Fast Food Pulls a Fast One

  • submit to reddit
Three NJ Taco Bell restaurants linked to E Coli outbreak (AP Photo)
Patrons enter the Taco Bell fast-food restaurant in Franklin Township, Somerset County, NJ. (AP Photo/Mike Derer)

Bad enough that the empty calories of many a fast-food meal have all the nutritional value of a fingernail paring. Even worse, the vast profits this industry pulls in are lining the pockets of its CEOs while many of those who work in the kitchens and behind the counters are struggling to eke out a living and can’t afford a decent meal, much less a fast one.

Yes, you have heard this before. Over the last year or so, you’ve probably seen news coverage of the strikes and other job actions fast-food workers have taken against their employers. Maybe you’ve even read about the wage theft lawsuits that have been filed against McDonald’s and Taco Bell, or the recent settlements in New York State against McDonald’s, Pizza Hut and Domino’s Pizza that have led to payments to employees of more than $2 million.

But, much in the way that Thomas Piketty’s book Capital in the Twenty-First Century lays out the hard data backing up everything we’ve believed about the reality of vast income inequality in America, a trio of new reports confirms with solid statistics what we’ve suspected about the fast-food industry — that those in charge are gobbling up the profits voraciously while their workers are forced into public assistance. What’s more, our tax dollars are subsidizing both the fast-food poor who need the help and the fast-food rich who don’t.

First, a recent data brief from the National Employment Law Project (NELP) notes, “Lower-wage industries accounted for 22 percent of job losses during the recession, but 44 percent of employment growth over the past four years. Today, lower-wage industries employ 1.85 million more workers than at the start of the recession.” In other words, as The New York Times more succinctly put it, “The poor economy has replaced good jobs with bad ones.”

Michael Evangelist, author of the NELP report, told the Times, “Fast food is driving the bulk of the job growth at the low end — the job gains there are absolutely phenomenal. If this is the reality — if these jobs are here to stay and are going to be making up a considerable part of the economy — the question is, how do we make them better?”

A study from the public policy and advocacy group Demos, Fast Food Failure, confirms that, “The fast food industry is… one of the highest growth employers in the nation” but needs to address “imbalanced pay practices in order to mitigate the damaging effects of income inequality.”

The numbers are stunning. According to Demos, “In 2012, the compensation of fast food CEOs was more than 1,200 times the earnings of the average fast food worker. Proxy disclosures recently released by fast food companies reveal that the ratio remained above 1,000-to-1 in 2013.”

The average fast-food CEO made $23.8 million last year, four times what the average was in 2000, while fast-food workers “are the lowest paid in the economy. The average hourly wage of fast-food employees is $9.09, or less than $19,000 per year for a full-time worker, though most fast-food workers do not get full-time hours. Their wages have increased just 0.3 percent in real dollars since 2000.”

That $19,000 is below the “poverty threshold” for someone supporting a family of three, and on average, fast-food workers actually make less than $12,000 because they don’t get called into work for a full forty hours a week. The Demos report also cites numbers from a University of Illinois/University of California-Berkeley analysis that “87 percent of front-line fast food workers do not receive health benefits through their jobs. Since fast food employers do not pay for the critical needs of low-wage workers and their families, public programs foot the bill.

“According to the same study, more than half of front-line fast food employees are enrolled in a public assistance program, at a cost of nearly $7 billion per year.” Those are public assistance programs for which we’re paying and which the fast-food giants count on to keep their profit margin high while not paying employees what they need to care for their families.

Which brings us to the third report, this one from the progressive Institute for Policy Studies (IPS) and titled, Restaurant Industry Pay: Taxpayers’ Double Burden. Double burden because in addition to the money in food stamps, Medicaid and other government assistance impoverished fast-food workers need to survive, taxpayers also are underwriting CEO compensation.

What? The IPS report explains that it’s pulled off by means of “a loophole that allows all U.S. publicly held corporations to deduct unlimited amounts from their income taxes for the cost of executive stock options, certain stock grants, and other forms of so-called ‘performance pay.’ In effect, these companies are exploiting the U.S. tax code to send taxpayers the bill for the huge rewards they’re doling out to their top executives.”

