Think everything on a dollar menu costs a dollar? Think again.

By Peter Van Buren
August 1, 2014

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How expensive are those everyday low prices? How much do things really cost on that fast-food restaurant’s dollar menu? The answer is more than you think, but maybe not for the reason you think.

The Supplemental Nutritional Assistance Program (SNAP, the current name for food stamps) is often thought of as something for the unemployed, though nothing could be further from the truth. Actually, 73 percent of those enrolled in the country’s major public benefits programs are from working families, just stuck in jobs whose paychecks don’t cover life’s basic necessities.

The United States now has the highest proportion of low-wage workers in the developed world, most of whom receive only the minimum wage (the federal standard is $7.25 an hour) and typically are capped by their employers well below 40 hours a week, so they won’t qualify for benefits. Hard work doesn’t always pay off. The math: even full-time work at $7.25 an hour only adds up to $290 a week. How do you live on that?

You don’t. You turn to food stamps and other forms of public assistance to make up the gap between minimum wage and a living wage. Which is just what large minimum-wage employers count on you doing.

Fast food workers claim public assistance at more than twice the rate of other employed people; McDonald’s workers alone receive $1.2 billion in federal assistance each year. About one out of every three retail workers gets public assistance. After analyzing Medicaid data, the Democratically led House Committee on Education and the Workforce estimated a single 300-person Wal-Mart in Wisconsin costs taxpayers $5,815 per associate in public assistance paid. Overall, American taxpayers subsidize the minimum wage with $7 billion in public assistance, which is what makes it possible for huge companies to get away with paying people so little. Add in the taxes you’re paying, and there’s nothing on the dollar menu that actually costs only a dollar.

Why else do many large companies like food stamps? Because poverty is big business.

Public benefits are now a huge part of corporate profits. The CEO of Kraft admitted that the mac n’ cheese maker opposed food-stamp cuts because beneficiaries were “a big part of our audience.” One-sixth of Kraft’s revenues come from food-stamp purchases. Pepsi, Coke, and the grocery chain Kroger also lobbied against SNAP cuts, an indication of how much they rely on the money.

Products eligible for SNAP purchases are supposed to be limited to “healthy foods.” Yet lobbying by the soda industry keeps sugary drinks on the approved list, allowing companies like Coke and Pepsi to pull in $4 billion a year in SNAP money revenues. Yum Brands, the operator of KFC, Taco Bell, and Pizza Hut, tried unsuccessfully to convince lawmakers in several states to allow its restaurants to accept food stamps.

In a January 2014 filing with the Securities and Exchange Commission, Wal-Mart was oddly blunt about what SNAP cuts could do to its bottom line. Wal-Mart’s business risks, the filing said, include: “changes in the amount of payments made under the Supplemental Nutrition Assistance Plan and other public assistance plans, [and] changes in the eligibility requirements of public assistance plans.”

How much profit does Wal-Mart make from public assistance? In one year, nine Wal-Mart Supercenters in Massachusetts received more than $33 million in SNAP dollars, more than four times the SNAP money spent at farmers’ markets nationwide. In two years, Wal-Mart received about half of the $1 billion in SNAP expenditures in Oklahoma. Overall, 18 percent of all food benefits money is spent at Wal-Mart. That’s about $14 billion.

Others also profit well from food stamps. Food stamps are distributed via Electronic Benefits Transfer or EBT (some recipients claim the acronym really means “Eat Better Tonight.”) JPMorgan Chase holds the contracts in half the United States to handle the transactions. In Florida, JPMorgan’s contract is worth $83 million, and in New York, it’s worth more than $112 million. Meanwhile, until recent changes, customer service for the JP Morgan EBT program was done via offshore call centers in India and Mexico who paid far below domestic wages.

So don’t believe anyone who says raising the minimum wage will automatically drive prices up. Whatever you think you are saving at the cash register in Wal-Mart (or at McDonald’s, KFC, Target…), you are paying in taxes to feed the woman ringing you up. If the business paid a living wage, there could a lessening in demand for public assistance. At the same time, give some thought to how much tax money is ultimately finding its way into the hands of a few large corporations via SNAP sales, another form of welfare, albeit the corporate kind.

Higher prices? You’re already paying more than you think.

PHOTO: Demonstrators chant in the driveway during a protest at the McDonald’s headquarters in Oak Brook, Illinois, May 21, 2014. REUTERS/Jim Young

24 comments

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It’s enough to make me lose my lunch…..

Posted by euro-yank | Report as abusive

The problem with this is the transition period. You will need to keep paying benefits for a while during the transition time of about 2 years. As Governor Thompson of Wisconsin discovered, longer hours worked to qualify for benefits can mean significant increases in childcare costs.

