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Obamacare Debate Masks Long-Standing Exploitation of Food Service Workers

Last week, a Wendy’s franchise in Omaha, Nebraska, became the latest member of the fast food industry to announce that the costs of complying with the Affordable Care Act were forcing it to slash the hours of hundreds of its employees.

Even before Obamacare, however, fast food corporations kept much of their workforce at part-time status as a means of minimizing labor costs and maximizing profits. 

The Omaha Wendy’s joins Applebee’s and Taco Bell franchises as well as Papa John’s CEO John Schnatter in claiming Obamacare will likely force them to cut hours.

In the meantime, food franchises are making big bucks and paying big bucks to their CEOs. The Wendy’s Co., Papa John’s International, Yum! Brands, which owns Taco Bell, and DineEquity, which owns Applebee’s, are all generating profits that surpass pre-recession levels and all pay their top executives millions, according to a study by the National Employment Law Project.

In addition, a study by the U.S. Bureau of Labor Statistics shows that rates of involuntary part-time work throughout the economy began accelerating in 2006, well before the passage of the Affordable Care Act—and even before the worst of the Great Recession.

Food service was one of three industries accounting for much of this growth, and in 2010, half of all fast food employees worked part-time, according to the Bureau of Labor Statistics.

Fast food restaurant employees are among the lowest paid workers in the country, most making less than $8 an hour. A study by the Economic Policy Institute titled “The Future of Work” found that nearly three-fourths of food service workers received wages at or below the poverty line.

In late November more than 200 New York City workers from McDonald’s, Taco Bell, Wendy’s and other fast food chains walked out, demanding higher pay, better working conditions and recognition of their unionization efforts.  Unionized workers are a third more likely to have employer-sponsored health insurance than non-unionized workers.

The strike was notable because concerted labor actions and labor organizing among fast food workers are rare.  High turnover rates make unionizing food service workers difficult, and even though retaliation for labor organizing is illegal, employers commonly intimidate workers by cutting their hours, according to UnitedNY.org, one of the groups behind the strike.

Food companies have been quick to attribute low wages and the high percentage of part-time positions to the Great Recession and more recently to the allegedly burdensome costs of Obamacare.

A study by the National Employment Law Project, however, found that large fast food companies weathered the economic downturn relatively unscathed and most are generating profits that surpass pre-recession levels.

McDonald’s Corp. saw profits grow 130 percent since 2008.  The profits of Yum! Brands, which owns Taco Bell, Pizza Hut, and KFC, grew 45 percent over the same period, and it gave at least one executive $20 million last year.

A study by the Urban Institute titled “Implications of the Affordable Care Act for American Business” found that for large businesses like national restaurant chains, Obamacare will increase total spending by only 4.3 percent.

While this is a tiny portion of the companies’ overall budgets, it has not stopped restaurants from blaming their policies limiting workers to part-time status on the cost of Obamacare.

Darden Restaurants, owner of Olive Garden and Red Lobster, for example, announced plans last fall to hire a higher percentage of part time workers, citing the Affordable Care Act.

After a public backlash, Darden conceded that 75 percent of its employees already worked part-time, partly as a result of a long-time Darden program to increase profits by reducing labor costs.

This included a 2011 Darden policy that forced the wait staff to share the tips with other employees like bartenders and busboys.  The pay scheme allowed Darden to pay more of their workers the minimum wage for tipped employees, $2.13 an hour, rather than the federal minimum wage for hourly workers, which is $7.25.

Darden is now more profitable than it was before the Great Recession, according to the NELP study.

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