The Public Cost of Low-Wage Jobs in America

New research we published Tuesday shows Alisha is far from alone. It might come as a surprise that most Americans on public assistance programs work. In fast food, workers rely on public assistance programs in particularly large numbers because jobs in the industry just don’t pay them enough. Fast-food jobs pay so little that 52 percent of the families of front-line fast food workers need to rely on public assistance programs, costing taxpayers nearly $7 billion a year. The cost is highest in California, at $717 million each year.

This is not an unfortunate side effect of our economy or our sputtering economic recovery. When hourly pay is so low that even full-time workers earn below the poverty level, the expectation that taxpayers pick up the tab becomes an indispensable part of an industry’s business model.

Our new report “Fast Food, Poverty Wages: The Public Cost of Low-Wage Jobs in the Fast-Food Industry” (http://laborcenter.berkeley.edu/publiccosts/fastfoodpovertywages.shtml) confirms that when employers pay poverty wages, workers like Snider are forced onto public programs to meet their basic needs. Earned income tax credits, publicly subsidized health insurance, income support and food subsidies are just some of the ways these working families bridge the gap between their paychecks and subsistence. This is the public cost of low-wage jobs in America.

While this is a problem across most service industries, the fast-food industry stands out for its low wages, skimpy hours and lack of benefits, which push 52 percent of workers onto public assistance, versus 25 percent of the overall workforce. The median wage for a front-line fast-food worker is $8.69 an hour and the median number of hours worked per week is just 30. Benefits are rare, with only 13 percent of workers receiving employer-provided health insurance, compared to 59 percent of workers overall. Even full-time hours are not enough to compensate for low wages. Remarkably, we found that more than half of families with a fast-food worker employed 40 or more hours per week have to enroll in public assistance programs to make ends meet.

The public benefits that workers like Snider are forced to depend on provide a vital support system for millions of the working poor. They should be the last line of defense, not a part of business as usual. These programs would be more effective if they were combined with higher wages. Whether they came from collective bargaining or minimum wage increases, higher wages would help families make ends meet without turning to taxpayer-funded programs.

This problem is not going away. A recent analysis by the National Employment Law Project shows that low-wage jobs account for nearly three out of five jobs generated since the end of the recession. The Economic Policy Institute expects nearly 30 percent of American workers to be employed in low-wage jobs in 2020, the same as 2010.

As long as pay remains low, these jobs will generate public costs. The fast-food industry is a major contributor to the growth of the low-wage economy — forcing more and more workers onto public assistance programs, which means taxpayers will be footing an even heftier bill if we don’t do anything to improve those jobs.

It doesn’t make sense that workers like Snider who prepare and serve food to millions of Americans each day can’t afford three meals a day for their own families. They don’t want to rely on food stamps and other kinds of public assistance and would much rather stand on their own two feet. For the good of the U.S. economy, fast-food workers, along with other low-wage earners, need a raise.

This article appeared in print on page 10 of the October 21st, 2013 edition of Hamodia.