not guarantee such progression. It would appear that these
positions, while having a job ladder, do not warrant placement into the upper tier.
Generally, the temporary, part-time nature of the crew positions as well as the general
lack of credentials and skills required suggest that these positions lie solidly within the
secondary market on this dimension, although swing managers must be recruited from
the crew. Desire for upward mobility within the firm is a key attribute of those promoted
from the crew level, with additional upward mobility being partly dependent on a
continuation of this commitment as well as willingness to invest in the time this
commitment entails.
The employment stability dimension shows less variance among the three categories.
The high rates of turnover experienced by the company in crew and swing manager
positions places both categories in the secondary market. For salaried managers, the
turnover is also extensive but is of the sort found in upper-tierjobs, movement to similar
jobs in other firms. In fact, in turnover of this sort, McDonalds may be a victim of
its own success. Their training program for managers is highly regarded in the industry
and their managers are actively recruited by competitors. On the dimension of pleasant
working conditions, there is virtually no distinction among the three categories. Whereas
the conditions are certainly not optimal, they are generally not of a nature to be
considered dangerous or unpleasant, therefore warranting placement in the lower tier
of the primary market.
On the due process dimension the three positions vary more substantially. Corporate
policy is very clear and strictly enforced on this issue. All employees are informed of
the policy upon hire and all are required to abide by it. For crewpersons the due process
includes verbal and written warnings prior to discipline and/ or dismissal. The allowable
penalties for each type of transgression are also set down in writing by corporate
headquarters. We argue that crewpersons and swing managers are in the lower tier of
the primary market on this dimension. For those individuals above the crew level, the
procedures are also clearly spelled out and there are also checks built into the process
to prohibit discriminatory practices by managers. These include the provision that
disciplinary actions involving managerial personnel must be reviewed and approved
by personnel at a higher level. These positions have been placed into the upper tier
of the primary market on this dimension.
Along the status there are clear distinctions between the three categories. The parttime temporary crew positions have low status and warrant placement into the
secondary market. The swing manager positions are of higher status as full-time
positions requiring some skills and allowing for some amount of authority. However,
the lack of upward mobility keeps them in the lower tier of the primary market. For
career managers of McDonalds stores, there exists more status but they are not in the
upper tier. To some degree this is due to the status (or lack of) attributed to the

One Firm, Two Labor Markets: The Case of McDonalds in the Fast Food lndustry

41

foodservice industry itself. Certainly persons of comparable skill and training in other
industries enjoy higher status that is in part attributable to the status of their industries.
And finally, along the dimension of control system there is further evidence of the
ambiguity that this case exhibits. Edwards (1979) defined system of control as the
manner in which direction, evaluation and discipline are coordinated and he identifies
three types of control (1) simple control that seeks rule orientation as desired worker
behavior, (2) technical control that seeks predictability and dependability as desired
worker behavior, and (3) bureaucratic control with internalization of company goals.
As Table 2 indicates, dual theory would argue that one could expect to find the
bureaucratic and technical patterns of control in the primary market of core firms and
the simple pattern of control in the secondary market of peripheral firms.
Discussion with our two informants revealed that the system of control at
McDonalds borrows from each of these models. All employees must internalize
McDonalds elaborate system of rules covering food preparation, establishment
cleaning, and so forth. The procedures and equipment used for food preparation also
establish some degree of technical control for all who use them, which certainly pertains
to crewpersons but also to managers when they participate in food preparation. It is
also the case that dependability and predictability in following rules and procedures
is demanded of all employees, and is a prime requirement for promotion from
crewperson to swing manager. An additional requirement is imposed on salaried/
control managers. The successful ones are those who have internalized company norms
and goals to the degree that their discretion can be trusted in the management of
individual stores. Thus while there are common elements to the control systems used
for all employees, the emphases differ and there are unique elements imposed at the
higher managerial levels. This mixture of control systems is not unique to McDonalds,
but is rather much closer to reality than the more simplistic models implied by dualist
theory.
Clearly, the job structure at McDonalds is neither representative solelyof a primary
nor sole1yof a secondary labor market but rather is a combination of both, dependent
upon the job category being evaluated. It seems obvious that there are at least two
labor markets within this single firm, where the forces creating bifurcation may be found
within the inconsistent nature of the economic characteristics of the firm itself. This
conclusion is reminiscent of Finlay (1 983) who argued that intra-occupation bifurcation
among crane operators argued for using jobs as opposed to occupations or industries
as the unit of analysis. Both cases point to limitations with traditional dualist
formulations, and suggest avenues for future work not bound by untenable
assumptions.3
CONCLUSIONS

