Cooking Up Poverty

Homeless Workers Are Fast Food’s Glaring Unpaid Cost, New Report Finds

The cook is on food stamps… The cashier is on Medi-Cal… The delivery driver lives in his car. This is the industry that brings you happy meals, according to a new report, “Hungry Cooks: Poverty Wages and Homelessness in the Fast Food Industry” released by the Economic Roundtable on May 2, analyzing the fast food industry and workforce here in LA City and County, as well as statewide.

“I used to volunteer at a church handing out food on Saturday mornings, and now I have to go there to ask for food,” said Dilia Espana, a Wendy’s worker in Oakland featured in the report.

Each worker brings in $59 per hour in revenue, in an industry dominated by five companies in California which generated $14.5 billion in profit in 2021, and $12 billion in 2022, according to the report. And their franchises are concentrated as well. “It’s not a mom-and-pop industry. It’s an industry of big players with big revenue,” the report’s co-author Dan Flaming told Random Lengths. “Many top brands in California have a number of multi-unit, mega-franchisees that own dozens or even hundreds of locations,” the report explains. Yet workers are paid so poorly that a fifth are on food stamps and a third are on Medi-Cal — massive de facto public subsidies for companies too cheap to pay their workers what they’re worth.

“My goal is to have a place to sleep, even a little room so my kids know where I am and can come and visit me,” said Jose de la Torre, of Lynwood, another worker highlighted in the report. “Right now, I am homeless and live in my car because the money from delivering pizzas for Papa John’s didn’t cover my bills and I have no money for rent.” He’s one of almost 3,600 homeless fast food workers in LA County, according to the report. More than 10,000 are homeless statewide.

“The big dog in terms of poverty employment is fast food,” Flaming said. “In California it has the largest share of workers in poverty and homeless.” A key problem is that “this is [a] part-time job,” he said. Less than half (45%) work at least 1,820 hours a year, compared to 69% for all other workers. The average is just 1,340 hours — equivalent to 26 hours a week.

And it’s not just part-time. “The scheduling is a big deal,” Flaming stressed. “It’s on demand and unpredictable, so it’s very hard to hold on [to] a second job.” As a result, “The pay is low, it’s very hard to pay rent, very hard to keep a roof over your head, a lot of them get food stamps at public expense, a lot of them get healthcare at public expense,” he said.

“My employer is retaliating against me for calling in sick with a knee injury and asking for paid sick leave,” said Edith Navarro, a Carl’s Jr. worker quoted in the report. “They cut my work hours by more than half and transferred me to a store in Whittier, so far from my home in Wilmington that I have to drive two hours to get there,” she said. “The shifts are so short it is hardly worth the cost of gas. I have fallen behind on my rent and my light and water bills.”

Many like Navarro could become homeless, like de la Torre. “Low-income households that spend over half of their income on housing are on the cusp of homelessness. These workers are choosing between paying for household necessities such as food and clothing, and paying their rent,” the report explains. A whopping 24% of LA City frontline workers spend this much, and “This includes 13 percent who spend over 70 percent of their income on housing,” the report notes. Statewide, frontline workers bear extreme housing costs at roughly twice the rate of workers outside the fast food industry.

But even more are precariously housed in a different way: “43% of folks in the Los Angeles area frontline workers live in overcrowded housing,” Flaming said. “So maybe somebody’s bedroom is the couch, maybe multiple people share a bedroom, there’s inadequate privacy, there’s inadequate living space per person, but you get by because it’s a way you can get shelter.”

“One-fifth of frontline fast food workers in Los Angeles receive food stamps and one-third receive health care through Medi-Cal,” the report notes. Both figures are twice that of workers in other industries. And their needs are even greater, as they’re more likely to be parents, by 9% statewide, 10% countywide and 11% citywide. This is despite the fact they’re also younger as a whole: 48% are under 25 statewide, compared to 13% in other industries. Citywide it’s “only” 38% compared to 12% — more than three times as many.

On top of the costs of food stamps and Medical is the public costs of homelessness — an average of $15,000 per year, according to Flaming. That’s a cost incurred without solving the problem — unlike preventing it in the first place. “You and I and our fellow taxpayers are shouldering costs for the industry, not just when we buy a hamburger, but when we pay taxes,” he said. “So, the public has a stake in having the industry be sustainable and equitable and the industry can afford it.”

Indeed, McDonald’s made $6.1 billion in profits in 2022, while its CEO, Christopher Kempczinski, made $17.77 million — 1,224 times as much as the average frontline worker.

And he’s not alone. “The chief executive named David Gibbs for Yum Yum Brands — that’s Taco Bell, Kentucky Fried Chicken, Pizza Hut — earns 1,603 times as much as the median worker at his company,” Flaming said. “So, he’s gonna earn more in an hour than the median worker does in a year. And I’m sure Mr. Gibbs is as smart as all get out, but is he really worth 1,603 times as much as somebody who’s making the food for us when we walk in the door?”

Wage theft is a problem, too, as it often is for low-wage work. “As far as I can tell, wage theft is built into the way Papa John’s operates. It has to do with how the computer system works,” de la Torre said. “My coworkers and I filed a wage theft complaint. Mine was for $45,000. The manager also made me work off the clock and do favors for him, driving his wife and kids around and buying him lunch every day, and I was not allowed to take meal breaks and rest breaks.” The multiple forms of wage theft aren’t unusual, either.

“The manager threatened to cut my hours if I didn’t do what he said,” de la Torre added. “I am traumatized by the things the manager told me. I was trapped in a scheme of wage theft, coercion and sexual harassment for about a year. It was terrible. I stayed because I really needed the job, despite all the abuse. I was so angry, but there was nothing I could do. I needed my job.”

The franchise structure and its rules are a big part of the problem. For example, “I work double shifts at two Subway stores, with no overtime pay because they say one store is owned by the father and the other store is owned by the son, so they say it is different companies,” said Gloria Gonzalez Garcia, of San Jose. But the larger problem is systemic. “The corporate agreements with the franchisees give the corporation first dibs on the money that comes in. So one of the ways the franchise operators have of trying to make profits is to minimize labor costs,” Flaming said. “And so the problem of low pay and poverty among homeless workers in the industry has origins in these corporate contracts with the franchisees. We need to ensure equitable job conditions.”

“I think in the public mind, we tend to be dismissive of workers who didn’t go to college, weren’t middle-class aspirational,” Flaming said. But their work, “has dignity, it has value, we need it. It makes the world go around. And yet we somehow have been willing to overlook it that they really can’t survive on what they’re paid.”

Solutions are possible. In fact, California already has one — in theory. In 2022, Assembly Bill 257 was signed into law, which would establish a council of state health and labor officials, along with representatives of industry and workers to “promulgate minimum standards” for wages and working conditions, including protections for workers who exercise their rights. It was set to go into effect at the beginning of this year, but it’s been put on hold by an industry-backed referendum that will be on the ballot in November 2024.

We can expect a blizzard of disinformation coming our way in the run-up to that vote, with scare stories about destroying the industry. But Flaming points to a very different reality, quoting from a Securities and Exchange Commission filing by Burger King’s parent company: “We believe that our franchise restaurants will generate a consistent, profitable royalty stream to us, with minimal ongoing capital expenditures or incremental expense by us.”

“In other words,” said Flaming, “They’re saying they’re sitting on a cash cow. They don’t have to put money in, they just take money out.” And a good portion of that comes right out of taxpayers’ pockets.