IPS calculated the pay of the CEOs at the 20 largest corporate members of the National Restaurant Association — known as “the other NRA,” the restaurant industry’s multimillion spending lobbyist. Among those 20 are the CEOs of McDonald’s, Chipotle, Starbucks, Dunkin’ Brands and Yum! Brands, which owns Kentucky Fried Chicken, Taco Bell and Pizza Hut. IPS discovered that over the past two decades, these executives “pocketed more than $662 million in fully deductible ‘performance pay,’ lowering their companies’ IRS bills by an estimated $232 million. That would be enough to cover the average cost of food stamps for more than 145,000 households for a year.” In fact, the bigger the executive payoff, the less the fast-food company pays in taxes. Talk about a Happy Meal. You want fries with that?

So going back to that question Michael Evangelist, author of the NELP report, asks — how can we make things better? For one, as IPS recommends, we can close the performance pay loophole. The Stop Subsidizing Multimillion Dollar Corporate Bonuses Act in Congress caps deductibility of employee compensation at $1 million, period. This could generate $50 billion in revenues over ten years, according to the House and Senate Joint Committee on Taxation. And California Congresswoman Barbara Lee has introduced the Income Equity Act. It cuts off corporate tax deductions for any executive’s pay that’s more than 25 times the salary of the company’s lowest paid worker or $500,000, whichever is highest.

If you think that’s unprecedented, IPS points out that both the Affordable Care Act and the TARP bank bailout sets a $500,000 deductibility cap “on pay for bailout recipients and health insurance firms. The deductibility caps on health insurance firms, designed to discourage these corporations from using profits from premiums to overcompensate their executives, go into effect this year.”

Second, of course, raise the minimum wage, preferably to $15 an hour. As per the IPS report, “Minimum wage increase supporters highlight the potential stimulus effects of putting more money into the pockets of low-wage earners. Unlike those at the top end of the income scale, minimum wage workers tend to spend all of their earnings” — just to meet basic needs. “Every extra dollar that goes to a low-wage worker adds about $1.21 to the national economy. This economic stimulus would pump money into local economies and help create new jobs.”

Ultimately, though, it’s the companies that must take action. Yet some of their CEOs say they favor a wage hike but still allow the National Restaurant Association to continue doing their dirty work for them, lobbying fiercely, as they are right now in Congress against any minimum wage hike at all (this is the same gang that for more than twenty years has kept the minimum wage for tipped restaurant workers at a paltry $2.13 an hour).

Time for the CEOs to put their money where it counts, “to arrest the damage,” as that Demos report says, “from pay disparity and restore the focus on long-term interests of the firm.” Time to show some foresight, for as wages remain stagnant, purchases will go unmade, the health and wellbeing of workers will continue to decline and with that deterioration, the service and reliability on which the companies ultimately depend for profitability will crash as well.

If things continue as they are, the only thing fast about the fast-food business will be the speed of its fall.

Michael Winship is the Emmy Award-winning senior writer of Moyers & Company and BillMoyers.com, and a senior writing fellow at the policy and advocacy group Demos.
  • submit to reddit

BillMoyers.com encourages conversation and debate around issues, events and ideas related to content on Moyers & Company and the BillMoyers.com website.

  • The editorial staff reserves the right to take down comments it deems inappropriate.
  • Profanity, personal attacks, hate speech, off-topic posts, advertisements and spam will not be tolerated.
  • Do not intentionally make false or misleading statements, impersonate someone else, break the law, or condone or encourage unlawful activity.

If your comments consistently or intentionally make this community a less civil and enjoyable place to be, you and your comments will be excluded from it.

We need your help with this. If you feel a post is not in line with the comment policy, please flag it so that we can take a look. Comments and questions about our policy are welcome. Please send an email to info@moyersmedia.com

Find out more about BillMoyers.com's privacy policy and terms of service.

  • Anonymous

    This story is so full or errors and misinformation as to be laughable.

