Dunkin’ Donuts

The harsh price Americans pay for fast-food jobs

October 16, 2013: 9:39 AM ET

Some 52% of families of cooks, servers, and other fast-food workers receive public aid, nearly twice the percentage of the overall workforce.

By Elizabeth G. Olson

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FORTUNE -- Taxpayers spend at least $7 billion annually to subsidize food stamps and other public assistance programs that fast-food industry workers depend on to get by, according to two new studies.

Some 52% of families of cooks, servers, and other fast-food workers receive public aid -- which is nearly twice the percentage of the overall workforce, based on an examination of public data on such assistance programs by the University of California Berkeley Labor and Education Center and the University of Illinois.

"These are conservative estimates that do not include programs like child care assistance or subsidized lunch programs," says Ken Jacobs, chair of the Berkeley Labor Center and co-author of the report, in a briefing.

While the fast-food industry vigorously disagrees with the recently published report, the researchers say their data supports claims by fast-food workers, who have staged walkouts in 60 cities over the past year to highlight their lack of full-time schedules and benefits like health care and to call for a $15 hourly wage.

"People who work in fast-food jobs are paid so little," Jacobs says, "that having to rely on public assistance is the rule, rather than the exception, even for those working 40 hours or more a week."

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A separate study, also issued this week, directly blames 10 fast-food heavyweights, including McDonald's (MCD), Burger King (BKW), Subway, Dunkin' Donuts (DNKN), and Domino's (DPZ), for more than half the total cost of the benefits, some $3.8 billion.

McDonald's alone accounts for $1.2 billion of the cost to taxpayers, the National Employment Law Project study found. The massive burger chain and others use a low-wage, no benefits model that forces workers to turn to the public safety net, the report found.

"The seven largest traded companies paid $53 million in compensation to their CEOs, but low-paid workers are unable to afford the basic necessities," says Jack Temple, author of the NELP report.

Other corporations singled out by the NELP were Yum Brands (YUM), Wendy's, Dairy Queen, Little Caesar's, and Sonic.

Berkeley's Jacobs says that "one of the most surprising findings is that more than two-thirds of the fast-food workers were over age 20, and 68% are the main earners in their families, and more are parents raising a child than teenagers living with their parents."

"The CEO of McDonald's makes more in a day than I do in a year," says Devonte Yates, 21, who earns $7.25 an hour at a Milwaukee McDonald's and receives food stamps. "Taxpayers are basically subsidizing the CEO, who has more money than he knows what to do with, and corporations need to pick up that slack."

In its defense, members of the restaurant industry argue that students make up a big chunk of their core workers and dispute the studies' findings.

"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% of restaurant owners having started their careers in entry-level positions. In fact, nine out of 10 salaried employees started as hourly workers," Scott DeFife, the National Restaurant Association's executive vice president in charge of policy and government affairs, said in a statement.

DeFife called the studies "misleading" and accused the researchers of failing "to recognize that the majority of lower-wage employees works part-time to supplement a family income. Moreover, 40% of line-staff workers in restaurants, the primary focus of the reports, are students."

Jacobs says that only one-third of such workers are under 19. He also noted the large share of families on public assistance, even those who work 40 hours a week. "So it's not just a question of work hours, but of wages."

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The median wage for fast-food workers nationally is $8.69 per hour, according to the studies, and only 13% of those jobs offer health benefits, compared to 59% of jobs overall in the U.S. The median fast-food worker also works only 30 hours weekly, in comparison to the average 40-hour workweek.

The states where fast-food jobs cost taxpayers the most are California, at $717 million; New York, at $708 million; Texas, at $556 million; Illinois, at $368 million; and Florida, at $348 million, according to Jacobs.

The 10 largest fast-food companies made more than $7.4 billion in profits in 2012, according to the study data.

On Capitol Hill, Sen. Tom Harkin (D-Iowa), said that "anyone concerned about the federal deficit only needs to look at this report to understand a major source of the problem: multi-billion dollar companies that pay poverty wages and then rely on taxpayers to pick up the slack, to the tune of a quarter of a trillion dollars every year in the form of public assistance to working families.

"Seven billion of this is just for fast-food workers, more than half of whom, even working full time, still must rely on programs like food stamps and Medicaid just to make ends meet."

McDonald's USA, in a statement, defended its track record of providing jobs to "hundreds of thousands of people across the country," and noted that "wages are based on local wage laws and are competitive to similar jobs in that market. We also provide training and professional development opportunities to anyone that works in one of our restaurants."

Despite spreading to dozens of cities, worker walkouts have done little to prick the industry's conscience, but Temple, author of the NELP study, says that "companies are very sensitive to their brand because its success depends on popularity.

"The tipping point is going to be continuing activities we've seen this past year until companies see business as usual is not going to cut it."

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