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.

We’re not backing down in the face of Trump’s threats.

As Donald Trump is inaugurated a second time, independent media organizations are faced with urgent mandates: Tell the truth more loudly than ever before. Do that work even as our standard modes of distribution (such as social media platforms) are being manipulated and curtailed by forces of fascist repression and ruthless capitalism. Do that work even as journalism and journalists face targeted attacks, including from the government itself. And do that work in community, never forgetting that we’re not shouting into a faceless void – we’re reaching out to real people amid a life-threatening political climate.

Our task is formidable, and it requires us to ground ourselves in our principles, remind ourselves of our utility, dig in and commit.

As a dizzying number of corporate news organizations – either through need or greed – rush to implement new ways to further monetize their content, and others acquiesce to Trump’s wishes, now is a time for movement media-makers to double down on community-first models.

At Truthout, we are reaffirming our commitments on this front: We won’t run ads or have a paywall because we believe that everyone should have access to information, and that access should exist without barriers and free of distractions from craven corporate interests. We recognize the implications for democracy when information-seekers click a link only to find the article trapped behind a paywall or buried on a page with dozens of invasive ads. The laws of capitalism dictate an unending increase in monetization, and much of the media simply follows those laws. Truthout and many of our peers are dedicating ourselves to following other paths – a commitment which feels vital in a moment when corporations are evermore overtly embedded in government.

Over 80 percent of Truthout‘s funding comes from small individual donations from our community of readers, and the remaining 20 percent comes from a handful of social justice-oriented foundations. Over a third of our total budget is supported by recurring monthly donors, many of whom give because they want to help us keep Truthout barrier-free for everyone.

You can help by giving today. Whether you can make a small monthly donation or a larger gift, Truthout only works with your support.