Low fast-food wages come at high public cost, reports say

Taxpayers are spending nearly $7 billion a year to supplement the wages of fast-food workers, even as the leading fast-food companies earn billions of dollars in annual profits, according to a pair of reports released Tuesday.

More than half of the nation’s 1.8 million “core” fast-food workers rely on the federal safety net to make ends meet, the reports said. Together, they collect nearly $1.9 billion through the earned income tax credit, $1 billion in food stamps and $3.9 billion through Medicaid and the Children’s Health Insurance Program, according to a report by economists at the University of California at Berkeley’s Labor Center and the University of Illinois.

Overall, the “core” fast-food workers are twice as likely to rely on public assistance than workers in other fields, said one of the reports, which examined nonmanagerial fast-food employees who work at least 11 hours a week and 27 weeks a year.

Even among the 28 percent of fast-food workers who were on the job 40 hours a week, the report said, more than half relied on the federal safety net to get by.

“These statistics paint a picture of workers not being able to get their fair share of the largest, richest economy in the world,” said Sylvia A. Allegretto, lead author of the report by the university economists, which was paid for by Fast Food Forward, a group that supports walkouts by fast-food workers. “It is a good thing that we have these work supports, but they should be a last resort.”

Those workers are left to rely on the public safety net even though the nation’s seven largest publicly traded fast-food companies netted a combined $7.4 billion in profits last year, while paying out $53 million in salaries to their top executives and distributing $7.7 billion to shareholders, according to the second report, by the National Employment Law Project, a worker advocacy group.

Fast-food industry representatives disputed the findings. Their restaurants offer a valuable entry into the workforce for millions of people, they said, including the 40 percent who are students.

“These misleading efforts use a very narrow lens and selective data to attack the industry for their own purposes, and fail to recognize that the majority of lower-wage employees work part-time to supplement a family income,” said Scott DeFife, executive vice president of the National Restaurant Association. “The inclusion of the earned income tax credit shows just how misleading these efforts are, as it is a tax credit specifically designed for working families, not public assistance, and is used to inflate their numbers.”

But many others are trying to support households, advocates said. They pointed to the growing activism among fast-food workers, poorly paid employees of federal contractors and other low-wage workers who for the past year have been calling a series of small but growing number of one-day strikes. They are demanding pay raises to $15 an hour and an easier route to forming unions.

The job actions are supported by organized labor groups, including the Service Employees International Union and Change to Win, which are lending staff and cash to the effort. The unions aim to increase pressure on lawmakers to raise the $7.25-per-hour federal minium wage while highlighting widening economic inequality.

Tionnie Cross, 29, works at a McDonald’s in Brooklyn, where she makes $7.35 an hour. Most weeks she is assigned no more than 28 hours, leaving her to rely on food stamps and government-sponsored health care to make ends meet, she said.

“I have a job, and I’m broke,” she said. “It is really bad, because I don’t want to depend on taxpayer money to survive.”

Fast-food industry representatives call the workers’ demands unrealistic. Raising wages for cooks, cashiers and drive-through window workers — who are paid a median wage of $8.69 an hour, according to the report by the Illinois and Berkeley economists — would ultimately cause these businesses to hire fewer workers overall, they argue. Also, they say, the franchisees who own many fast-food restaurants operate on thin profit margins, and dramatically raising wages would force them out of business.

But advocates for fast-food workers say the new reports demonstrate what they have long suspected: that the fast-food industry generates substantial profits that aren’t distributed equitably. Moreover, they said, the low wages leave taxpayers to take up the slack.

“I think what the report does is separate myth from reality,” said Jack Temple, a policy analyst who authored the report by the National Employment Law Project. “While fast-food interests call their business a low-margin, low-profit industry, there are actually billions of dollars at the corporate level. There are plenty of resources to change this business model that involves workers having to rely on public assistance to make ends meet.”

Michael A. Fletcher is a national economics correspondent, writing about unemployment, state and municipal debt, the evolving job market and the auto industry.
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