Posted by davidhoffman5 | Report as abusive

Agree. Let’s have the real price please, and stop with the corporate subsidization through tax payer programs.

Posted by brotherkenny4 | Report as abusive

Nothing is free. Save 8% on some chinese junk at walmart, pay 20% more to cover these workers’ unpaid medical bills through higher premiums and higher taxes to cover their medicaid.

This is why we pay 200% more per capita on medical care in the U.S. than any other developed nation in the world. But we only rank 23rd in quality of care. We think we’re getting a bargain at the walmarts of the world, and paying double on the back end.

Posted by AlkalineState | Report as abusive

“…a single 300-person Wal-Mart in Wisconsin costs taxpayers $5,815 per associate in public assistance paid.” Really? So you mean if we closed that Wal-Mart tomorrow, the state would save all that money? Um, no. Nice try. Then you would have 300 unemployed individuals costing the state even more money in assistance programs.

These are companies that give jobs to people that otherwise might struggle to find work. It’s not like these workers could quit tomorrow and go get an office job making 50-60k. I would like to know how many of these workers own designer clothing, bags, and shoes, or a large-screen HD television, a smart phone, etc – before we start pointing the blame at companies for not paying “adequate wages.” The real problem here is living above one’s means.

Posted by mizugori | Report as abusive

How is the ‘real problem here is living above one’s means.’ So having enough money to feed yourself and kids and provide them shelter is ‘living above ones’ means’? Laughable!

Posted by USAPragmatist | Report as abusive

mizugori is right. How dare these surfs try to have anything fun in their lives. They should know their place!

Posted by Solkre | Report as abusive

“The math: even full-time work at $7.25 an hour only adds up to $290 a week. How do you live on that?”

The answer is, you don’t. Minimum wage jobs were NEVER intended to be something you could completely support yourself with, let alone a family. Have we really reached such a pitiful point in history where the expectation is that a fry cook at McDonald’s should not be considered poor?

When are we going to wake up to the fact that so many Americans even trying to survive working minimum wage jobs demonstrates a colossal failure of our education system, economy, and plain old motivation? You know that intellectual laziness is in control when you hear the voices that simply want to paper over the problem by doubling the minimum wage.

Posted by Nickolai | Report as abusive

Interesting, but sadly there are few references on data cited. I hope some in depth investigating reporting by Reuters can shed more light on the matter.

Posted by mtdallas | Report as abusive

Hey..the Stock market is booming….200 zillion new jobs..and there’s no inflation…say, could you lend me $20 for a cup of coffee…?

Posted by rikfre | Report as abusive

la vérité fait mal …. et vous ne voulez pas le mettre là-bas …

Posted by rikfre | Report as abusive

If you are young, you should learn German and move to Europe. The life is better, and government benefits really mean something. Apart from Europe, there really isn’t any other good place to go. The US has destroyed its middle class, and its distribution of wealth looks more like feudal Europe. There is no hope. All is lost. Most people can expect the rest of their lives to be difficult, debt-ridden, and humiliating. The less you expect, and the the less you try, the happier you will be.

Posted by WestFlorida | Report as abusive

this notion of a living wage is preposterous and rooted in an outdated industrial model. folks need to shun wages and pursue independent means of supporting themselves and their family. this country is one of the richest in natural resources and productivity and trading your efforts for a wage is ridiculous.

Posted by BobWhite2000 | Report as abusive

It will only get worse.
In the near future, educated newcomers without any discernible sense of community or charity will block or discontinue massive public welfare programs. Changing demographics in this country mean permanent generational poverty, gated communities, a garrison state, and a very busy penal system.
Dystopia for the masses; utopia for the few.

Posted by MossyMorse1118 | Report as abusive

I would rather have folks working at Wal-Mart and getting public assistance than having them out of work and requiring even more public assistance.

Yes, corporate lobbyists have really messed up the SNAP “food stamp” program by ensuring that their high profit, and often unhealthy, items are on the eligible for purchase list. A huge chunk of the dollars spent on SNAP go to subsidize corporations not to feed the poor. How likely is that to get fixed now that we have the absurd Citizens United ruling from the Supreme Court?

Posted by QuietThinker | Report as abusive

there’s a problem with this commentary.

a couple Congress persons recently got lots of publicity by “surviving” on a $77 per week food budget. this is the $$ the “experts” decided the minimum wage family would have for food per person. do not shoot the messenger.

we’re retired, I keep careful track of our budget. I use a credit card to pay for the groceries – I tell you how many $ we spent per month on groceries for the last four years.

we budget $600 a month – which includes feeding the cats.

