Picking Up The Tab for Full Service Restaurants

In the news, great attention has been paid to the activities of fast food workers striking to increase their salary up from minimum wage, their plight with fast food restaurants, and their heavy reliance on public assistance to get-by. Included with fast restaurant workers whose employers are represented by the National Restaurant Association are full service restaurant workers who make up the bulk of the worker in the restaurant industry. The plight of full service restaurant workers is documented in an article by Sarah Anderson at IPS.

Of the 4 million people working in the restaurant industry, 50% rely on public assistance to get by at a cost of $9.5 billion. This rivals WalMart and other low wage retailers who also depend on public assistance and communities for their employees. While restaurants like Papa John’s complain about having to pick up the tab for healthcare insurance or having to raise prices 10 cents for a medium pizza, they fail to mention taxpayers are paying the hidden cost to their low wages. 8 of the 10 lowest paid jobs are represented by restaurant workers of which 5 are in the full service restaurant segment.

To supplement underpaid restaurant workers (which also subsidizes their employers) and is paid by taxpayers are public assistance programs such as Medicaid and CHIP health Insurance programs, the federal earned income tax credit (EITC), food stamps (SNAP), basic household income assistance (TANF), the national school lunch program, childcare assistance, low income home energy assistance program, section 8 housing, and housing choice vouchers. What has not been mentioned is a second form of subsidy to full service restaurants through the sub minimum wage, which also requires customers to pay these workers’ wages directly through tips.

The industry is not being decimated by rising costs, employment is expected to grow 10% by 2022 suggesting greater industry growth and translating into higher public assistance costs and less labor productivity. “Full-service restaurant workers are at the core of America’s growing low-wage economy; many of these workers’ earnings are far below what’s needed to meet their subsistence needs.” Greater than 21 percent of all tipped workers live in poverty representing 2.5 times the overall work force in poverty. At a cost of $9.5 billion to subsidize the industry, it may be worthwhile for taxpayers to decide whether to pay the money upfront rather than through government programs.

invisible hand Table 1 represents the five biggest players in the Full Service Restaurant business segment and the annual cost of public assistance subsidies. Along with Olive Garden, Darden owns six smaller chains: LongHorn Steakhouse, Capital Grille, Bahama Breeze, Seasons 52, Eddie V’s and Yard House. Darden employs 150,000 employees with over 1500 locations and serves 320 million meals annually. DineEquity is better known as IHOP and owns the Applebys chain. With nearly 3600 locations it is bigger than Darden; but, most of the restaurants are franchises. Brinker International is the parent company of the Chili’s as well as the smaller Maggiano’s Little Italy chain. By its name, you may recognize Bloomin Brands as the owner of Outback Steakhouse. Add to this, Carraba’s Italian Grill, Bonefish Grill, and Fleming’s Prime Steakhouse and Wine Bar. If you have not passed a Cracker Barrel in the southeast or while traveling south; then, your eyes have not been open. These companies are heavily subsidized through public assistance.

Are you going to end up paying more for a nice meal at many of these restaurants, the answer is yes you will. The cost of which will transition from the rear door where it is hidden and to which you are paying it anyways after being handled multiple times to the front door and “potentially” going directly to the restaurant worker serving you. Either you believe in a fair wage for a fair day’s work or you believe in keeping an underground of subsistence existence financed by you in the end and continued subsidizing of companies. It is appropriate to eliminate the tipped sub-minimum wage and raise the minimum wage. This is something ALEC the mouth piece for the National Restaurant Association and state governments have been fighting. A particular emphasis should be placed on raising wages at companies which use public assistance to supplement payroll wages. Continue to provide support programs for minimum wage workers. Actively encourage collective bargaining by restaurant workers as a buttress against large companies which today have legislature and private organizations such as ALEC at their backs. With the renewed emphasis, it is only then can Labor begin to reap some of the productivity gains denied them.

Other References: Picking Up The NRA’s Tab; The Public Cost of Low Wages In the Full Service Restaurant Industry