10.17-2

Fast Food, Poverty Wages: The Public Cost of Low Wage Jobs in the Fast Food Sector

A new report by the University of California, Berkeley, Center for Labor Research and Education and the University of Illinois at Urbana-Champaign Department of Urban

& Regional Planning describes the social and economic consequences of low wages for fast food workers.  The executive summary and excerpts from the conclusion are below. 

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Executive Summary

 

Nearly three-quarters (73 percent) of enrollments in America’s major public benefits programs are from working families. But many of them work in jobs that pay wages so low that their paychecks do not generate enough income to provide for life’s basic necessities. Low wages paid by employers in the fast-food industry create especially acute problems for the families of workers in this industry. Median pay for core front-line fast-food jobs is $8.69 an hour, with many jobs paying at or near the minimum wage.

 

Benefits are also scarce for front-line fast-food workers; an estimated 87 percent do not receive health benefits through their employer. The combination of low wages and benefits, often coupled with part-time employment, means that many of the families of fast-food workers must rely on taxpayer-funded safety net programs to make ends meet.

 

This report estimates the public cost of low-wage jobs in the fast-food industry. Medicaid, the Earned Income Tax Credit and the other public benefits programs discussed in this report provide a vital support system for millions of Americans working in the United States’ service industries, including fast food. We analyze public program utilization by working families and estimate total average annual public benefit expenditures on the families of front-line fast-food workers for the years 2007–2011.1 For this analysis we focus on jobs held by core, front-line fast-food workers, defined as nonmanagerial workers who work at least 11 hours per week for 27 or more weeks per year.

 

Main Findings

 

More than half (52 percent) of the families of front-line fast-food workers are enrolled in one or more public programs, compared to 25 percent of the workforce as a whole. The cost of public assistance to families of workers in the fast-food industry is nearly $7 billion per year. At an average of $3.9 billion per year, spending on Medicaid and the Children’s Health Insurance

Program (CHIP) accounts for more than half of these costs. Due to low earnings, fast-food workers’ families also receive an annual average of $1.04 billion in food stamp benefits and $1.91 billion in Earned Income Tax Credit payments.

 

People working in fast-food jobs are more likely to live in or near poverty. 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. Even full-time hours are not enough to compensate for low wages. The families of more than half of the fast-food workers employed 40 or more hours per week are enrolled in public assistance programs.

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Conclusions

 

Because pay is low and weekly work hours are limited, the families of more than half of the workers in the fast-food industry are unable to make ends meet without enrolling in public programs. These families are twice as likely as working families in general to require public aid. Our conservative measurements indicate this public assistance carries a minimum annual price tag of nearly $7 billion.

 

Low wages, benefits and work hours in the fast-food industry come at a public cost. For front-line fastfood workers and others whose jobs pay too little to provide for food, shelter, health care and other basic necessities, Medicaid, the Earned Income Tax Credit, the Supplemental Nutrition Assistance Program and Temporary Aid for Needy Families are indispensable programs. These programs provide a last line of defense between America’s growing low-income workforce and the want of basic necessities. The results of this report suggest these programs would be more effective if they were combined with measures to improve wages and health benefits among low-wage workers.  Pay in the fast-food industry could be increased through a variety of means. Many fast-food workers earn close to the minimum wage and would benefit from an increase in the minimum wage or through targeted local laws to raise labor standards. Collective bargaining in the fast-food industry would increase wage and benefits standards in correspondence to the markets in specific geographic areas and the economics of particular market segments. Very few fast-food restaurants currently have collective bargaining agreements. However it is achieved, improving wages and health benefits in the industry would improve the living standards of low-income families while reducing the public cost of low-wage work.