Monthly Archives: September 2014

How taxpayers subsidize the profits of low paying employers

I wrote this in June 2013 but thought it was relevant again in light of the the continuing fast food worker strikes.

The recent strikes by fast food workers provides an excellent illustration of how the government subsidizes the profits of low-paying corporations through social spending. The strikes have spread from New York to Chicago to St. Louis and several other cities. These brave workers are risking the loss of their jobs to protest their pathetically low wages. Many of them tell how they must rely on SNAP, Medicaid, and other safety net programs just to keep their families alive and fed. And the people working these minimum wage jobs are mostly women – not teenagers, as if often supposed: Here’s how the government subsidy works. Say McDonald’s pays a working mom minimum wage, i.e., $7.25/hour. The chart below shows how many hours of work at minimum wage are required to pay fair market rent in each state: rent Or, to put it another way, at least 25% of working class people are now spending over half of their income on rent. So this working mom is spending well over 30% of her income (which is the standard for what is considered “affordable”) for rent alone.

As I said before, these fast food workers are relying on safety net programs to keep their families fed and in reasonable health. These programs are paid for by taxpayer money, of course. Because McDonald’s wages are insufficient to maintain this working mom’s family then a certain amount of government spending is required to maintain them. That amount of government spending is what should be paid to her by McDonald’s. Because that amount is not paid by them it actually amounts to a government subsidy. The government is effectively paying part of the McDonald’s personnel costs. And because McDonald’s does not have to pay that cost they are more profitable. McDonald’s can thus profitably exploit its employees, knowing that the taxpayers will pay to keep their employees fed, housed, and alive – but only barely.

UPDATE: This article cites some numbers from Wisconsin:

Right now, Walmart sets a high standard–in low wages and poor working conditions. The average wage comes to just $8.81, and it’s extremely difficult to get enough hours to live on. On top of that, Walmart uses every trick in the book to avoid providing workers with company benefits. Like other low-wage employers, Walmart keeps workers’ wages so low that many of them qualify for government aid. According to a recent report by the Democratic staff of the U.S. House Committee on Education and the Workforce, “The Low-Wage Drag on Our Economy,” which analyzed data released by Wisconsin’s Medicaid program, “a single 300-person Walmart Supercenter store in Wisconsin likely costs taxpayers at least $904,542 per year and could cost taxpayers up to $1,744,590 per year–about $5,815 per employee.”