    First of all, the author thinks that fast food workers in the kitchens and counters actually work for McDonalds or TacoBell. This is completely not so – for example 85% of MacDonalds locations are franchises.

    So the overwhelming majority of these workers work for franchisees, which are typically small businesses which may own from one to a few franchises each, and typically employ less than 50 people in total. So that renders his entire opening paragraph false and moot.

    Second – there is no work theft agains McDonalds and TacoBell as claimed in the second paragraph. There is a law suit against franchisees – again small business owners. So there goes his second paragraph.

    So now, at best, we are talking about how taxes are subsidizing the small business owners – the franchisees. So lets look at that.

    McDonalds franchisees employ about 750,000 people in 31,000 locations. Some of them do receive some sort of assistance – virtually all because they have children (plural) – and receive SNAP or housing assistance.

    But, what would happen if these jobs didn’t exist? What is the cost of an additional 3/4 of a million people without jobs?

    Estimates vary but most are around 1% fast food job loss for each $1 raise in the minimum wage. So raising it to $15 would presumably cause about 75,000 people to lose their jobs – at Mc Donald’s franchises alone (true some likely would be offset by some additional hiring in other businesses). What is the cost to taxpayers of that?

  • Anonymous

    If we want to have a stable, growing economy then we need to have all workers, part and full time, earn a living wage and a floor on payrolls as a percentage of GDP. We cannot afford as a society to “forget” after a couple of generations why we so desperately needed these things. That is why we need a constitutional amendment to indelibly recover our democratic and entrepreneurial spirit. Anything less will condemn us to cycles of boom bust with each collapse witnessing the demagogues come out of the woodwork and heightened risk of war.

  • Davideros

    Oh dear, not YOU again, for xx hundredth time. Your hair-splitting is risible. How many franchises can you fit on the head of a pin, baron? As for work theft, you’re completely wrong. See the Demos report: “In New York, Domino’s Pizza and McDonald’s have settled cases of labor market violations with the
    Attorney General’s office for amounts that sum to more than $2
    million.Large, comprehensive private law suits have been filed
    against McDonald’s and its franchisees in Michigan and Califor-
    nia as well as against Pizza Hut locations in Colorado and other
    states. Taco Bell was named as a defendant in class action law
    suits in every year from 2007 to 2010 for violations of California
    labor laws. In 2009 Papa John’s Pizza faced a collective action
    suit by delivery drivers in Missouri.The suits allege that fast
    food companies have pushed wages below the legal threshold
    for workers by denying payment for hours worked or overtime,
    and taking workers off the clock illegally in order to hold down
    the costs of operation, in addition to other violations.”

  • Anonymous

    I’m sorry, but you are wrong.

    The cases you are citing -e.g. Dominos in NY – were settled by TWENTY THREE different FRANCHISEES, not Dominos.

    The McDonalds case in NY you also cited were also settled by SEVEN different Franchisees, not McDonalds.

    It is really no surprise that the author’s and your anger at American businesses is so strong, that it clouds your ability to even target the right businesses.

    That says a lot. Keep on hating business owners. I’m very sure employees will, in your world, have wonderful employment, without employers. The tooth fairy is said to to overpay workers to do little – kind of like public employee union jobs.

  • Davideros

    Zzzzzzzzzzzzzzz…

  • Anonymous

    My Uncle Nathaniel recently got a nearly
    new red Chrysler 200 Sedan only from working part time off a home pc… find
    out this here C­a­s­h­D­u­t­i­e­s­.­ℂ­o­m

  • Anonymous

    Interesting. First of all, our economy is stable and growing. In the 60s and 70s, at the hight of income equality, and high taxation, we had riots in the streets, white flight from the cities, and real wars.

    Now we have low crime, low inflation, low interest rates, and a very robust economy. The financial crisis of 2007/2008 was nothing more than a needed adjustment, with benign long term implications for our economy – e.g. housing prices are now more inline with incomes.

    “We need to have all part times workers earn a living wage”. What does that mean? If I work 4 hrs a week I’m guaranteed a wage to live on?

