Skip to content Skip to footer

Taxpayers Subsidize Restaurant Pay

A new report reveals just how much the restaurant industryu2019s current low-wage model costs ordinary taxpayers.

More than four million Americans work in the full service restaurant industry. Of these, nearly half rely on public assistance for their family’s basic needs, according to Restaurant Opportunities Centers (ROC) United researchers. The total cost of this taxpayer-funded support amounts to more than $9.4 billion per year.

The report also breaks down the public cost of low wages at the five largest full-service restaurant corporations: Darden (owner of Olive Garden, LongHorn Steakhouse, and other chains), DineEquity (parent of IHOP and Applebees), Bloomin’ Brands (Outback Steakhouse and other chains), Brinker International (Chili’s Grill & Bar), and Cracker Barrel.

Because they have the largest workforce, DineEquity puts the heaviest burden on taxpayers, with employees relying on $450 million in public assistance per year, according to ROC estimates.

In addition to the subsidies resulting from the industry’s low-wages, taxpayers are also subsidizing these corporations’ executive compensation. Last year the Institute for Policy Studies crunched some numbers on this. Specifically, we calculated the cost of a loophole that allows corporations to deduct unlimited amounts from their income taxes for the cost of executive compensation — as long as the pay is in the form of stock options and other so-called “performance pay.” This loophole serves as a massive subsidy for excessive executive compensation.

We found that in 2012 and 2013, the CEOs of the 20 largest corporate members of the National Restaurant Association pocketed more than $662 million in fully deductible “performance pay,” lowering their companies’ IRS bills by an estimated $232 million. The NRA is a major opponent of raising the minimum wage, especially for tipped workers, as well as paid sick leave and fair scheduling laws.

Among full-service restaurants, the company that had enjoyed the largest CEO pay subsidy was Darden. Then-CEO Clarence Otis, Jr. took in nearly $9 million in fully deductible “performance pay” over the years 2012 and 2013. That works out to a more than $3 million taxpayer subsidy.

Otis was pushed out of the company in 2014 for— you guessed it— poor performance. He nevertheless sailed away with compensation and retirement funds valued at the time at $36 million.

ROC, which works to improve wages and working conditions for the nation’s restaurant workforce, timed their new report to coincide with the NRA’s annual lobby days in the U.S. Congress. The chair of the Ben & Jerry’s corporation recently slammed the NRA for their role in perpetuating the industry’s low-road model. “The National Restaurant Association and the American Hotel & Lodging Association are using every legal and political tactic in the book to block minimum wage raises from being implemented in Seattle, San Diego, Los Angeles, and other cities,” Ben & Jerry’s executive Jeff Furman wrote. “Instead, these trade associations should be helping businesses transition to a high-road model.”

For the sake of their workers —and for taxpayers —let’s hope they get the message.

Angry, shocked, overwhelmed? Take action: Support independent media.

We’ve borne witness to a chaotic first few months in Trump’s presidency.

Over the last months, each executive order has delivered shock and bewilderment — a core part of a strategy to make the right-wing turn feel inevitable and overwhelming. But, as organizer Sandra Avalos implored us to remember in Truthout last November, “Together, we are more powerful than Trump.”

Indeed, the Trump administration is pushing through executive orders, but — as we’ve reported at Truthout — many are in legal limbo and face court challenges from unions and civil rights groups. Efforts to quash anti-racist teaching and DEI programs are stalled by education faculty, staff, and students refusing to comply. And communities across the country are coming together to raise the alarm on ICE raids, inform neighbors of their civil rights, and protect each other in moving shows of solidarity.

It will be a long fight ahead. And as nonprofit movement media, Truthout plans to be there documenting and uplifting resistance.

As we undertake this life-sustaining work, we appeal for your support. Please, if you find value in what we do, join our community of sustainers by making a monthly or one-time gift.