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Are We Subsidizing Corporate Profits with Tax Dollars by Allowing Them to Pay a Non-Livable Minimum Wage?

Posted by on Oct. 19, 2013 at 10:51 PM
  • 175 Replies

Why U.S. Taxpayers Pay $7 Billion A Year To Help Fast-Food Workers

New York City Council speaker and then-mayoral candidate Christine Quinn speaks at a fast-food workers' protest outside a McDonald's in New York in August. A nationwide movement is calling for raising the minimum hourly wage for fast-food workers to $15.

New York City Council speaker and then-mayoral candidate Christine Quinn speaks at a fast-food workers' protest outside a McDonald's in New York in August. A nationwide movement is calling for raising the minimum hourly wage for fast-food workers to $15.

Richard Drew/AP

If you hit the drive-through, chances are that the cashier who rings you up or the cook who prepared your food relies on public assistance to make ends meet.

A new analysis finds that 52 percent of fast-food workers are enrolled in, or have their families enrolled in, one or more public assistance programs such as SNAP (food stamps) Medicaid or the Children's Health Insurance Program (CHIP).

That's right: With a median wage of $8.69 per hour for front-line fast-food jobs — cooks, cashiers and crew — workers are taking home a paycheck, but it's not enough to cover the basics, according to the authors of "."

"The taxpayer costs we discovered were staggering," says co-author Ken Jacobs of the Center for Labor Research and Education at the University of California, Berkeley.

"The combination of low wages, meager benefits and often part-time hours means that many of the families of fast-food workers have to rely on taxpayer-funded safety net programs to make ends meet," Jacobs told me by phone.

The report finds that the fast-food industry's low wages, combined with part-time hours and lack of health care benefits, creates demand for public assistance including $3.9 billion per year in Medicaid and Children's Health Insurance Program (CHIP) benefits. Add on another billion for the Supplemental Nutrition Assistance Program (SNAP), formerly known as food stamp assistance. Earned Income Tax Credit payments (a subsidy to low-wage workers) amount to about $1.95 billion per year.

Contrary to the assumption that the typical fast-food worker is a teenager living with his or her parents, the report finds that the vast majority of front-line fast-food workers are adults who are supporting themselves — "and 68 percent are the main wage earners in their families," of the University of Illinois at Urbana-Champaign, a co-author of the paper, says in a about the study.

He says about a quarter of those working these jobs in fast-food restaurants are parents supporting children at home.

The report was funded by , a group campaigning for higher wages.

The analysis comes as a campaign for $15 per hour wages has garnered significant attention around the country. Over the past year, workers in cities nationwide have temporarily walked off their jobs to protest low wages.

But some more conservative-leaning economists say raising wages would do nothing to curtail the taxpayer spending on public assistance programs.

"I don't think raising the minimum wage to $15 an hour would solve that problem," , a resident scholar at the American Enterprise Institute, told me during a phone interview. He describes himself as a center-right economist.

Strain says raising wages to that level would have unintended consequences: Namely, fast-food companies would slow down their hiring. And this would lead to more workers looking for jobs — and potentially needing to rely on more public assistance.

Strain says the $7 billion taxpayer bill is not necessarily problematic.

"I think the system seems to be working the way it is — not that it's working perfectly," he says, adding, "In general, the government is making sure these people's basic needs are met, which is an appropriate role of government."

At the same time, Strain argues, fast-food businesses are paying their workers wages that they judge to be equal to the value these workers are adding to the production process.

"If we were to raise the minimum wage to $15 an hour, I think most economists, including me, would argue that that would result in a lot fewer workers," since fast-food companies would slow down on hiring.

Ken Jacobs disagrees.

"I think there's very good evidence on what's happened when wages have been improved for low-wage and fast-food workers," Jacobs says.

He points to a fast-food company, , as an example of an employer that pays higher-than-average wages, yet is still profitable.

And, Jacobs says, some municipalities are raising minimum wages, such as San Jose, Calif., where the minimum wage is set to increase in January of 2014. And there are proposals in states including to phase in hourly minimum wage hikes as well.

