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Domestic News | October 29, 2013

Is welfare subsidizing the fast-food industry?


Activists from a wage-increase campaign group called Low Pay is Not OK, published a clip last week...

Fast food workers demonstrate outside a McDonald’s restaurant in New York City. (Associated Press/Photo by Richard Drew)

Activists from a wage-increase campaign group called Low Pay is Not OK, published a clip last week from a secretly recorded phone conversation between a McDonald's employee named Nancy and someone from the "McResources" employee help line.

Fair wage activists are using the clip to fuel their nationwide demand for higher minimum wages and collective bargaining rights, according to a story inThe Atlantic. But economic analysts say their proposed remedies will only make the problem worse.

In the audio recording, which is not provided in its entirety, Nancy says she has worked at McDonald's for 10 years without a raise. She goes on to complain about not being able to afford food and healthcare for herself and her two children. In response, the hotline representative recommends she apply for food stamps and Medicaid.

"McDonald's doesn't want to pay its workers more," the Low Pay is Not OK advertisement concludes. "Instead, it wants you to pay its workers more."

So far, McDonald's hasn't responded to the audio recording or the activists' campaign.

Fast food workers currently earn an average of $9 an hour. According to a study by the University of California, 52 percent of them rely on some type of public assistance, costing taxpayers $7 billion a year. Wage-increase activists say instead of pointing employees to public services and forcing taxpayers to absorb the cost, employers should pay their workers enough money to live on. They're demanding the federal government raise the minimum wage to $15 an hour, almost double the current national average, and give workers collective bargaining rights without retaliation.

So far, the campaign has gained national attention, including laudatory press coverage and support from various political figures like New York City Council Speaker Christine Quinn and Rep. Keith Ellison, D-Minn. The movement climaxed briefly in August with a nationwide strike, during which thousands of service workers gathered in city streets waving posters in front of businesses like McDonald's, demanding they pay more.

But conservative analysts point out that asking the government to get involved and force employers to pay more wouldn't help the poor. "The problem with minimum-wage increases is that they reduce access to these entry-level jobs," writes David Weinberger at The Heritage Foundation. "It is a basic tenet of economics that when the price of something rises, people buy less of it."

Raising the cost of hiring makes it more difficult to run a business and offer jobs. Increasing the minimum wage would harm small businesses that can't afford to pay workers $15 an hour. It also would lead to stricter hiring policies that could make it more difficult for low-skilled and minimally educated workers to find jobs. Lastly, the increase in pay would eventually extend to higher prices, hurting both middle and lower classes.

Conservatives like Weinberger, point out that minimum-paying jobs equip workers with skills necessary to succeed in the professional world and more frequently than not, lead to upward mobility. "The market works and rewards those who work to get ahead," writes James Sherk, another policy analyst at The Heritage Foundation. "The government does not need to step in for minimum wage earners to get a raise."