We have argued that the firm of McDonalds has characteristics more consistent with
the core of the economy than of the periphery. We have also argued that in terms of
the jobs found in typical McDonalds stores, placement into the secondary, lower-tier
primary, or upper-tier primary markets depends on the position being analyzed. In some
cases the jobs we have analyzed do not fit neatly into upper-tier, lower-tier, and
secondary labor market positions. We are not surprised to find the presence of secondary

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market, lower-tier, and upper-tier primary market jobs within the same firm, because
many large firms distinguish between exempt and non-exempt employees on a
number of dimensions including pay, benefits, and working conditions. What we think
is not well-known is the centrality of primary labor market jobs in a firm whose image
is traditionally, and erroneously, one of an economic peripheral. Assuming 4 to 5
managers in each of the 2 165company-owned stores suggests in excess of 10,OOO primary
labor market positions in just this portion of the firm.
An important point regarding the ambiguous nature of this case is the presence of
the channels of upward mobility in a firm that also exhibits secondary market
characteristics. Channels in this firm can begin at the storelunit level and proceed
upwards to corporate headquarters. A major avenue to higher management involves
upward mobility through the ranks of operating a store or stores. This fact is inconsistent
with dualist theory that maintains that peripheral firms do not structure job ladders
to permit such movement. Whereas it is unclear how frequently such mobility occurs,
our sources pointed to particular individuals prominent in the firm with career paths
beginning in individual stores. Information from our informants also suggested the
possibility that the store manager jobs at McDonalds may be similar to managerial
jobs at comparable levels in other firms, those we would more likely identify as being
core firms.
The implications of this information are considered for the status of the dualist
theories reviewed. We reject the strictist form of parallelism that maintains that primary
market jobs predominate in core firms and secondary jobs predominate in peripheral
firms, because McDonalds appears to be a case of a core firm with a majority of
secondary labor market jobs, but also a significant number of primary labor market
jobs and an explicit ladder that links the jobs we have described. If, however, those
dimensions are retained along which sectors and markets are described (i.e., those
outlined in Tables 1 and 2), we can still look for parallelism in those dimensions. For
example, the firm was identified as having the core characteristics of size and
concentration, but the peripheral characteristics of lack of unionization and presence
of competition. We also described crew and shift manager positions as low paying and
prone to turnover, but salaried manager positions as being higher paying and prone
to the same pattern of turnover seen in managerial jobs at similar levels in other
industries. These patterns may suggest that the presence of competition among firms
in this industry and the lack of unionization leads to lower wages for crew and swing
managers, but that the size of the firm makes it necessary to develop the positions of
salaried manager as consistent with the theory concerning how primiary labor market
positions are structured. These findings suggest that, instead of focusing on parallelism
of structures, we focus on parallelism of characteristics. Thus the notion of parallelism
between economic structure and labor market organization remains a useful one,
provided one focuses on the characteristicsof these structures and not on these structures
as a whole.
It is important to compare and contrast this case with that described by Bluestone
et al. (1981) in their analysis of the retail industry because both industries are part of
the expanding nonmanufacturing sector of our economy. There are clear similarities
at the level of economic organization. Although the retail trade industry has existed
for some time and the fast-food industry is a relative newcomer, both have been

One Firm, Two Labor Markets: The Case of McDonalds in the Fast Food Industry

43

characterized by increasing concentration, the development of large corporate

hierarchies and the growth of centralized financial control. Both contain firms operating
within the context of international markets, with financial decisions made within the
context of international markets as well. The paradox of competition is also present
in both. Giant firms have emerged, and these largest firms are able to eliminate
competition with a number of smaller firms. However, an ever present fact of life is
the competition among the largest firms for the consumers dollar.
It is at the level of the labor market, however, that key differences emerge. Bluestone
and his colleagues (1981) described a very obvious deskilling process for retail clerks,
a growing stratum of highly paid upper-management jobs, and a correspondingdecline
in middle-range jobs both in pay and in skill. Although the structure of retailing has
changed to offer more and more standardized products, no new industry has been
created. The growth of McDonalds and other fast-food firms, however, have accounted
for rapid growth in what had been a small industry. Whereas the traditional restaurant
industry is still maintained with elaborate menus and individualized production of
customer orders, the fast-food industry has grown-up with different labor needs. Clearly
the skill requirements differ across these two related industries, with the low-skillcrewperson job growing at the expense of the more diversified semiskilled food
preparation jobs in traditional restaurants. To the extent that deskilling has occurred,
it has occurred not because the traditional semiskilled jobs have been eliminated, but
rather because the lesser-skilled alternative has grown so fast.4 Although there has been
proliferation of the corporate hierarchy as a function of firm growth, the dominant
story is not one of this growth coming at the expense of crew person skill. The fact
that there are very obvious channels of upward mobility is also inconsistent with the
picture Bluestone et al. (1981) paint of retail trade. We do, however, see similarity in
the types of people employed in the two industries: women and youth are two major
categories of workers well-represented at the crew person level. Although
documentation cannot be provided on this dimension, we were informed that racial
minority groups are also well represented in these positions.
We must also consider the extent to which McDonalds is typical of firms in the
industry. Althogh our primary interest is in the firm itself, it is clear that the remaining
firms in the industry do not always emulate McDonalds policy regarding the existence
of job ladders, use of due process, and level of training for employees. Whether these
firms will come to adopt some of the traits of the leading firm over time remains to
be seen. Whereas McDonalds, Burger King, and Wendys (the three industry leaders,
in that order) accounted for 72.4% of the hamburger market in 1975, by 1981 they
accounted for 79.6% of the market, and analysts project further concentration to come
(Blackwell et al. 1984, p. 115). This industry may be in the early stages of consolidation
in the same way that manufacturing of steel and autos were in the early part of this
century. If so, we would expect an increase in intra-industry homogeneity with reference
to existence of job ladders, levels of compensation, and other personnel practices. It
may also be the case that while upward mobility within the firms was not primarily
a function of credentials in the early years of the firm, such factors will become
increasingly important as the firm matures.
Finally, we are interested in suggesting avenues for future theoretical and empirical
work to extend the ideas presented in this article. Given the tremendous growth in the

