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The $7 Billion Problem of Low-Wage Fast-Food Jobs

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That's how much taxpayers spend on social net programs for fast-food workers, according to a new study from UC Berkeley. And they say that estimate is conservative.

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For almost one year now, Fast Food Forward has been organizing fast food workers across the nation in their push to increase the minimum wage and gain the right to unionize. Now, a new report funded by the organization has found that it isn't just fast food workers who carry the burden of low-wage fast food jobs: Conservatively, low-wage jobs at fast food restaurants like McDonald's (NYSE:MCD), Burger King (NYSE:BKW), and Wendy's (NASDAQ:WEN), cost taxpayers $7 billion every year.

That figure, from a new report of UC Berkeley entitled "The Public Cost of Low-Wage Jobs in the Fast-Food Industry," reflects only the costs of four major social benefits programs that low-wage workers are compelled to use in order to feed themselves and their families. Those programs are Medicaid and the Children's Health Insurance Program ($3.9 billion), the Earned Income Tax Credit ($1.9 billion), food stamps ($1 billion), and Temporary Aid for Needy Families ($200,000). The final number of $7 billion doesn't even include the taxpayer cost of programs like child care assistance, WIC, section 8 housing, fair-priced lunches, or any of the multitude of state-based aid programs.

The study focused on a core demographic of the "front-line fast food workforce," which includes non-managerial workers who work for at least 10 hours per week and 27 or more weeks per year, with a median wage of $8.69 per hour. Of this demographic, 13% receive health benefits through their employer. Moreover, a full 52% of workers in the core demographic rely on at least one of the four public safety nets measured for the study, more than twice the rate of the American workforce as a whole.

And disproving the notion that most of these workers are teenagers, more than two-thirds of the studied demographic are over the age of 20; parents raising children outnumber teenagers.

Jack Temple, a policy analyst at the National Employment Law Project, and another author of the study, said on a press call yesterday that a substantial majority of the $7 billion cost to the public comes from low-wage jobs at only a few of the major fast-food companies, including those mentioned above, McDonald's, Burger King, and Wendy's, as well as Subway, Starbucks (NASDAQ:SBUX), Taco Bell (NYSE:YUM), and Dunkin' Donuts (NASDAQ:DNKN). Those seven companies, the biggest fast food companies in the US, paid their CEOs a combined $53 million last year while a majority of their employees make close to minimum wage.

When asked what the tipping point might be, what would make companies start paying their employees more, Temple answered, "Growing public pressure is what will account for accelerating pressure for higher wages. Companies are sensitive to their brand and their brand's popularity. They are sensitive to any negative press."

The Fast Food Forward movement seems to be raising awareness of fast-food workers' fight for higher wages, but for the workers, conditions are as grim as ever. On the press call, the Reverend Martin Rafanan, Co-Chair of the St. Louis Workers Rights Board, said that two of five women in a women's homeless shelter that he helps run are full- or part-time employees at fast-food restaurants. "Because their margin was so tight, any little thing could throw these women into homelessness," said Rafanan, commenting on how difficult it is to get by on a minimum wage.

Echoing this sentiment, Wilieta Dukes, an employee of Burger King in Durham, NC, said, "We're not expecting to get rich working in fast food, but why can't we just pay our bills and rent?" She has been working in fast food for over 16 years, and now her son does as well.

The Fast Food Forward movement is still less than a year old: It was launched last November and quickly became the largest attempt ever made to unionize fast-food workers in the US (see some of Minyanville's early coverage of the movement here). Now, strikes have spread from New York City to major cities across the country, and the new report from UC Berkeley which demonstrates the high cost to all Americans, will likely raise even more awareness.

Illustrating how gross income inequality has become the norm in the fast-food industry, Devonte Yates, an employee of McDonald's in Milwaukee who lives off of food stamps, said, "The CEO of McDonald's makes more in a day than I do in a year."

Follow me on Twitter: @JoshWolonick and @Minyanville
No positions in stocks mentioned.
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