I don't think it's a bad idea to have kids work. It is a great learning experience. I got my first legit job when I was 8 years old. I quickly learned about taxes when I saw the government deduct them from my paycheck. And it made me ask adult questions such as "what is social security?" and "why don't we get paid at least the minimum wage?"
We organized a sit-in strike when I was 10 and the result was that even though we couldn't reach an amicable agreement with the city and there was real violence when they tried to replace us with scabs, we still ended up making significantly more money doing the same job because our services were needed regardless of whether it was the city paying us or not.
That was a life lesson that no grade school can teach you.
I don't mind them having the kids work at the school, but they shouldn't be able to get away with paying them with a crappy and unhealthy school lunch from the company store. They should pay them prevailing wage and let the kids buy whatever they want with it, including ordering a pizza delivery or whatever.
You would see those bull**** school lunches get unpopular very quickly.