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October 17, 2013

Study: Taxpayers Foot Bill for Low-Wage, Fast-Food Jobs

by Matthew Hilburn

That burger you picked up at the fast-food restaurant may be cheap, but that low price could come at a high cost to taxpayers.

More than half of the fast-food workers in the United States receive some kind of public assistance at a cost of nearly $7 billion annually to taxpayers, according to a report by the University of California at Berkeley’s Center for Labor Research and Education.

“The taxpayer costs we discovered were staggering,” said Ken Jacobs, chair of UC Berkeley’s Center for Labor Research and Education and coauthor of the report. “People who work in fast-food jobs are paid so little that having to rely on public assistance is the rule, rather than the exception, even for those working 40 hours or more a week.”

Earlier this year, fast-food workers in 60 cities went on strike calling for higher pay so they could survive without having to rely on public assistance.

The report said fast food is a $200 billion-a-year industry, but the median wage for core front-line workers at fast-food restaurants nationally is $8.69 an hour. Only 13 percent of the jobs provide health benefits, according to the report.

The low wages and lack of health benefits contributed to an increased reliance on programs such as Medicaid, the Children’s Health Insurance Program and food stamps, the report said. Adding to the cost is nearly $2 billion of earned income tax credits for fast-food workers. The earned income tax credit is a refundable tax credit predominantly for low to medium income families with children.

The report added that fast-food workers enrolled in public assistance at more than twice the rate of the overall workforce.

“This is the public cost of low-wage jobs in America,” said UC Berkeley economist Sylvia Allegretto, co-chair of the Center for Wage and Employment Dynamics. “The cost is public because taxpayers bear it. Yet it remains hidden in national policy debates about poverty, employment and public spending.”

Scott DeFife, Executive Vice President of Policy and Government Affairs for the National Restaurant Association, the largest lobby group in the food services industry, called the report “misleading.”

“The majority of lower-wage employees works part-time to supplement a family income. Moreover, 40 percent of line staff workers in restaurants, the primary focus of the reports, are students,” he said. “The inclusion of the Earned Income Tax Credit shows just how misleading these efforts are, as it is a tax credit specifically designed for working families, not public assistance, and is used to inflate their numbers.”

But Marc Doussard, one of the Berkeley report’s coauthors and an assistant professor of urban and regional planning at the University of Illinois at Urbana-Champaign, said the report helps dispel the myth of fast-food workers as largely untrained teenagers.

“More than two-thirds of core frontline fast-food workers across the country are over the age of 20, and 68 percent are the main wage earners in their families,” Doussard said. “And more than a quarter of Americans working in fast-food restaurants are parents, raising at least one child.”

DeFife said fast-food jobs can serve as stepping stones to higher paying jobs.

“America’s restaurant industry provides opportunities for millions of Americans, women and men from all backgrounds, to move up the ladder and succeed. In addition to providing more than 13 million job opportunities, the restaurant industry is one of the best paths to achieving the American dream, with 80 percent of restaurant owners having started their careers in entry-level positions. In fact, nine out of 10 salaried employees started as hourly workers.”

The Berkeley report was funded by Fast Food Forward, a coalition of workers and labor, religious and community groups campaigning for higher wages and rights on the job for New York City fast-food workers.