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Low Wages in Fast Food Cost Taxpayers $166 Million in Wisconsin

Workers are forced to utilize safety-net programs to supplement small paychecks

Oct. 23, 2013
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More than half of all front-line fast food workers earn so little that they are enrolled in one or more public assistance programs such as Medicaid, food assistance or the Earned Income Tax Credit, compared to about 25% of the workforce as a whole.

These low-wage workers use about $7 billion per year in taxpayer benefits nationally and about $166 million in Wisconsin, according to a new study from researchers at the University of California Berkeley Center for Labor Research and Education and the University of Illinois at Urbana-Champaign.

“This is the public cost of low-wage jobs in America,” the authors wrote in the just-released study Fast Food, Poverty Wages. “The cost is public because taxpayers bear it. Yet it remains hidden in national policy debates about poverty, employment and federal spending.”

These subsistence-wage workers wouldn’t need to rely on the public safety net if they earned higher wages and more employers provided affordable health care coverage.

Wages are so low in the fast-food industry that more than half of its full-time workers are enrolled in public assistance programs.

The study found that the median fast-food worker’s hourly wage is $8.69—slightly higher than the federal minimum wage of $7.25—and only 13% receive health benefits from their employer.

The study found that 34% of the 28,000 fast-food workers in Wisconsin utilize the Earned Income Tax Credit, Medicaid programs such as BadgerCare, or FoodShare.

According to the state Department of Health Services list of companies with employees and their dependents enrolled in BadgerCare during the first quarter of 2013, McDonald’s franchisees ranked #2, with 1,061 BadgerCare enrollees. Topping the list of employers with BadgerCare enrollees is Walmart, with 2,942 individuals.

A separate report released earlier this year by the Center on Wisconsin Strategy (COWS) found that 18,100 food service workers, about 68%, in metro Milwaukee earned what it calls the poverty wage, or $11.19 an hour, in 2012. The median wage in Milwaukee’s food service industry is $8.60 an hour.

COWS called for raising the minimum wage, expanding workers’ rights, and establishing minimum wage and benefit standards for firms that do business with local government.


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