United States and World Politics

Fast-Food Giants Make Billions

While Their Workers Use Billions In Welfare Benefits

By Steven Rosenfeld

Two new studies profile the worst employers in America.

Wages at America’s fast-food chains are so low that millions of employees have been receiving at least $7 billion a year in welfare benefits between 2007 and 2011, according to a new study by University of California and University of Illinois labor economists.

“Our research estimates the public cost of low wages—low wage jobs in the fast food industry,” said Ken Jacobs, chair of the U.C. Berkeley Center for Labor Research and Education. “We specifically focus on the core, frontline fast-food workforce. These are people you are most likely to see when you walk into a fast-food restaurant.”  

“The median wage for these workers is $8.65 an hour,” Jacobs said Tuesday. “Only 13 percent have health benefits through their employer. The combination of low wages, meager benefits and often part-time hours means that many of the families of fast-food workers must rely on taxpayer-funded safety net programs to make ends meet.” 

But the billions in taxpayer subsidies is only half of the story, the labor economists said, because a companion report, also released Tuesday, October 15, 2013, found that the ten largest fast-food chains made more than $15 billion in profits and shareholder give-backs in 2012—revealing the industry could afford to pay living wages. 

The ten biggest chains earned $7.44 billion in profits in 2012, National Employment Law Project (NELP) found. The ten chains, with 2.25 million workers, account for “nearly 60 percent, or $3.8 billion, of the almost $7 billion in public costs associated with their low-wage, no-benefit business model,” it said. These corporate-run franchises granted “more than $53 million in compensation to their highest-paid executives and an additional $7.7 billion in dividends and buybacks to shareholders.” 

The ten largest fast-food chains are McDonald’s, Yum Brands (Pizza Hut, Taco Bell, KFC), Subway, Burger King, Wendy’s, Dunkin’ Donuts, Dairy Queen, Little Cesar’s, Sonic, and Domino’s.

McDonald’s, with slightly more than 700,000 workers in the U.S., was the fast-food giant costing taxpayers the most, with employees collecting $1.2 billion in public assistance in four federal-state programs: Medicaid/CHIP, which is healthcare for households making below the poverty line; the Earned Income Tax Credit, food stamps and TANF, or aid to needy families. The economists did not count welfare benefits like housing subsidies, meaning the total public cost is larger than what it reported, its authors said.

The findings in two reports were based on household income data collected by the U.S. Census Bureau, which is one of the most detailed confidential surveys conducted by the government, and Wall Street earnings reports. It was funded by Fast Food Forward, a national campaign seeking $15 an hour in wages and benefits such as paid sick leave.  

The twin reports are part of a shaming campaign to pressure the fast-food industry to fill in the gap between wages and benefits that hover above the legal minimum wage, but are not living wages. They were summarized in a media conference call where several fast food workers described the impact of low wages and no benefits on their lives.

“I don’t expect to get rich,” said Willietta Dukes, a 40-year-old North Carolina Burger King worker who receives food stamps. “But why can’t we pay our bills?”

“The CEO makes more in a day than I make in a year,” said Devonte Yates, a Milwaukee McDonald’s worker who receives food stamps and said he has no expectation that he will be given employee benefits such as healthcare. “They can afford to pay their workers more. We work hard. We should be able to live simply and have basic necessities.”

The UC Berkeley/University of Illinois study makes a strong case that fast-food jobs are possibly the worst in America, based on the percentage of workers who turn to a mix of state and federal welfare programs to make ends meet and raise their children.

“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 academics’ report said, which found that 26 percent of these workers were parents; and 42 percent were older than 18. The rest were younger teenagers not living on their own.

Fast-food workers with families could not escape the cycle of poverty, the report said.

“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,” it said. “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.”

Burger King worker Willietta Dukes said she was proud of doing her job well and said the industry’s wages have fallen over time.

“I am good at what I do,” she said, saying she raised two children working at fast-food chains for 20 years. “It hasn’t always been this way.”

Steven Rosenfeld covers democracy issues for AlterNet and is the author of Count My Vote: A Citizen’s Guide to Voting (AlterNet Books, 2008)., October 15, 2013