Jacobs argues that it's possible that employers may see a small decline in profits, but when wages are raised, "you do find a significant decline in turnover [of workers], which is cost-saving for employers."

National Woman's Party


by on Oct. 19, 2013 at 10:51 PM
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Replies (1-10):
DropZoneMom
by Bronze Member on Oct. 19, 2013 at 11:13 PM
5 moms liked this

Yup.  Fast food workers and Walmart employees make up the bulk of PA recipients.   While I don't necessarily think $15/hour is necessary, the minimum wage in this country should certainly not be less than $12/hour.   When 2 people are working full time, they should NOT be below the poverty level, nor should they qualify for PA.

stormcris
by Christy on Oct. 19, 2013 at 11:14 PM
4 moms liked this

Just a point but if they started paying them a 'living wage' that would no longer be a living wage for very long.

NWP
by guerrilla girl on Oct. 19, 2013 at 11:16 PM
2 moms liked this

I am just left wondering if those who think corporations deserve as much profit as they can skim and believe that welfare recipients who work for these corporations are lazy takers actually "get" who is really taking their tax dollars?

Quoting DropZoneMom:

Yup.  Fast food workers and Walmart employees make up the bulk of PA recipients.   While I don't necessarily think $15/hour is necessary, the minimum wage in this country should certainly not be less than $12/hour.   When 2 people are working full time, they should NOT be below the poverty level, nor should they qualify for PA.


National Woman's Party


FromAtoZ
by AllieCat on Oct. 19, 2013 at 11:18 PM

These workers are beneath others.  They are lucky to have a job.  Besides, why did they not make better choices long ago to prevent them from having to use these 'stepping stone' jobs as 'real' jobs?

Sure, they may be working but it isn't good enough.  


NWP
by guerrilla girl on Oct. 19, 2013 at 11:20 PM
2 moms liked this

Maybe...but the income gap is certainly capable of absorbing the difference between profits and sustainability. 

Profits have never been higher.

Quoting stormcris:

Just a point but if they started paying them a 'living wage' that would no longer be a living wage for very long.


National Woman's Party


Sisteract
by Whoopie on Oct. 19, 2013 at 11:25 PM

Lots of people have been bamboozled-

NWP
by guerrilla girl on Oct. 19, 2013 at 11:26 PM
2 moms liked this

Jacobs argues that it's possible that employers may see a small decline in profits, but when wages are raised, "you do find a significant decline in turnover [of workers], which is cost-saving for employers."

mcknitro
by Member on Oct. 19, 2013 at 11:37 PM
2 moms liked this
If the minimum wage is raised to $15 an hour, do u think educated workers who make 15 are going to be happy making the same as a mcdonalds worker? They will demand raises and everyone will demand raises and then prices will go up and 15 an hour won't be a sustainable wage for long.
NWP
by guerrilla girl on Oct. 19, 2013 at 11:43 PM
8 moms liked this

In better economic times the divide wasn't so wide. We are in much of the state we are in because shareholder profits come first.

Corporate profits have NEVER been higher than they are now, but these margins are not sustainable.

The income gap is big enough to absorb most, if not all of the difference between profits and sustainability.

When the income gap is not so wide, everybody wins.


Quoting mcknitro:

If the minimum wage is raised to $15 an hour, do u think educated workers who make 15 are going to be happy making the same as a mcdonalds worker? They will demand raises and everyone will demand raises and then prices will go up and 15 an hour won't be a sustainable wage for long.


National Woman's Party


smalltowngal
by Platinum Member on Oct. 19, 2013 at 11:45 PM
4 moms liked this



Quoting stormcris:

Just a point but if they started paying them a 'living wage' that would no longer be a living wage for very long.

If you started paying people a living wage, they would no longer qualify for benefits and still have the same amount of money to spend. Companies would have to decide whether or not to raise prices of products or actually pay CEO's reasonable raises to make up the difference the government was no longer covering.

You look at companies that do pay a decent wage to their employees and their CEO's usually have a lower income. Cotsco being a good example. 

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