Taxpayers Subsidizing Fast Food Profits

Nov 20, 2013

Two months after a national strike against restaurants by workers demanding a raise, there’s a lot still left out of coverage of the disagreement.

First, most fast-food workers are not teen-age employees working part-time, according to new data. Most fast-food employees are trying to support families on the low-paying jobs.

More surprisingly, perhaps, more than half of front-line fast-food employees’ households have to use some form of tax-funded assistance to make ends meet – at a cost of about $7 billion a year, according to new research from the University of Illinois at Urbana-Champaign and the University of California/ Berkeley. Fifty-two percent of these workers rely on food stamps, Medicaid or the Earned Income Tax Credit.

So: Fast-food corporations profit from taxpayers helping their workers get by.

Bill Knight

The universities’ report, “Fast Food, Poverty Wages: The Public Cost of Low-Wage Jobs in the Fast-Food Industry,” says, “The data we have assembled indicate working families would directly benefit from improved pay and hours in the fast-food industry.”

It says, “We show that fast-food workers live in poorer families compared to other workers; they are primarily adults; and they require public assistance at a higher rate than the workforce as a whole.”

According to the U.S. Bureau of Labor Statistics, in 2012 nearly 7 million Americans worked in the fast-food industry. Their average pre-tax annual income is about $18,000, a bit more than $9 an hour. For a family of three, that’s below the federal poverty line of $19,000.

Fast-food giants argue that their wages are fair for the skills needed and that if they raise pay, prices would rise for the cheap-and-easy grub.As an industry, however, fast food makes billions of dollars annually – and taxpayers essentially subsidize their corporate profits. The fast-food industry generates about $165 billion in revenue annually, based on 2011 market research by IBISWorld. McDonald’s alone last year reported operating income of more than $8 billion on gross revenues of $27.5 billion.

The research found:

* Families of fast-food workers are twice as likely to use social programs. For the workforce as a whole, the rate is 25 percent; for fast-food workers, it’s 52 percent. Researchers said, “The high participation rate of families of core fast-food workers in public programs can be attributed to three major factors: the industry’s low wages, low work hours and low benefits.”

* Fast-food workers and their families are more likely to be living in poverty than others. The study says, “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.”

* Between 2007 and 2011, the total state and federal cost of providing public assistance to the families of fast-food workers is almost $7 billion per year, including Medicaid, the Children’s Health Insurance Program, food stamps and the Earned Income Tax Credit.

* While most fast-food workers have been assumed to be teenagers living at home, only 18 percent fit that definition; 26 percent have children; 68 percent are not in school and are single, or married adults with or without children,” it notes.

* Only a minority of workers in the fast-food industry have health insurance. Researchers say, “Overall, 13 percent of core front-line fast-food workers receive health benefits through their employer, compared to 59 percent for the workforce as a whole.”  

Service Employees International Union (SEIU) President Mary Kay Henry, who supports the campaign for a $15 an hour wage for fast-food workers, said, “People who work for large, profitable corporations like those in the fast-food industry should be paid enough to afford basics like housing and groceries for their families. But the reality is that hundreds of thousands of fast-food workers need food stamps and other help from public assistance … just to tread water in this economy.”  

Bill Knight’s newspaper columns are archived at

The opinions expressed are not necessarily those of Tri States Public Radio or Western Illinois University.