    Are you even aware that the vast majority of part time workers are employed by small businesses, and that these small businesses are always on the edge of profitability vs going out of business with 7% of them failing every year and 50% of them failing at some point?

    Who do you think will pay your mandated “living wage”?

    It is unbelievable that an apparently educated grown American can believe that a magic won of constitutional amendments can be waved and all of a sudden everyone is middle class – even part time workers with no skills.

    Amazing.

  • JonThomas

    Excellent comment. And in the face of the person to whom you replied, here’s just one example and link to backup your words.

    “Since 1985, the Labor Department has found that McDonald’s AND its franchises have had to pay back wages more than 300 times for FLSA violations.” [emphasis mine]

    The McDonald’s corporation itself issued a statement regarding these suits and (unlike the trollish poster above) included their own possible complicity…

    “McDonald’s and our independent franchisees are committed to undertaking a comprehensive investigation of the allegations and will take any necessary actions as they apply to our respective organizations.”… http://money.cnn.com/2014/03/13/news/companies/mcdonalds-wage-theft-class-action/

    Keep up the good work.

  • Anonymous

    The US economy is only strong as measured by corporate profits, which are at an all-time high as a percentage of GDP. It is sicker than 1929 because payrolls as a percentage of GDP are at an all time low, having fallen from 52% to 42% since 1972. This despite the fact that spouses joined the labor force during this period. We will soon find out if an economy built on more and more for the owners and less and less for the workers is sustainable. I suggest you take a hard look at the mountain of consumer credit, mortgage and student loan debt we are creating which can never be paid back on the dwindling wages received by workers.

    You asked where the living wages would come from. If we return to the 1972 distribution between payrolls and corporate earnings then the average family would receive an additional pay of $12,500.

  • Anonymous

    I don’t get this fascination with the few decades after world war II that rosy eyed liberals have.

    Don’t you get the fact that those decades were an aberration? A singularity. A unique event in history?

    The US was founded and governed since 1776 by 0.01%, slave owning oligarchs. The US economy prospered nightly from 1776 to 1929 with hugely unequal distribution of income and wealth, including millions of blacks that worked for a wage of ZERO for most of that period. There is zero evidence that income inequality hiders growth.

    Then enter the 50s. Where the US was the ONLY industrial power not bombed into oblivion. That is a singularity. We suppressed household formation for 6 years by sending young men to war. We had rationing for 6 years. Everyone was bombed into ruined. And then we said “GO”. End rationing. Bring the GIs home. Export to the world. Rebuild the world. The US economy was 50% of the world economy then.

    So yes – unions could demand high wages – there was no competition. Capital had suffered (depression and wars). Socialism (high taxes, etc) was tolerated because there was a threat of communism as an alternative system.

    Those conditions vanished.

    We are now competing with China and Russia no to see who has better social policies. We are competing for capital, investments, jobs.

    You can not punish capital and businesses and succeed. You need to coddle and woo investments.

    If I have $10B to invest, I have Texas, Mexico, China, Russia, etc pitching to me why I should invest there. In 1950 I could realistically only invest in the US.

    It is a different world. Unskilled labor is in full competition with automation and global labor.

    There is not magic answer other than being pid based on the value you add. Flipping burgers and making beds, only adds so much value and can only be paid so much. There is nothing you can do about it.

  • GregoryC

    We do not have low inflation — health care costs are rising 10% or greater annually. My hometown, gas & electric and water/sewers annual costs have been rising by 7.5% annually. Gas had doubled since Obama was first inaugurated. Food prices are rising. My property taxes rise every year, not because of home values, but increases in the cost of public education, necessary community service (fire, police, EMS).

    Living wage? Obama fake jobs recovery with 70% of the jobs created paying under $40K annually, 44% of the jobs paying less than $13.33 per hour.

    If you can’t afford to pay a living wage, you shouldn’t be in business.

  • GregoryC

    Did you lose your way to the Fox news website?

  • GordonM

    Thank you for telling us how you really think..LOL

  • Anonymous

    Ler me turn that around for you.

