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Fast Food's Cheap Labor Costs U.S. Taxpayers $7 Billion a Year

Florida Miami Homestead McDonald's fast food restaurant inside counter employee Hispanic man cashier customer
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Whether you "Run on Dunkin'," (DNKN) are "Lovin' It" at McDonald's (MCD) or are simply incapable of resisting Subway's demands that you "Eat Fresh," one thing is clear: America loves the low prices and convenience of its fast food. This month, however, two recent studies have offered a fresh look at the hidden expenses behind fast food -- and, more specifically, the high cost of its cheap labor. As a shocking number of fast food workers are growing reliant on public assistance programs to help them make ends meet, it's becoming increasingly clear that low-paid fast food workers come with a very high price for consumers.

The notion that low wages come at a high social cost has gotten a lot of press this year. For the most part, however, that ink has focused on Walmart (WMT), America's largest private employer. In July, the company drew headlines when it refused to open three planned stores in Washington, D.C., after the city raised its minimum wage for big box retailers to $12.50 per hour.

It isn't hard to see how this would be a difficult transition for Walmart: its average cashier makes $8.53 per hour. And, in order to keep benefits low, the company has a history of giving its workers fewer than 30 hours per week. At the average wage, a Walmart cashier working 26 hours per week would bring home $11,532, placing him or her $42 above the poverty line for a single person household. Add in a spouse or child, and the Walmart worker would land well below the poverty line.

So it isn't hard to understand why many Walmart employees rely on welfare and other public assistance programs. A 2004 Berkeley study determined that the average Walmart worker in California received almost $2,000 a year in public aid, and a study released by congressional Democrats earlier this year estimates the cost at up to $5,815 per employee per year. That works out to between $904,542 and $1,744,590 that every single Walmart store costs taxpayers. Which means Walmart's is effectively forcing you and your fellow average Americans to subsidize its stunning profits -- whether you shop there or not.

While it's important to not let Walmart off the hook, it's clear that the discount behemoth is only part of the problem. According to a UC Berkeley Labor Center report released this week, 52 percent of all front-line fast food workers are enrolled in at least one public assistance program, and one in five households with a family member working in fast food is below the poverty line.

If one considers that many fast food workers are high school and college students living at home, the high costs of low wages become even more stark. According to the Berkeley study, more than half of all families with a family member working 40 hours per week or more at a fast food restaurant receive public assistance.

All told, the Berkeley study found that fast food restaurants cost taxpayers $7 billion a year.

Berkeley's Labor Center isn't the only group investigating the high cost of low wages. Earlier this month, the National Employment Law Project offered an even more granular analysis of the public assistance benefits paid to fast food workers. According to their study, the top 10 fast food chains are collectively responsible for $3.8 billion in public assistance costs per year, with McDonald's leading the pack at $1.2 billion. In other words, because of its low wages, McDonalds alone costs the U.S. an average of $1,695 per worker.

You want fries with that?



Bruce Watson is DailyFinance's Savings Editor. You can reach him by e-mail at bruce.watson@teamaol.com, or follow him on Twitter at @bruce1971.

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tim

Another Cry baby Bruce Watson Bullshit story. Get a real writer Dailyfinance.

October 19 2013 at 5:07 PM Report abuse -1 rate up rate down Reply
willypfistergash

Fast food emlloyees are being compensated at their skill level, and at a mutually agreed upon wage.

October 18 2013 at 8:54 PM Report abuse rate up rate down Reply
1 reply to willypfistergash's comment
willypfistergash

Employees.

October 18 2013 at 8:54 PM Report abuse -3 rate up rate down Reply
willypfistergash

clark8642
Doesn't affect any of us. Just like the $24 billion for the recent side show it is all added to our tab for the kids to pick up.




clark......the estimated $24 billion wasn't a cost. The money was never spent. Words matter.

October 18 2013 at 8:29 PM Report abuse -2 rate up rate down Reply
2 replies to willypfistergash's comment
clark8642

Never spent? hopefully you are kidding. The added interest costs for our debt service? The cost for back pay for federal employees? The lost revenue from reduced business at parks and near federal installations? The unemployment compensation? Wait until all the data are in. The figure in direct costs will exceed the S&P estimate. And it will all go on the tab. We refuse to do without the services we refuse to pay for is still accurate but I don't remember who said it originally.

October 18 2013 at 8:39 PM Report abuse +1 rate up rate down Reply
1 reply to clark8642's comment
willypfistergash

How is back pay any additional cost? It would have been less if they were on the job?

What I'm saying is lost revenue is not a cost, as revenue and spending are not the same thing.

October 18 2013 at 8:44 PM Report abuse -2 rate up rate down
clark8642

We told the federal employees they could not work and then we paid them for doing no work. That is a waste of resources and is not a wash by any means. Lost revenue is an increase in our debt as long as we are running a deficit. Revenue and spending are not the same yet a change in either one affects the bottom line.

October 18 2013 at 8:51 PM Report abuse +1 rate up rate down Reply
1 reply to clark8642's comment
willypfistergash

We didin't pay them any more. Side note...amazing how many working for the fed gov are non esssential...like the EPA? 93% are non essential! In the private sector non essential workers are non workers. The back pay was a wash. We pay them for doing no work for ten holidays a year, sick days, personal days....many are duplicate programs and plenty of waste. The GAO says we could cut $125 billion a year.

