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Editorial: Taxpayers' $7 billion Subsidy to Fast-Food Profits Should End

St. Louis Post-Dispatch, October 30, 2013

 By Editorial Staff

Is fast food so vital to the nation that taxpayers should spend $7 billion a year to supplement the industry’s profits? Imagine the outcry if that was proposed.

And yet a study by economists at the University of Illinois at Champaign-Urbana and the University of California at Berkeley’s Labor Center says it’s already happening.

Seven billion dollars a year is what it costs taxpayers for Medicaid, food stamps and the other public assistance programs for fast-food workers who are paid poverty-level wages.

A second report, “Super-Sizing Public Costs” by the National Employment Law Project, said low wages and missing benefits at the 10 largest fast-food companies in the country cost taxpayers about $3.8 billion a year.

Another way to look at it: McDonald’s posted $1.5 billion in third-quarter profits. Taxpayers paid $1.2 billion last year for public assistance to the McDonald’s workforce. That’s $300 million per quarter, a 20 percent contribution to the company’s bottom line.

It’s enough to give you indigestion.

The academic study – “Fast Food, Poverty Wages” – shows that more than half of the nation’s 1.8 million “core” fast-food workers rely on the federal safety net to survive. Core workers are front-line, non-managerial employees.

Collectively these workers get $1.9 billion through the nation’s earned income tax credit, $1 billion in food stamps and $3.9 billion through Medicaid and the Children’s Health Insurance Program.

The study examined employees who work at least 11 hours a week and 27 weeks a year. Of that group, 28 percent worked 40 hours a week and half of them also relied on federal public assistance to make ends meet.

Rallies, job walkouts and demonstrations this summer in St. Louis and elsewhere around the country highlighted the plight of fast-food workers. Labor organizers and social service advocates have been calling for higher wages for the workers, whose median hourly pay is $8.69.

The minimum wage in Missouri is $7.35 an hour, with an automatic increase built into the law to reflect inflation. The federal minimum wage is $7.25 an hour. Activists also are urging the workers to seek collective bargaining agreements.

The fast-food giants are accused of keeping their wages low and profits high by intentionally steering workers to sign up for food stamps and other public assistance programs.

The “Fast Food” researchers calculated that the cost to Missouri taxpayers, where about 49 percent of fast-food workers receive public assistance, is about $146 million a year.

Post-Dispatch reporter Kavita Kumar wrote Tuesday that Allan MacNeill, a Webster University political economist, said the public cost was probably underestimated. That’s because it did not include managers and people who work fewer than 10 hours a week.

The study also looked at only five of the largest federal public assistance programs, excluding other federal and state programs that would have pushed the figures higher, Mr. MacNeill said.

By under-paying employees, companies push their real cost of doing business onto the public at large. This can be called corporate welfare. Or socialism. But not capitalism.

Fast-food workers should be paid a living wage. The corporations that hire them must stop relying on the public for anything more than buying the occasional burger.

 

Original Article

 

 
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