    If you can’t live on your income, you should earn more or spend less.

    There. Fixed.

    Don’t stop trying to proscribe who should or shouldn’t be in business. That is their business – pun intended. It sounds like you have trouble managing your live. Fix that.

  • GordonM

    The problem is that these jobs even matter, that we are scraping the bottom of the barrel for work, and that a lot of folks sincerely believe that the days when a person could get an honest days pay for an honest days work was an aberration.

  • Anonymous

    Even the Wall Street Journal has admitted that trickle down is a failure. As far as investment, US corporations are already sitting on over $2 trillion of liquid assets. How much more do they need to accumulate at the expense of workers? This despite the untold billions they are plowing into stock buy backs to compensate for their shrinking sales. Perhaps their sales would be more robust if they paid their workers a fair share of the gross profits. Then workers could purchase more of their goods and services.

  • Anonymous
  • Anonymous

    That is just it. There is no trickle down. There never was. There was a momentary aberration in 1935-1975, induced by a world wide depression, a global war, and 2 decades of suppressed demand, and fear of communism, that was let loose with the US as the only standing industrial power.

    There was no trickle down then either.

    It was just that the economy and demand were going up so fast, that growth overtook capital returns for a while.

    We are in hyper competitive world. There is absolutely no way, outside of public employee unions and other walled (from competition) industries (e.g. defense and health care), that workers can, for long, extract wages above their marginal added value.

    The fact that US companies had $2T in assets is good, not bad. It gives them flexibility for investments and acquisitions. The issue is that most of that money is “overseas”, because the US, misguidedly , is the only major economy that insists on taxes its corporations on profits that happened outside its borders.

    All other countries are like “bring your overseas profits and invest here, no tax”. The US is like “if you want to bring your overseas profits here, you need to give the IRS 35% of it”.

    You get the economic results of our stupid and misguided “punish the corporations, go after the rich” policies.

    They know how to fight back and avoid pain, you know.

  • Anonymous

    The effective tax paid by US corporations is already less than ROW. The only problem with your “value-added” thesis is that there won’t be enough wage-based demand to purchase the fruits of worker’s labor. We can only fill in with rapidly rising personal debt for a while and then the economy would collapse. The, everyone loses.

  • Anonymous

    I’m sorry, but your theory does not align with the facts.

    For example, there has been and continues to be a large consumer deleveraging, meanwhile automobile production is back to near all time highs and home prices are recovering and reaching new all time highs in many places. Cars and homes being the #1 and #2 largest purchases that Americans make.

    College costs continue to go up very fast, yet Americans are going to college at ever increasing rates.

    So there is absolutely no indication that American consumer spending is suffering. Which, given that consumption represents 70% of the American economy, would be impossible to happen withe the economy goring at 2-3%.

    Yes – there is no demand for unskilled workers making $28/hr. But there is plenty of demand for skilled workers at $10/hr.

    Our competitors – e.g. China – have millions of jobs for skilled labor at $2/hr. If American workers want to get $10/hr they better be 4 times more productive (adjusting for cost of transportation and energy). If they want $28/hr, they better be 12 times more productive.

    Other than that is whining.

  • Anonymous

    Yes, this growth has been fed by artificially low interest rates which discourage saving and encourage taking on debt. We have historically high credit card debt, auto debt, mortgage debt and student loan debt. This supplementation of flagging wage-based demand with increased personal debt is not sustainable. The primary reason mortgage debt has come down is because of foreclosures and short sales. Payrolls as a percentage of GDP have fallen from 52% in 1972 to an historic low of 42% today. You can’t ever pay back the loans with such low payrolls.

  • Anonymous

    You didn’t have to toss in that lie at the end about “minimum wage” for tipped employees. They NEVER make that little, BY LAW. So it’s not actually the “minimum”. They can only be paid that amount by their employer IF their tips combined makes them more than minimum wage, which is almost always the case, in fact they often make double, triple, quadruple, the minimum wage. If the tips ever did actually fall short, then the restaurant would be required to pay the full minimum wage, not $2.13.