Public assistance for fast-food workers costs taxpayers, reports say

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10/16/2013 11:48 PM

05/16/2014 10:28 AM

Low-paying jobs in the fast-food industry exact a multibillion-dollar cost on U.S. taxpayers, according to two national reports released Tuesday.

U.S. taxpayers pay about $7 billion a year to support Medicaid, food stamps and other public assistance programs for fast-food workers who earn poverty-level wages, a team of university researchers said in one of the reports.

Median front-line pay of $8.69 an hour, especially when coupled with part-time work hours and no health insurance benefits, pushes slightly more than half of the nation’s 1.8 million “core” fast-food workers into taxpayer-funded assistance programs, said one report, titled “Fast Food, Poverty Wages.”

The “Fast Food” report, produced by research teams at the University of Illinois at Urbana-Champaign and at the University of California, Berkeley’s Center for Labor Research and Education, was issued at a time when labor organizers and social service advocates have been calling for a wage increase and collective bargaining for fast-food workers.

Major rallies were held twice this past summer in Kansas City and elsewhere around the nation, including one-day walkouts by some fast-food workers and demonstrations at some restaurants.

The “Fast Food” researchers calculated that Missouri taxpayers pay about $146 million a year to low-wage workers enrolled in assistance programs. A similar cost breakout wasn’t available for Kansas.

The second report released Tuesday, titled “Super-Sizing Public Costs,” was a smaller study issued by the National Employment Law Project. It said low wages and a lack of benefits at the 10 largest U.S. fast-food companies alone cost taxpayers about $3.8 billion a year.

The “Super-Size” report drew fire from the Employment Policies Institute, which said it overestimated taxpayer cost by assuming that all front-line fast-food workers obtain public assistance. The institute, which tends to represent employers’ interests, said nearly one-third of such workers are teenagers or otherwise don’t qualify for public assistance programs.

“If even 25 percent of the affected employees in NELP’s report aren’t costing taxpayers a dime, that would mean NELP’s estimates are off by roughly $1 billion per year,” the institute said in a news release.

Nonetheless, researchers involved with the larger “Fast Food” study said their findings should dispel the idea that fast-food workers are mostly teenagers earning fun money.

“More than two-thirds of core front-line, fast-food workers across the country are over the age of 20, and 68 percent are the main wage earners in their families,” said Marc Doussard, an assistant professor of urban and regional planning at the University of Illinois. He said more than one-fourth of fast-food workers are parents raising at least one child.

The larger academic study found that fast-food workers enroll in public safety net programs at more than twice the rate of the overall workforce.

But the report also noted that the public support of about $7 billion for fast-food workers represented a small fraction of the $243 billion a year spent to operate the four major public assistance programs for all recipients.

It analyzed the combined costs of Medicaid, the Children’s Health Insurance Program, the earned income tax credit, food stamps and the Temporary Assistance for Needy Families program.

“People who work in fast-food jobs are paid so little that having to rely on public assistance is the rule, rather than the exception, even for those working 40 hours or more a week,” said Ken Jacobs, chairman of the Berkeley labor research center.

A group of Kansas City activists who have been calling for a minimum wage increase, especially for fast-food workers, used the release of the reports to stage a midday rally Tuesday in front of a Wendy’s restaurant near 31st and Main streets.

Linda Schroeder, a member of the Missouri Association for Social Welfare who attended the rally, said her association supports a higher minimum wage because “livable wages and affordable health care are crucial to the well-being of everyone.”

The national minimum wage of $7.25 an hour applies in Kansas. It is $7.35 an hour in Missouri, which has an automatic increase built into the law to reflect inflation. Some states have higher state minimums than the federal wage floor.

Fast-food companies defend the wages paid to front-line workers as appropriate for jobs that are entry level or step-up opportunities. They say that the wages also are appropriate given the prices they charge for food and that significant wage increases would lead to job loss in order to hold the line on payroll costs.

Spokesmen for the fast-food industry also note that many such restaurants are owned by franchisees or are mom-and-pop operations that have thin profit margins and lack the deep pockets and profits of large corporate owners like McDonald’s or Yum Brands, which owns Pizza Hut, Taco Bell and KFC.

The reliance on public aid isn’t confined to low-paid workers in the fast-food industry, the “Fast Food” report noted. Nearly three out every four enrollments in major U.S. public benefits programs are by working families across the board, it said.

Based on 2007-11 data, the cost of public assistance to fast-food industry workers averaged:

• $3.9 billion a year for Medicaid and the Children’s Health Insurance Program.

• $1.04 billion a year for food stamp benefits.

• $1.91 billion a year in earned income tax credits.

“This is the public cost of low-wage jobs in America,” said Sylvia Allegretto, an economist at Berkeley. “The cost is public because taxpayers bear it. Yet it remains hidden in national policy debates about poverty, employment and public spending.”

The related “Super-Size” report contrasted workers’ wages with profits in the fast-food companies that employ them.

The nation’s seven largest fast-food companies had combined profits of $7.4 billion last year, and their top executives received $53 million in total compensation, the report said. Shareholders received about $7.7 billion in dividends and stock buybacks.

Some worker advocates want to raise entry-level fast-food pay to $15 an hour and unionize the workers. The movement is supported by the Service Employees International Union and Change to Win.

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