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The shocking cost of stingy pay in America

Taxpayers shell out $153 billion a year to help low-wage workers survive

April 21, 2015 2:00AM ET

Getting up and putting in a hard day’s work should keep you out of poverty, right? Not in 21st century America, where restaurant employees struggle to feed their families and home-care workers worry about losing the roof over their heads.

Corporate America’s fixation on curbing employee benefits and wages has forced more and more working families onto public assistance rolls.  We’re not talking about so-called welfare kings or queens. We’re talking about people who punch the clock at jobs that are often as exhausting as they are thankless. The people who stock the shelves, clean the offices and keep society running smoothly.

Stinginess may reduce a company’s bottom line — though even that claim is doubtful, since many studies show that low pay can result in higher turnover and lost productivity. But squeezing workers to the max indisputably costs taxpayers dearly. As you contemplate the taxes you just filed, consider that you are subsidizing the right of gigantic, profitable companies to deny hard-working citizens a living wage.

A new study from researchers at the University of California, Berkeley brings this issue clearly into focus.

Sifting through expenditures on various programs such as food stamps and Medicaid, researchers find that the government shells out $152.8 billion a year to keep working families afloat. All told, over half of combined state and federal spending on public assistance goes to families where at least one member works 26 or more weeks per year and 10 or more hours per week. 

In California, the cost of picking up the slack from companies such as Walmart, Burger King and Macy’s is $3.7 billion a year. In New York, the price tag is $3.3 billion. Texans are shelling out $2 billion. Couldn’t we build a few schools with that money? Repair some roads and bridges? Invest in new technology?

Boosting the minimum wage would lift living standards for up to 25 million people in America without leading to significant job losses or other costs.

Workers’ wages have been declining in recent years. The Berkeley researchers note that from 2003-2013, inflation-adjusted wages sank for the entire bottom 70 percent of the American workforce — in other words, most of us. To add insult to injury, that same period saw a large decline in the share of people who get job-based health coverage.

Conservatives often claim that lazy and unskilled workers are to blame for wage stagnation. But that argument has been debunked by economists such as Lawrence Mishel, president of the Economic Policy Institute, who point to government minimum-wage and anti-union policies that have weakened the bargaining position of low- and middle-wage workers as the real culprit.

It’s promising that at the start of 2015, workers in 21 states and the District of Columbia got a pay raise, and that more elected officials across the country are considering increases. Walmart recently announced that it will raise all of its full-time and part-time employees’ pay to at least $9 an hour starting in April, with the lowest wage rising to $10 an hour by February of next year. That’s welcome news, particularly since the cost to taxpayers of Walmart’s low wages, according to a report by the Democratic staff of the U.S. House Committee on Education and the Workforce, is $5,815 per employee.

Action is long overdue. Economists such as Joseph Stiglitz have been warning for years that economic inequality is tearing the country apart and dampening our economic future. There are many causes of inequality, of course, but America’s miserly minimum wage is a big reason for inequality at the bottom. A report by the Economic Policy Institute finds that raising the minimum wage would help reduce inequality, particularly as it affects lower-wage women and, by extension, the families they support. Stiglitz and other experts have pointed out that boosting the minimum wage would lift living standards for up to 25 million people in America without leading to significant job losses or other costs.

Perversely, many conservatives would like to cut or close the very programs that are currently allowing low-wage Americans to meet life’s basic necessities, even as they seek to block minimum-wage increases. Presidential hopeful Jeb Bush has been particularly strident in denouncing federal wage hikes, insisting “we need to leave it to the private sector.” Like his potential fellow GOP contenders for president Marco Rubio and Rick Perry, Bush would like to scrap the federal minimum wage altogether.

Bush likes to throw in a threat that low-wage workers who see a pay increase would soon be replaced by a robot, a form of dubious fear-mongering regularly trotted out by conservatives anytime someone calls for better worker conditions. As usual, this is a highly questionable line of thinking: In 2011, a Wall Street Journal survey found that most economists blamed high unemployment on a weak demand for goods and services — not automation. With unemployment numbers dropping, it seems even less likely that a robot-driven jobocalypse is on the horizon.

What Bush and his fellow presidential aspirants need to answer as they make their bid for the White House is a simple question: Why do you think taxpayers should subsidize the refusal of corporations to pay a living wage?

Lynn Stuart Parramore is a contributor to Al Jazeera America, Reuters, Huffington Post and other venues.

The views expressed in this article are the author's own and do not necessarily reflect Al Jazeera America's editorial policy.

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