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Fast-Food Workers Are Costing the US $7 Billion a Year in Public Aid

Time – Business & Money, October 15, 2013

By Martha C White

Those cheap fast-food prices conceal a huge hidden cost—even if you never pull into a drive-thru. New studies by the University of Illinois, University of California, Berkeley, and the National Employment Law Project find that taxpayer-funded safety net programs effectively subsidize fast food workers' low wages.

Researchers say roughly 2.3 million non-managerial employees at the 10 largest fast-food companies in the United States cost taxpayers an estimated $3.8 billion per year in safety-net benefits. When you add in the families of these workers — 68% of workers are the primary wage earners in their family — the numbers balloon to almost nearly $7 billion per year. Reliance on public assistance is "the rule rather than the exception for fast-food jobs," says University of California Berkeley's Center for Labor Research and Education chair Ken Jacobs, even for those who work 40 hours or more a week.

(MORE: Fast Food Strikes Go Viral: Workers Expected to Protest Low Wages in 35 Cities Thursday)

More than half of families are enrolled in one or more of public safety-net programs, including Medicaid, food stamps, the earned income tax credit, and the Children's Health Insurance Program. Jacobs says the real number is probably higher, since the research doesn't include WIC, subsidized housing or school lunches, home heating assistance or state programs.

Researchers say a combination of factors create this situation. "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 UC Berkeley/U. Illinois report says. The average front-line employee at a fast-food restaurant earns $8.69 an hour, and only 13% of these workers are estimated to have health insurance through their jobs.

This combination of low pay and limited work hours yields an average annual salary of only $11,056.14. And while it's certainly true that some people flipping burgers and taking drive-thru orders are teenagers, that report finds that only 18% are under the age of 18 and living with their parents. Even when you includes minors who don't live with their parents and college kids living at home, the total adds up to just under a third of all fast food workers.

(MORE: Fast Food Strikes: Unable to Unionize, Workers Borrow Tactics From 'Occupy')

Of course, fast food companies aren't the only ones that rely on minimum- and low-wage workers; big-box retailers like Wal-Mart have also come under fire for what they pay employees. But researchers found that 44 percent of restaurant and food service workers were enrolled in one or more assistance programs, the highest of any industry. On a media call, Jacobs said researchers were surprised that such a huge percentage of workers needed this assistance just to stay afloat.

For the vast majority of these workers, there's little hope they'll ever move up the socioeconomic ladder and escape this cycle of poverty and dependency. A previous study by the National Employment Law Project found that only 2% of fast-food jobs are managerial, professional or technical, in contrast to more than 30% of jobs in the American labor market overall that fall in this cateory.


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