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

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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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