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Sunday, December 08, 2013

The True Cost of Minimum Wage

Burger-flipping as a career option is the topic of a lot of jokes in America, but it's no joke to those who actually work in the fast food industry.

The following stats, from a recent report by the U.C. Berkeley Labor Center, highlight the true costs to society of keeping wages low in the fast-food sector:
Figure 1: Participation in Public Programs
  • 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. (See graphic.) This is true even when the workers in question are working 40 hours a week.
  • The cost of public assistance to families of workers in the fast-food industry is nearly $7 billion per year.
  • At an average of $3.9 billion per year, spending on Medicaid and the Children's Health Insurance Program (CHIP) accounts for more than half of these costs.
  • Due to low earnings, fast-food workers' families also receive an annual average of $1.04 billion in food stamp benefits and $1.91 billion in Earned Income Tax Credit payments.
  • People working in fast-food jobs are more likely to live in or near poverty. 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.
For more stats, see this Mother Jones piece.

Of course, low wages are a problem throughout the restaurant industry, not just the fast-food piece. The problem extends to retail as well. A Walmart in Ohio recently made news when it held a food drive—for its own employees.

Industry apologists will argue, of course, that if Walmart or McDonalds had to pay $12/hr starting pay, they would go out of business. That's complete nonsense. U.C. Berkeley's Labor Center researchers have already done the arithmetic for Walmart: If Walmart were to set a pay floor of $12/hr, the average net cost increase to shoppers would be 46 cents per store visit. A similar calculation for McDonalds comes to much the same answer. (McDonalds serves 69 million orders a day through 34,000 restaurants. Figure 300 minimum-wage-hours worked per restaurant per day. Every extra dollar an hour in wages comes to 15 cents extra per customer order.)

So McDonalds, if you're listening, what's your response to this? I'd like to know. Leave a comment below.

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