Fast Food Workers Strike Again: Pros, Cons and How ObamaCare Factors In

By FOXBusiness

Fast-food workers returned to the scene on Thursday as they continue their push for increasing the minimum wage.

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Workers across the country, including Washington, D.C., Chicago and New York City, went on strike to push for raising the federal minimum wage to $15 from $7.25 an hour

The movement is nearly a year old after the initial strike in November 2012, when 200 fast-food workers walked out of their jobs in New York City. Thursday’s coordinated strikes are the biggest event yet.

In addition to higher wages, the workers from fast-food giants including McDonalds (NYSE:MCD), Wendy’s and Burger King want the right to unionize without retaliation. The movement has been called misguided by critics, who claim it would create job cuts and squeeze franchise owners with already-small profit margins. But supporters say the move would allow workers to better support themselves and potentially lessen strains on government safety net programs.

“I can’t Survive on $7.35” says Martin Rafanan, community director of the St. Louis fast-food worker movement, adding that that the current minimum wage structure is “slowly killing our community.”

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The movement has support from President Obama, who said in a speech Wednesday in Washington, D.C. that he would back a Senate measure to increase the federal minimum wage to $10.10 an hour. The current federal minimum wage is $7.25, and has not been raised since 2007. Wage inflation in 2013 has increased by 1.8%, compared to 1.1% overall economic inflation.

States with the highest minimum wage include Washington at $9.19, Oregon at $8.95 and Vermont at $8.60. Some cities have higher minimum wage than their states’ levels including San Francisco at $10.55 an hour, Santa Fe, New Mexico at $10.51 and San Jose, Calif., at $10 an hour.

“No one benefits from jobs in this economic structure,” says Rafanan. “A dollar increase in one person’s salary puts a dollar back into the economy as well. We could essentially be dumping large amounts of money back into our economy, and that is worth it for us.”

The Pros of Raising the Federal Minimum Wage

While National Center for Policy Analysis labor analyst Pam Villarreal acknowledges minimum wage jobs were never intended for people to make a living and raise a family on, due to today’s tight job market and post-recession economy, many are attempting to do just that.

“Raising the minimum wage to $15 an hour would help people make ends meet, especially those who are supporting families working in fast food jobs. Fifteen dollars an hour won’t make anyone wealthy, but again it would provide a comfortable standard of living.”

A 2012 study from the UC Berkeley Labor Center found 52%  of front-line fast food workers are on some form of public assistance, costing nearly $7 billion per year. The nation’s 10 largest fast-food companies account for $3.8 billion of that, according National Employment Law Project estimates.

Defenders of the movement say raising wages could help lower the amount of Americans relying on these safety nets.

“If we increase their wages, it would relieve the taxpayers of paying these benefits for workers,” Villarreal says. “The problem with that analysis is that they don’t consider the fact that a lot of these workers would then be unemployed.

The Cons of Raising the Federal Minimum Wage

Villarreal says in the long run, increasing the minimum wage can eliminate full-time jobs.

“There is already pressure on the retail industry because of ObamaCare,” she says. “Anecdotal evidence shows people are reducing their staff so they don’t have to provide health insurance. But I think even part-time workers would be laid off because it will increase their costs as well.”

Mike Saltsman, research director at the Employment Policies Institute, says the move would cause stores to reduce their workforces and bring on more technological help to bridge the gap.

“In this case, I think it means stores will close or go the way of European fast food restaurants where customers place their orders using technology.”

He points out that many fast-food store owners are smaller franchisees, meaning they pocket small margins of the profits their stores bring in annually.

“A lot of the focus is on large corporations, but only about one-third of low-income earners are at large businesses with more than 1,000 employees,” Saltsman says. “Fifty-two percent are at really small businesses with less than 100 employees. The people picking up the tab with this minimum wage hike running up that high are people with small businesses facing stark economics.”

The Health-Care Connection

A flood of full-time workers being moved to part-time due to a nationwide minimum wage hike could lead to a higher number of people needing subsidized health care on the exchanges, says Villarreal.

“If that is the [government’s] whole plan here, it’s pretty smart,” she says. “It’s almost too intelligent for the government to think of… There’s a possibility that you would have more people that would need to enroll in ObamaCare, which could increase subsidies that taxpayers provide.”

The Affordable Care Act mandates that every individual in the country have insurance by the end of open enrollment period on April 1, 2014 or face a penalty of up to $95 a year or 1% of their annual income. Those making up to 400% of the federal poverty level, which is $45,000 for an individual or $94,000 for a family of four, are eligible for subsidized plans at lower costs.

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