$77 per week times four weeks per month = $308
for two people, that’s $616 per month.

so the minimum wage worker has more money to spend on food than I budget, and this is a problem?

I buy fresh fish, pork tenderloin, whole chicken, fresh vegetables, fresh fruits, etc – we’re not eating the cat food. we eat pretty darn good, actually.

what I don’t buy is heaps and carts of junk food, prepared ‘meals’ – no prepared food of most no kind. and I cook from scratch. which – and you can see this coming – is what I see mothers with kids in cart, kids in tow, kids running all over the store, are buying. liters and liters and liters of soda. sugar packed everything.

……….the problem is not the cash flow, the problem may well be the parent flow.

Posted by Breadie | Report as abusive

When I was young, food assistance was in the form of distributed non-perishables including rice, flour, dry beans, skim milk powder, corn meal, lard, cooking oil, sugar, iodized salt, oatmeal, peanut butter, among other basic ingredients. Recipients had to demonstrate cooking facilities. NO ONE had objections to supplying these food basics for truly poor people. Conversely, the poor had incentives to raise their income in order to “graduate” from this limited diet.

The same could be achieved today with EBT cards simply by limiting their use to these essentials by means of the grocery bar codes along with shelf stickers indicating approved products. No more 3 liter cokes, no more rotisserie chickens, no more lobster. People who really needed food could survive while those just wanting to save enough cash to buy a TV would drop out. Costs would be lower.

Posted by scidude | Report as abusive

The world is corrupt. Only God’s Kingdom, which will be a real government over the earth, can bring justice for all. A manager at one Walmart recently told me that his Super Center suffered $1500.00 per day in stolen DVDs / CDs etc. This is not food. This is blatant, thieving lawlessness and the Bible condemns thieves. Everybody else has to pay for the greed and thievery of others. God will bring such people to an end. Let Jehovah’s Witnesses explain to you how to be part of God’s coming New World Order.

Posted by fwupow | Report as abusive

a test

Posted by UauS | Report as abusive

BobWhite2000: Remove a livable wage eh? lol! Sorry but that comment was nothing short of stupidity. There was a time in your country that this was actually the case. Did you know the result? Children worked for pennies a day and adults were working up to 16 hours a day even with that they were hungry and could barely afford to live. If that’s your ideal society there are still places in Asia which is right up your alley.

Posted by Davison133 | Report as abusive

@fwupow — Who are you to speak for God? Your dogmatic comments shouldn’t be welcomed to a site like Reuters. You add nothing to this debate. Be ashamed at the depth of your ignorance. May God have mercy on your soul.

Posted by sapereaude92 | Report as abusive

Wages are low due to a flood of unskilled labor across the border and prices are surging from the massige amount of newly printed dollars. Then the politicains step up and blame businesses who suceed while following the rules. Americans really are morons for electing these self serving sociopaths to high office.

Posted by DennisVictor223 | Report as abusive

This piece is only describes one relatively small symptom of an economy that is very much out of balance. The biggest symptoms are decades long trade and budget deficits. If the U.S. limited the value imports to the value of exports that would surely create employment and tax revenue. Then, if we sensibly managed immigration and taxes we could find a proper balance for budgets, trade and wages. The global corporations would initially cry like girls but in the end they will also benefit from a return to growth in average wages and an increase in the labor participation rate.

Posted by smith_9000 | Report as abusive

“you are paying in taxes to feed the woman ringing you up”

Probably not – from the Congressional Budget Office:
http://www.cbo.gov/publication/44604

“Higher-income households pay much more in federal taxes than do their lower-income counterparts: They have a much greater share of the nation’s before-tax income, and they pay a much larger proportion of that income in taxes. Households in the top quintile (including the top percentile) paid 68.8 percent of all federal taxes.”

People in the top quintile do not as a rule shop at Walmart or eat at McDonalds. Taxpayers in the other quintiles (the 80% of the population that contributes the remaining $0.31 of each tax dollar) don’t generally generate enough tax revenue to cover the cost the tax funded services that they consume themselves. This is the way that taxes are supposed to work – people who pay high taxes are paying for the services of those who don’t pay enough taxes to fund their own services. Many of these minimum wage jobs can be done by teenagers living at home and working part time for spending money. Teenage unemployment is high because these jobs are being taken by adults who are unable to find better paying jobs. Without these jobs, the demand for tax funded services like SNAP would be even higher as these people would require even more government services. It is Walmart and McDonalds who are subsidizing the government rather than the other way around.

Posted by walstir | Report as abusive