New study shows why we have to raise the minimum wage to $15 an hour

Your Big Mac and Baconator aren’t as cheap as you think they are. In fact, every time you bite into a burger or other fast food concoction, the federal government subsidizes your meal—and the profit made by the fast food company.

That’s because more than one half of low-wage workers employed by the largest U.S. fast food restaurants earn so little that they get public assistance.  An analysis of Census Bureau figures by researchers at the Universities of California-Berkeley and Illinois released this week found that 52% of fast food workers used Medicaid, food stamps or the Earned Income Tax Credit program, between 2007 and 2011.  In fact, more than twice as many fast food workers sign up for public aid programs than does the overall workforce.

Another study—this one by the National Employment Law project (NELP)—found that public assistance for fast food workers costs U.S. taxpayers $3.8 billion a year. That’s a $3.8 billion subsidy to the fast food industry and denizens of fast food. It’s almost 2% of the total sales of the U.S. fast food industry, but a much larger portion of the profit. So if senior management of McDonald’s, Burger King, Wendy’s and Sonic are enjoying their country club memberships and private pools, they have the U.S. government and taxpayers to thank.

The NELP study estimates that the average in-store fast food employee makes $8.94 an hour.  That works out to less than $20,000 per year for someone working 40 hours a week 52 weeks a year.

I can understand why taxpayers subsidize the development of alternative energies, oil and gas drilling and university attendance. But why are we subsidizing an industry that contributes so much to our national health epidemics of obesity, diabetes and heart disease?

I’m thinking that if we ended this subsidy by raising the minimum wage to a decent level—say $15 an hour—your burger and fries would likely cost a little more and that the big fast food purveyors would make a little less profit. Of course, if fast food cost what it is supposed to cost without government subsidies, maybe some part of the market for fast food would opt for healthier and tastier food.  While that might lead to healthier Americans, it would definitely lead to fast food companies making even less money. And we couldn’t have that, could we?

Could and should.

The argument that raising the minimum wage would lead to job losses is complete garbage.  Employers tend to only hire when they need someone and when they can demonstrate to themselves that the additional employee will help to make a lot more money than the new employee’s salary, benefits and cost to train and equip. Many companies get fat over time and have to do occasional trimming or purging—but that’s not related to the minimum wage. These companies didn’t hire additional workers because they were cheap, but because company management thought they needed them at the time.

It makes sense that employers like to pay as little as possible for everything, including labor. But the minimum wage sets a floor on how low employers can go for public policy reasons: most everyone would agree that it’s in the best interest of the country to make sure that people who work will be able to eat and have shelter. With the current minimum wage, far too many don’t have the basics.  It’s time to raise it.

The call for $15 an hour minimum for all workers is realistic because over the past 30 years we have allowed the minimum wage to lose ground against the cost of living and corporate profits. Keeping the minimum wage low was an integral part of the game plan in the class war against the middle class and poor that the wealthy began in this country under Reagan.

The first step in returning to a more equitable distribution of wealth is raising the minimum wage.

You might have to pay more for your hamburger, but fewer of your tax dollars will go to the public aid programs for the poor that so many Americans love to hate.

2 comments on “New study shows why we have to raise the minimum wage to $15 an hour
  1. kcbill13 says:

    Agree that the minimum wage should be raised. It is a given, and I think your argument is correct.

    But there is another side to subsidies from government here. Many of the ingredients in fast food are based upon heavily subsidized corn crops, where both big Ag and big Chemical industries are involved in industrial food production which uses these ingredients to make food that is not good for any of us.

    A tangent I know, but there really is a lot to the story of how fast food and farmers (read as big Ag, not family farmers), subsidies also distort prices and depress wages for working folks.

  2. Rich Gautier says:

    To start off – I believe the minimum wage is too low. It’s not a living wage, but I also don’t believe it is meant to be. Simple math tells you 7.50/hr is $15000 a year. If you assume both partners make $15,000 and have no children, $30,000/year will get you by in some areas of the country, but be woefully inadequate in any major metropolitan area.

    With that said, I don’t think your reasoning is sound. Saving money on aid programs won’t mean the money that is collected on taxes will go back into the hands of the people. It will be spent on other programs – not only would it be irresponsible to send this money back to the taxpayers (where the wealthy are taxed too lightly as it is), because the money is needed in infrastructure. So – not only are the big macs going to cost more on the menu, but you won’t be seeing an actual cost savings on the other end.

    Don’t think McD’s won’t be raising the price of a big mac anytime soon – Fast food in this country is woefully under-priced – leading to bad habits made possible by the low price of prepared food. A pizza pie has been $10 (on sale) for a VERY long time, and it’s probably more expensive to make one in your own oven with off-the-shelf ingredients [unless you grow your own wheat and tomatoes and have a cow]. I’m sure the big guys are just WAITING for a reason to altogether raise the cost of a lunch-out – and that could be a great thing for the American waistline, when they learn to pack a sandwich and some fruit for 500 calories instead of the 1200 calorie super-size meal that costs less than 2 gallons of gas.

    Yes, raise the minimum wage – start demanding corporate boards to put a rein on executive pay and tie it to lowest-paid workers, and pay more for convenience. But don’t think that it’s because it’s going to save you money. It’s going to cost more…and that’s maybe a good thing.

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