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nonmanufacturing sectors of our economy in recent years, and relatively minimal

analysis of these settings in social science, we advocate additional studies of firms and
industries in the retailing and service industries. We have uncovered some distinct
similarities between department store retailing and the fast-food industry in terms of
economic organization and construction of the labor market, as well as some important
differences. We have only begun, however, to assess the external validity of the model
that Bluestone and his colleagues uncovered in their work, or of the findings we have
presented here. There is also a need to evaluate whether the findings already produced
will hold as these firms and industries continue to develop and take an even greater
place in the US.economy. In terms of the development of theories regarding economic
segmentation, the findings presented have reaffirmed the usefulness of the dimensions
of economic segmentation and labor market differentiation suggested by current
theories, while overreliance on schemes positing discrete segments appears unwarranted.
Ahead of us is the task of developing a theory that specifies which dimensions of
economic segmentation are associated with which dimensions of labor market
differentiation. It is our hope that continued analyses of cases such as this one will
provide the basis for such a reformulation.
ACKNOWLEDGMENTS

An earlier version of this article was presented at the Annual Meetings of the Southern
Sociological Society, New Orleans, April, 1986. We appreciate helpful comments by
Michael Wallace, Glenna Colclough, E. M. Beck, William Bridges and three anonymous
reviewers.
NOTES
1 . Although these three positions are key to store operations, they are not exhaustive of store
job titles. For example, some stores contain crew trainers who are recruited from the crew
after six months of service and demonstration that they can perform all types of crew jobs. This
position is neither necessary nor sufficient for promotion to swing manager, and is still an hourly,
part-time position.
2. Whereas the franchised and affiliated stores are not required to maintain/utilize the
corporate structure, the services of the corporate training staff are available to franchisees and
affiliates should they choose to use them. The system has no legal and/or contractual control
over these matters beyond requiring that owners complete required courses prior to ownership;
at the same time the rigidity of corporate standards (and the revocation clause in contracts)
provides strong inducement to use the systems training methods. The extent to which franchised
and affiliated stores invest in human resource development beyond the minimum system
requirements is variable and cannot be adequately evaluted here.
3. One reader has argued that the dominance of the franchiser-franchiseerelationship within
the McDonalds system accounts for the difficulty of categorizing McDonalds using core/
primary and periphery/secondary terminology, as compared with afirm such as General Motors.
We know, however, that GM has franchised dealers who distribute cars in the same way that
McDonalds has franchised to distribute hamburgers, and GM is clearly part of the core. A key
difference, however, betwen the two firms is that there is no production of hamburgers aside
from individual stores in contrast to centralized production of automobiles then distributed to

One Firm, Two labor Markets: The Case of McDonalds in the fast food Industry

45

widely dispersed dealerships. GM also earns more profit from dealer sales that McDonalds does
from franchise sales. Yet the two cases are similar in that franchises may provide very few
candidates for upward mobility within the firm.Sociological analyses of franchising are limited
and deserve investigation. We agree that the centrality of the francher-franchisee relationship
within the McDonalds system is important (see Love, 1986 for a detailed analysis of this
relationship). However, we do not agree that this form of economic organization is primarily
responsible for difficulty in categorizing the firm into traditional dualist categories.
4. This statement is not based on an historical analysis of the relevant job descriptions, but
rather on the assumption that the job in question involved little skill to begin with, and thus
could not have been deskilled to the same degree as the retail clerk job. The fact that the firm
grew so quickly after its founding as compared with the development of the modem department
store industry out of its earlier retail trade origins is consistent with this assumption.

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