Two new reports released this week have shed light on how America’s fast food companies have quietly outsourced a significant chunk of their labor costs to the taxpayer, with more than half of the industry’s 3.65 million low-wage workers on public assistance at a cost of $7 billion each year.
Researchers at the University of California, Berkeley released a study on Tuesday showing that front-line fast food workers earning a median wage of $8.69 an hour are more than twice as likely to rely on public benefits programs as the rest of the workforce — 52% compared to 25%.
Of that $7 billion, well over half — $3.9 billion — is spent on Medicaid and the Children’s Health Insurance Program (CHIP) for fast food workers and their families. UC Berkeley’s researchers found that 68% of these low-wage earners are the main breadwinners in their households, with over a quarter raising children.
A companion report released by the National Employment LawProject found that the 10 biggest fast food corporations in the country are responsible for nearly 60%, or $3.8 billion, of the annual $7 billion outlaid by the taxpayer for low-wage workers. These same 10 companies made a cumulative $7.4 billion in profits in 2012, paying out an additional $7.7 billion in dividends and buybacks to shareholders.
The NELP compared just how much the public purse subsidizes labor costs at each of these ten restaurant chains. McDonald’s MCD +0.17% topped the list, costing the taxpayer $1.2 billion annually in public assistance programs for their low-paid workers. Yum Brands comes in at a distant number two, with its Pizza Hut, Taco Bell and KFC subsidiaries costing $648 million in benefits programs for workers each year.
The chair of the Senate Committee on Health, Education, Labor, and Pensions (HELP) reacted to the two reports in a statement to the press, describing the figures as “stark.”
“Anyone concerned about the federal deficit only needs to look at this report to understand a major source of the problem: multi-billion dollar companies that pay poverty wages and then rely on taxpayers to pick up the slack, to the tune of a quarter of a trillion dollars every year in the form of public assistance to working families,” said Sen. Tom Harkin (D-Iowa). “Seven billion of this is just for fast food workers, more than half of whom, even working full time, still must rely on programs like food stamps and Medicaid just to make ends meet.”
“In a nation as wealthy as the United States, no one who works hard for a living should live in poverty,” Harkin added. “Underpaying workers affects us all. These highly-profitable companies paying poverty wages should raise wages and listen to their workers’ demands to form a union. We should also increase the minimum wage, as I have proposed. These steps are not only the right thing to do for low-wage workers, but also the smart thing to do for the economy and for taxpayers.”