U.S. fast food workers cost $7B a year in public benefits

Fast food workers in the U.S. cost taxpayers up to $7 billion US a year in government benefits and incentives because they cannot live on their pay, according to two studies published Tuesday.

Studies say low-wage, low-benefit jobs model is putting burden on taxpayer

Kevin Cole protests outside a fast food restaurant on Aug. 29 as fast-food workers walked out to demand higher wages. (Nick Ut/Associated Press)

Fast food workers in the U.S. cost taxpayers up to $7 billion US a year in government benefits and incentives because they cannot live on their pay, according to two studies published Tuesday.

Because the industry relies on low wages, no benefits and restricted hours, more than half of workers in the fast food industry rely on some form of public assistance, according to Researchers from the University of California, Berkeley and the University of Illinois.

The mean wage of a fast food worker in the U.S. is $8.69 an hour and almost 20 per cent lived in families that fall below the poverty line between 2007 and 2011, the research found.

Companies … are basically pushing off part of their costs on the taxpayers-  Jack Temple, National Employment Law Project

Overall, according to the study, an average of $7 billion of taxpayer money was spent annually on assistance for fast food workers each year between 2007 and 2011. Ken Jacobs, the chairman of the UC Berkeley Labor Center and author of the report, called that figure a “staggering” burden on the taxpayer imposed by the private sector.

A companion report, by the National Employment Law Project, estimated that McDonald's alone accounts for $1.2 billion of taxpayer benefits to workers.

Jack Temple, a public policy analyst at NELP, points out that the top six fast food companies in the U.S. had profits of $7.4 billion last year, with their CEOs paid a collective $52.7 million.

Low-wage work a burden on taxpayers

"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."

The Berkeley study, titled Fast Food, Poverty Wages, argues that 60 per cent of the jobs lost between 2007 and 2009 were middle-income jobs.

That has led to more Americans turning to minimum wage jobs and unable to make ends meet. Almost 68 per cent of these front-line workers are adults and not in school, and some 20 per cent have children.

The study recommends finding ways to improve wages and bring in health benefits for these workers, to reduce the burden on the taxpayer.

This summer fast food workers across the U.S. have been protesting in an attempt to get a higher minimum wage.

Robert Reich, a Berkeley professor of public policy and former Labor Secretary during Bill Clinton's first term as President, worries that the vanishing middle-class is hurting U.S. growth, especially given the new jobs created during the recovery are all low-wage.

“We’ve not seen this kind of an anemic recovery since ever – particularly given that the recession we’re coming out of was the second worst downturn in the last 100 years,” he said in an interview with the Lang & O’Leary Exchange.

Middle-class robbed of purchasing power

“A lot of that is because the vast middle-class in America doesn’t have the purchasing power they need to effectively keep the economy going.”

Reich argues the U.S. is an “outlier” in its growing inequality of wages.

“Other nations don’t have nearly the extent of concentrated income and wealth at the top with the typical household actually dropping in terms of adjusted income as is happening in the United States,” he said.

“I don’t think it’s totally unrelated to the issues we are dealing with in Washington. Because if you’ve got more and more middle-class and lower-middle-class people working harder than ever, becoming angrier and frustrated and desperate because they’re not getting ahead, they are easy prey for demagogues on the left or the right who basically want to tell them their problems are due to the poor or the rich or farmers or what have you? This is a recipe for scapegoating.”


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