State gives McDonald’s $270,000 in subsidies

Article and Official Information Act request by Byron Clark, Fightback.

In 2009 the Ministry of Social Development began paying wage subsidies to McDonalds when the company hired beneficiaries though the Flexi-wage and Skill Investment Subsidy programmes, the latter of which has now ceased. This allowed McDonalds to receive public money for employing a former beneficiary, longer term beneficiaries would attract a larger subsidy, though there has never been any evidence that McDonalds is employing more people than they would otherwise.

McDonalds is not a charity providing jobs, nor are they a volunteer based NGO that hires paid staff based on the availability of funding. As a for profit corporation, McDonalds has a duty to return a profit to shareholders and will hire the amount of workers required to produce and sell their product. Even with subsidies it is not in their interests to hire more workers than required, as this would be an unnecessary expense.

So just how much public money has been paid to McDonalds? Figures obtained under the Official Information Act reveal that $272,574 was paid between July 1 2009, when the subsidies began, and June 30 this year.  This was for hiring 110 beneficiaries. Some McDonald’s restaurants are listed with Work and Income under their individual franchise, and are not included in that figure, so the total is likely to be higher. A further 700 beneficiaries were hired without McDonalds receiving wage subsidies.

While receiving tax payer money, McDonalds in New Zealand has also been accused of using accounting tricks to avoid paying tax. A large amount of revenue is excluded from taxable profit because it used to pay for use of the McDonalds trademark, $50 million more was spent on trademark fees than tax in the past three years.

McDonalds has an income of about $200 million a year in New Zealand, so the wage subsidies are just a drop in the bucket, this doesn’t mean they are insignificant however, rather it raises the question of why public money should be spent adding to an overflowing bucket.

For the past several months workers at McDonalds have been taking industrial action in an attempt to improve wages or conditions. The company is known for paying lower wages and offering fewer benefits than others in the fast food industry, where Unite has made significant gains for workers. The company is known for paying lower wages and offering fewer benefits than others in the fast food industry, where Unite has made significant gains for workers. Unlocking the wealth generated by McDonald’s workers, and by the majority of workers who pay tax, could lay the basis for a system based on social need rather than private profit.