But to my point, whike revenue and spending are both part of a budget, they are not the same thing. When people say a tax cuts 'cost', it is not a true statement.

October 18 2013 at 9:04 PM Report abuse -1 rate up rate down
willypfistergash

boy...patty murray and paul ryan look pretty happy to be sharing a conference room together. This committee is a waste of time..just like all the rest of them.

October 18 2013 at 6:07 PM Report abuse -2 rate up rate down Reply
willypfistergash

Raise the minimum wage and the federal poverty will sortly follow.
Whatever.

October 18 2013 at 5:29 PM Report abuse -3 rate up rate down Reply
1 reply to willypfistergash's comment
willypfistergash

Shortly

October 18 2013 at 5:29 PM Report abuse -1 rate up rate down Reply
willypfistergash

Costs taxpayers $7 billion a year? That only affects around 53% of us doesn't it?

October 18 2013 at 5:28 PM Report abuse -1 rate up rate down Reply
1 reply to willypfistergash's comment
clark8642

Doesn't affect any of us. Just like the $24 billion for the recent side show it is all added to our tab for the kids to pick up.

October 18 2013 at 7:44 PM Report abuse +1 rate up rate down Reply
unno2002

Eliminate welfare, taxpayer problem solved...

October 18 2013 at 1:41 PM Report abuse +1 rate up rate down Reply
1 reply to unno2002's comment
clark8642

Solved? Not hardly. A total elimination of federal welfare payments would cut $400 billion from the deficit. Any plan for the rest of the deficit? Because you are okay with having the poor contribute, I would think you would be okay with a tax increase on the wealthy, so they can do their part, for the remainder? Or maybe we should cut defense a few hundred billion? You have more work to do.

October 18 2013 at 4:22 PM Report abuse +2 rate up rate down Reply
5 replies to clark8642's comment
runswthscisors40

Don't want to work low-paying jobs?.....then don't!.........but guaranteed, those same "former McDonald's employees" will STILL be on the public dole..........just another lame-blame article by the lib eral m ed ia............never heard of the "cost of doing business"??.................

October 18 2013 at 1:21 PM Report abuse rate up rate down Reply
willypfistergash

badsomey
Baggers are not the most intelligent creators on this planet
.
.
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It's awesome when dunces like this badsomey comment on other's intelligence while making a screw up like this......that's funny stuff right there.

October 18 2013 at 1:12 PM Report abuse -1 rate up rate down Reply
mac2jr

Minimum Wage and You ©

How much do you earn, you charge customers $20 to $60 per hour, but do you work a full time job as a private independent contractor? Many private contractors have tools, an office, advertising, travel expenses, shopping expenses, employees, taxes, insurances, advertising, etc., that take nearly 40 to 60% of the $20 to $60 per hour charged, thus leaving some $12 to $24 per working hour as salary. From this, one has to consider that many independent contractors never get enough jobs to cover a 40 hour week, but may get only one to five jobs per week, and each job is a minimum of 4 hours, or $80 to $240. So, lets say that one gets five jobs at $80, for a total of $400, divided by 40 hours per week, which comes out at $10 per hour, slightly over the minimum wage for most communities {minimum wage varies by state and community}.

We then have the workers of some major corporations that are making far less than the poverty level for the size of their family. These are workers in well know and shopped super stores, and well know appliance manufactures, who rely on the State and Federal Governments to make up the difference to their workers with Food Stamps, Medicaid, Medicare, etc.

Now who can live on $10 per hour? First we have the lower end of Social Security, usually women in their 60s, 70s, 80s, and 90s, who receive on average some $650 per month, or $3.75 per hour. Then we have the higher end of Social Security, usually retired blue collar or professional men getting about $1,400 per month, or $8.07 per hour.

The lowest group is probably the food service industry people, many times younger women with children, who work for the a minimum wage of $2.13 per hour plus tips, as established by Herman Cane some 22-years ago in Congress. The idea is that 'tips' will make up the difference between the $7.25 minimum wage and the $2.13 actual minimum wage for these workers, and if not, then the restaurant or fast food chain will make up the difference, which seldom happens. Now think of the person working 'Graveyard' and how much in tips he or she receives. Would you work for $2.13 per hour? These people are currently {August 2013} in Washington, D.C. petitioning for a $5.00 minimum wage.

You hear about 45,000,000 Americans on Food Stamps, getting government aid in the form of housing, medical, schooling, phones, etc., and many put the blame on government 'give-away' programs, but when you ACTUALLY STUDY the problem of POVERTY, you can see that Corporate America are those that have depressed salaries, cut benefits or refused to provide benefits, failed to pay their fair share of expenses, and are the real culprits behind Poverty and the potential downfall of this great country.

Bring back the Unions, we need a balance of economic power in America.

October 18 2013 at 10:50 AM Report abuse -2 rate up rate down Reply
1 reply to mac2jr's comment
willypfistergash

What percentage of Americans work for corporate America?

October 18 2013 at 11:27 AM Report abuse -1 rate up rate down Reply