Monday, October 21, 2013

The $7 Billion Cheeseburger

Nearly two-thirds (63%) of spending on public benefits goes to working families, according to a study released last week by researchers at the University of California and the University of Illinois.  These families make up 73% of enrollments in these safety net programs.

Working families are defined as those where at least one member is working.  While probably unintended, low wage industries are shoving costs off on to government, which is one of the rationales behind passage of the Affordable Care Act.

A high proportion of these low wage workers - a whopping 87% - do not receive health benefits.

In the case of fast food giants, more than half of their front-line workers, including the 28% fortunate enough to get 40 hours of work a week, are enrolled in one or more public assistance programs.

This is twice as much compared to 1-in-4 Americans nationwide.

This amounts to a $7 billion taxpayer subsidy each year for fast food businesses alone.  The proportion of Americans in low wage jobs has ballooned to 4-in-10 nationwide, according to another study.

Yet another recent study of U.S. food policy shows that “…huge subsidies are lavished on crops that become the ingredients for highly processed foods — including “junk” foods,” and other high margin staples in the fast food business model.

The result is a significant part of the $11 trillion diet-related heath issues and lost productivity is pushed off on taxpayers and higher premiums for those lucky enough to have health insurance.

Another report finds that the agriculture subsidy per taxpayer supports just over half an apple compared to 20 Twinkies, a junk food favorite where 17 of the 37 ingredients are taxpayer subsidized elements directly related to obesity, which burdens the economy with $150 billion in hidden costs annually.

Fast food giants and suppliers also make up 1-in-4 of the top 100 businesses keeping outdoor billboards on life support ever since use by tobacco companies were outlawed.

There is now an established link between prevalence of outdoor billboards and obesity.  And billboards themselves require the sacrifice of trees and vegetation, robbing taxpayers of not only these publicly owned assets but their public health benefits, such as screening noise and particulates as well as purifying air and storm run off of pollutants.

All of this amounts to a public subsidy of an unsustainable business model that relies on subsidized ingredients paying workers as little as possible while letting taxpayers pick up the costs.

Recently, it was estimated that for fast food companies to pay a livable wage it would require adding only 68 cents to a popular hamburger, but economists countered that to please investors, the companies would most likely just trim labor costs.

The not so veiled threat is that if required to do the right thing, they would hire fewer people, cut hours and push even more costs off onto the general public and taxpayers.  It is not unlike the hubristic mentality that just ripped $24 billion out of the economy in 16 days.

This is the same threat some of these businesses make about the Affordable Care Act and the requirement for health insurance to lower the burden on taxpayers.

I’ve personally sat on legislative committees for two state restaurant associations.  I’ve learned that there are many good people who want to do the right thing in these types of businesses but they are shouted down by small cadres of condescending extremists all too aware that they can’t go it alone or less honorable competitors would cut them to pieces.

So this is where the free market breaks down because it rarely requires full-cost accounting.  The minimum wage today is much lower than in 1955 when adjusted for inflation.  We’re paying for the cost of subsidized burgers and fries whether we like it or not, whether we realize it or not.

The low wage, taxpayer subsidy is not unique to fast food businesses, that’s just where I have the most familiarity having worked for forty years in visitor centric cultural and economic development.

Similarly, a report updated last spring found that in another segment of the tourism sector, a typical 300-employee Wal-Mart Superstore shifts more than $5,815 per employee onto taxpayers each year or a total of between $1 million and $1.7 million in corporate subsidy per store.

The tourism sector cannot make excuses by pointing just to how many employed there are students.  Nearly 7-in-10 frontline fast food workers are not in school and are single or married adults with and without children.  Two-thirds rely on that income as an essential component of family income.

In my opinion this status quo isn’t working.  We need to experiment with things like requiring health insurance and a livable wage rather than pushing costs off on taxpayers where anti-government types want to “drown it in a bathtub” as a way of controlling costs.

The “drowning” metaphor is horrible when people’s lives are at stake. It is also bad for business.  I’d rather start paying the “real” costs of things even if it takes a while to get things right.

If you missed it, the reports cited are linked where noted in the text.

Don’t take my word, click through and read for yourself, maybe while eating at a fast food business.  Look in the faces of the people serving you and ask yourself if you would pay a little extra at the counter so they can make a livable wage.

Reflect on the fact that more than 7-in-10 are women, more than 2-in-5 are minorities.  Only 13% receive health benefits through their employer compared to 59% of workforce as a whole.

You’re paying hidden costs in taxes anyway.  Isn’t it time for the free market to incorporate a triple-line approach to cost-benefit analysis?

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