What Is the Cost of Low Wages for Fast-Food Workers

By Chris Hoenig

Hundreds of fast-food workers across the United States went on strike Thursday, demanding better pay and the ability to form unions.

Workers walked out of chain restaurants in about 100 cities, expanding on this summer’s one-day actions, which took place in about 60 cities around the country. Demonstrations were planned in another 100 cities as well.

“They understand they’re not going to win from a one-day strike,” Kendall Fells of Fast Food Forward, the protests’ organizer, said. “Fight for 15,” a reference to the desired minimum wage of $15 an hour, has become one of the battle cries for workers, who chanted “We can’t survive on $7.25” in New York City and “Hey-hey, ho-ho, $7.40 has got to go” in Detroit.

“We need them to sacrifice with us,” Reverend Charles Williams II said of fast-food customers in Detroit. “We are sacrificing our time, the workers are sacrificing their wages. We need people who eat fast food to sacrifice their coffee, to sacrifice their McMuffin.”

The National Restaurant Association said many protesters have been union employees rather than actual fast-food workers, who have struggled to unionize themselves due to high turnover rates. The Service Employees International Union has been the largest backer for fast-food workers. The union is more than 2 million members strong, representing employees in healthcare, janitorial and other service industries.

Many fast-food employees earn little more than the federal minimum wage of $7.25 an hour, the equivalent of only about $15,000 per year for those who work 40 hours each week. An August 2013 study from the Center for Economic and Policy Research found that more than 10 percent of fast-food workers actually make less than minimum wage, while nearly 80 percent make less than $10.10 an hour—the amount Senate Democrats are proposing as the new federal minimum wage, with the support of President Obama.

When adjusted for inflation to 2012 dollars, the federal minimum wage peaked in 1968 at the equivalent of $8.56 an hour. It has not been above $8 an hour since, dropping below $6 an hour (in adjusted dollars) within the last five years. Since it was raised to $7.25 in 2009, almost 6 percent of the wage’s purchasing power has been lost to inflation.

There are about 2.9 million fast-food workers nationwide, making up more than 10 percent of all wage earners in the lowest-paid jobs (defined by the Pew Research Center and Bureau of Labor Statistics as being below $10.15 an hour). Many are young adults—more than a third are between the ages of 25 and 54—and more than a quarter of fast-food workers, married or unmarried, have kids. More than one-third are Black or Latino, accounting for a larger percentage than the ratio of Blacks and Latinos in the U.S. population. In fact, Blacks and Latinos have the highest rates of un- and underemployment, while income distribution gaps only increase.

Restaurant owners including McDonald’s Corp., Burger King Worldwide Inc. and Yum Brands Inc., owner of KFC, Pizza Hut and Taco Bell, say increased wages would force them to cut jobs and raise their menu prices, with the average burger going from $3 to $3.50. But the American public supports raising the minimum wage, with a February Pew survey finding 71 percent of people in favor of increasing the federal minimum wage to $9 an hour. Wide support was found among Democrats (87 percent in favor) and Independents (68 percent in favor), but also among Republicans, 50 percent of whom support the increase with 47 percent opposing. Only those Republicans who agree with the philosophy of the Tea Party were against the increase (64 percent opposed vs. 32 percent in favor), while 60 percent of Republicans who disagree or have no opinion of the Tea Party support the move.

Economic Costs

The low wages barely keep most fast-food workers above the federal poverty line. One in five families that includes a restaurant employee lives in poverty, while nearly 60 percent of fast-food workers nationwide make less than three times the level the government defines as the poverty line ($11,490 for an individual or $23,550 for a family of four, this year). Just 30 percent of the country’s entire workforce earns wages this low.

As a result, more than 940,000 fast-food workers (including 52 percent of front-line employees and more than half of employees who work more than 40 hours per week) and their families are enrolled in public-assistance programs, such as Medicaid or food stamps. The average family receives $7,650 in aid, costing the federal government—and America’s taxpayers—nearly $7 billion per year, according to a study from the University of California, Berkeley. Nearly $4 billion is spent on Medicaid and the Children’s Health Insurance Program for these employees every year, while more than $1 billion in food stamps are distributed. Another $1.9 billion is provided in the form of tax subsidies such as the Earned Income Tax Credit.

More than $100 million in aid will be sent to front-line fast-food employees in each of 22 different states, with California ($717 million), New York ($708 million) and Texas ($556 million) having the largest shares of front-line workers. Illinois ($368 million), Florida ($348 million), Georgia ($297 million), Ohio ($291 million), Tennessee ($269 million), North Carolina ($264 million) and Michigan ($251 million) are other states with employees receiving more than a quarter-billion dollars in aid each year.

Physical Costs

Living in or so near to poverty is known to increase the risk of health problems. Low-income neighborhoods typically lack full-service grocery stores, markets and restaurants to provide healthy food options. Instead, the same fast-food restaurants that employ and pay these workers so poorly are found with greater frequency, increasing the likelihood of obesity and all the health problems that come along with it.

Obesity, which has been classified as a disease by the American Medical Association, is most common among non-Latino Blacks. A lot of the health problems linked to obesity, such as coronary heart disease, type 2 diabetes, hypertension and increased risk of stroke, are also disproportionately common among Blacks.

Living below the poverty line has also been linked to many of the same diseases and conditions, as well as an increase in dental issues like cavities and a 60 percent increase in the infant mortality rate.

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