The Guardian, October 15, 2013
The fast-food industry's business model of low wages and low employee benefits is costing American taxpayers billions of dollars a year in public assistance programmes, according to two reports published on Tuesday.
Researchers from the University of California, Berkeley and the University of Illinois found that 52% of US fast food workers earn so little they are forced to rely on at least one type of public assistance programme.
They described as "staggering" the extent to which such public programmes effectively subsidise the fast-food industry's reliance on low-paid workers.
Compared to the average American worker, "non-managerial" fast food employees like cooks, servers and cashiers are twice as likely to need public assistance, the researchers found.
Overall, according to the study, an average of $7bn of taxpayer money was spent on assistance for fast-food workers each year between 2007 and 2011.
A companion report, by the National Employment Law Project, said that an estimated $3.8bn is spent each year on workers at America's 10 largest fast-food companies, and that McDonald's alone accounts for $1.2bn of that.
Jack Temple, a public policy analyst at NELP, said the fast-food industry model of low wages, non-existent benefits and limited working hours for front-line workers costs more than it appears to, because taxpayers are picking up the big chains' slack.
"It doesn't matter whether you work or shop at McDonald's or not, the low-wage business model is expensive for everybody," Temple said. "Companies … are basically pushing off part of their costs on the taxpayers."
Ken Jacobs, the chairman of the UC Berkeley Labor Center and author of one of the reports, said he and his colleagues found that only 13% of fast-food workers – who earn an overall median wage of $8.69 an hour – receive benefits like health insurance from their employers.
The need for public assistance programmes is "the rule rather than the exception", Jacobs said, even for those working more than 40 hours per week.
The estimated total cost of $7bn annually is likely to be low, researchers said, because they only looked at four types of public assistance: food stamps; healthcare; the Earned Income Tax Credit and Temporary Assistance for Needy Families, the program typically best known as "welfare."
They did not include subsidised housing, school lunches, home heating assistance or state programs in their analysis.
"The high participation rate of families of core fast-food workers in public programs can be attributed to three major factors: the industry's low wages, low work hours and low benefits," the Berkeley report said.
The studies come in the wake of strikes and walkouts organized by fast-food employees in 60 US towns and cities in the summer, part of a small but growing movement among service and retail workers to call for higher wages and the ability to unionize without harassment by employers.
Earlier this year, a report by House Democrats estimated that the cost of Walmart workers' reliance on public assistance – including food stamps, healthcare and other programmes – is $900,000 per year at just one of the company's 4,000 stores.
A spokesman for McDonald's said: "Our history is full of examples of individuals who worked their first job with McDonald's and went on to successful careers both within and outside of McDonald's.
"As with most small businesses, wages are based on local wage laws and are competitive to similar jobs in that market. We also provide training and professional development opportunities to anyone that works in one of our restaurants."
The National Restaurant Association, a trade group, criticized the reports as misleading. It described the restaurant industry as one of the "best paths for realising the American dream" and said that nine out of 10 salaried employees started out as hourly workers.
"America's restaurant industry provides opportunities for millions of Americans, women and men from all backgrounds, to move up the ladder and succeed," Scott DeFife, the association's executive vice-president for policy and government affairs, said in a statement.