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The Public Cost of Fast Food Wages

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Photo:fibonacciblue/Flickr/Creative Commons License

Watch the California Matters episode on fair restaurant wages here.

A person needs to make a certain amount of money to live. Let's call this (x). The person has a job, which pays them a certain amount of money (y). As long as (y) is greater than (x), life is fine and things are good. But, if (x) is less than (y), then we have some issues. Namely, the person needs to supplement their income with something else (z).

So, who pays for (z)? It's no surprise, but you do.

The big takeaway message from this new report from UC Berkeley entitled The High Public Cost of Low Wages is just how much you pay. The report examines how much is spent with public funds on the state level to account for the difference. (There have been previous studies looking at the federal cost, but this is the first to look specifically at the state level.) And the numbers tell a costly tale.

Between the years 2009 and 2011, states spent $25 billion a year on public assistance programs like Medicaid and SNAP. Predictably, California has been the biggest spender by far, with $7.328 billion dollars going towards public assistance during that time. Of that, half of it was spent on "working families" -- households with at least one person with a job, but one that isn't enough to sustain the family.

Where this fits into the Fight for $15 is that fast food industry has the highest percentage of workers who require public assistance to supplement their income, with over 52% of them collecting additional state funds. In essence, this means we're all footing the bill for fast food organizations to continue paying nearly nothing to their employees.

I spoke with Ken Jacobs, one of the UC Berkeley researchers who conducted the study, about the findings.

Are these findings particularly surprising?

Ken Jacobs: I think what has continued to surprise us is just the high share of workers on public assistance in certain occupations. We have looked previously at fast food workers, and saw that 50% to 52% of workers and their families are on public assistance. Also close to 50% for childcare workers and home-care workers. And 25% of part-time college faculty, adjunct faculty, people with a Masters or PhDs. These were jobs that at one point were almost entirely full-time workers with good pay, but have been turned over the years into more and more adjuncts doing the teachings, looking to piece together jobs at multiple colleges with lower pay, to the point where a quarter of them are utilizing public assistance to meet basic needs.

Has this been a drastic change over time?

Jacobs: One of the things we have not done, and what we need to, is to see how this has changed over time. But what we do know is that real wages have been declining, especially at the bottom, over the past 25 years, especially over the last decade. Between 2003 and 2013, real wages -- that is, inflation adjusted -- have fallen for the bottom 70% of the population. But the biggest decline was for the bottom third and bottom 10%, which is where you find the most people receiving some form of public assistance. We've also seen a decline in job-based coverage by about 10% during that same period. The combination means that more families need to rely on public assistance to make ends meet.

So, just what is the solution?

Jacobs: The evidence is very strong that when you raise wages, the need for public assistance goes down. When you raise the wages, the need for public assistance is reduced, which is savings to the state and federal governments, who can then target their funds more effectively.

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