McDonald's will raise hourly wages of its employees in the U.S. in the coming months.
McDonald's said Friday that it will be raising the hourly wages of its more than 36,500 employees at its company-operated U.S. restaurants by an average of 10%.
With a 10% average increase, the company's entry-level crew members will be earning at least $11 to $17 per hour. Shift managers will have starting wages of at least $15 to $20 per hour.
"In this highly competitive market for talent, successful employee recognition, recruitment, and retention is fundamental to drive growth," McDonald's U.S. President Joe Erlinger said in an internal memo.
McDonald's is reportedly also encouraging its franchisees to do the same. The company said increasing wages during this time makes the most sense for the community and for the company's long-term growth.
McDonald's decision to increase its workers' hourly wages comes as its rival Chipotle announced that it would be increasing its starting hourly wages to $15 per hour starting this week.
The announcements from the two companies have spooked some investors. Analysts said investors expect the companies to report lower profits due to the higher wages.
McDonald's share price dipped by 2% following its announcement, while Chipotle's stock dropped by 6.5%. Stock prices of other restaurant stocks also dropped Friday as investors anticipate similar announcements. Wendy's stock dipped slightly, while Burger King's parent company Restaurant Brands dropped by 3.5%.
Analysts at Yahoo Finance argued that the wage hikes may be good for the fast food restaurant sector as a whole. In a bull case thesis on restaurant stocks following the wage hikes, analysts said the wage increases will be putting more money in the pockets of lower-income consumers. Analysts said the wage increase will also encourage more consumers to spend their savings, increasing sales for fast food restaurants.
Analysts said the wage hikes will likely result in a short-term hit to the companies' profits. However, the macroeconomic dynamics point to a more positive effect on the industry in the long term. Analysts said the dips are a good buying opportunity for investors.