Taxpayers subsidize fast food industry

Published On October 18, 2013 | By Joseph (Ken) | Business, Economy

minimum wage

In July I came across an interesting article Halifax coffee shop workers push for union 

These usually university-educated workers often realize their stop-gap employment has become more long-term and they are motivated to turn these positions into good jobs, he added.”

Stop-gap employment is one where you generally accept low pay (usually minimum wage) because it’s temporary. The fast food industry is a stop-gap employer with high turnover rates (75%) and low pay, which is a result of the difficulty in unionizing because of such high turnover rates.  

The idea of unionizing wasn’t received well by some One unionized cup of coffee? That’ll be $8.95 | National Post

“There’s no question that union conditions will put added financial strain on employers, who may opt to jack up prices, or else, limit new hires to part-time positions. “

Ironically, the argument of financial strain on employers from unionization, and the “adjustments” employers make to offset the increased cost, is the same argument used against minimum wage laws.

The Negative Effect of Minimum Wage Laws

“There is no “free lunch” when the government mandates a minimum wage.  If the government requires that certain workers be paid higher wages, then businesses make adjustments to pay for the added costs such as reducing hiring, cutting employee work hours, reducing benefits, and charging higher prices.”

And yet, when considering the next article, maybe putting more financial strain on employers is what we need, as it may alleviate some financial strain on taxpayers.

Fast-Food Workers Are Costing the U.S. $7 Billion a Year in Public Aid

“Those cheap fast-food prices conceal a huge hidden cost—even if you never pull into a drive-thru. New studies by the University of Illinois, University of California, Berkeley, and the National Employment Law Project find that taxpayer-funded safety net programs effectively subsidize fast food workers’ low wages.

“Researchers say roughly 2.3 million non-managerial employees at the 10 largest fast-food companies in the United States cost taxpayers an estimated $3.8 billion per year in safety-net benefits.  More than half of families are enrolled in one or more of public safety-net programs, including Medicaid, food stamps, the earned income tax credit, and the Children’s Health Insurance Program. “

It is the same in Canada as well.  In not paying a living wage, the fast food industry is in essence being subsidized by the Canadian taxpayer through public safety-net programs such as MSP Premium Assistance, GST Quarterly Tax Credits, Child Tax Benefits and the Working Income Tax Benefit (WITB).

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About The Author

Joseph (Ken)
(Ken) is a Registered Public Accountant with over 25 years of public practice experience in the accounting profession. Ken specializes in accounting information systems, taxation and financial reporting.

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