Bill Knight – November 21
1:14 pm
Wed November 20, 2013

Taxpayers Subsidizing Fast Food Profits

Two months after a national strike against restaurants by workers demanding a raise, there’s a lot still left out of coverage of the disagreement.

First, most fast-food workers are not teen-age employees working part-time, according to new data. Most fast-food employees are trying to support families on the low-paying jobs.

More surprisingly, perhaps, more than half of front-line fast-food employees’ households have to use some form of tax-funded assistance to make ends meet – at a cost of about $7 billion a year, according to new research from the University of Illinois at Urbana-Champaign and the University of California/ Berkeley. Fifty-two percent of these workers rely on food stamps, Medicaid or the Earned Income Tax Credit.

So: Fast-food corporations profit from taxpayers helping their workers get by.

Bill Knight

The universities’ report, “Fast Food, Poverty Wages: The Public Cost of Low-Wage Jobs in the Fast-Food Industry,” says, “The data we have assembled indicate working families would directly benefit from improved pay and hours in the fast-food industry.”

It says, “We show that fast-food workers live in poorer families compared to other workers; they are primarily adults; and they require public assistance at a higher rate than the workforce as a whole.”

Bill Knight's November 21 commentary

According to the U.S. Bureau of Labor Statistics, in 2012 nearly 7 million Americans worked in the fast-food industry. Their average pre-tax annual income is about $18,000, a bit more than $9 an hour. For a family of three, that’s below the federal poverty line of $19,000.

Fast-food giants argue that their wages are fair for the skills needed and that if they raise pay, prices would rise for the cheap-and-easy grub.As an industry, however, fast food makes billions of dollars annually – and taxpayers essentially subsidize their corporate profits. The fast-food industry generates about $165 billion in revenue annually, based on 2011 market research by IBISWorld. McDonald’s alone last year reported operating income of more than $8 billion on gross revenues of $27.5 billion.

The research found:

* Families of fast-food workers are twice as likely to use social programs. For the workforce as a whole, the rate is 25 percent; for fast-food workers, it’s 52 percent. Researchers said, “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.”

* Fast-food workers and their families are more likely to be living in poverty than others. The study says, “One in five families with a member holding a fast-food job has an income below the poverty line, and 43 percent have an income two times the federal poverty level or less.”

* Between 2007 and 2011, the total state and federal cost of providing public assistance to the families of fast-food workers is almost $7 billion per year, including Medicaid, the Children’s Health Insurance Program, food stamps and the Earned Income Tax Credit.

* While most fast-food workers have been assumed to be teenagers living at home, only 18 percent fit that definition; 26 percent have children; 68 percent are not in school and are single, or married adults with or without children,” it notes.

* Only a minority of workers in the fast-food industry have health insurance. Researchers say, “Overall, 13 percent of core front-line fast-food workers receive health benefits through their employer, compared to 59 percent for the workforce as a whole.”  

Service Employees International Union (SEIU) President Mary Kay Henry, who supports the campaign for a $15 an hour wage for fast-food workers, said, “People who work for large, profitable corporations like those in the fast-food industry should be paid enough to afford basics like housing and groceries for their families. But the reality is that hundreds of thousands of fast-food workers need food stamps and other help from public assistance … just to tread water in this economy.”  

Bill Knight’s newspaper columns are archived at billknightcolumn.blogspot.com

The opinions expressed are not necessarily those of Tri States Public Radio or Western Illinois University.