When a Paycheck Isn’t Enough


April 23, 2015

 “When jobs don’t pay enough, workers turn to public assistance in order to meet their basic needs. These programs provide vital support to millions of working families whose employers pay less than a livable wage.” – The High Public Cost of Low Wages

Public assistance programs are indeed vital to working families. In fact, nearly three-quarters of people receiving public assistance are members of working families, according to a new report from the University of California Berkeley’s Center for Labor Research and Education. For many workers, the low pay, lack of benefits, and fewer hours they’re given mean that the paychecks they earn just aren’t enough to keep up with everyday living expenses. Sadly, that’s no surprise given the fact that the report found that after adjusting for inflation, wages across the country either remained flat or fell for the entire bottom 70 percent of workers in the US from 2003 to 2013.

minimum wage rally living wage for all

Fifty-two percent of fast-food workers, 46 percent of child care workers, and 48 percent of home care workers receive public assistance. Fields with a traditionally lower-educated workforce weren’t the only ones in need, however; 25 percent of part-time college faculty and their families receive at least one type of public assistance.

The four important antipoverty programs used by working families that the report focused on – Medicaid and the Children’s Health Insurance Program, Temporary Assistance for Needy Families (TANF), SNAP/food stamps, and the Earned Income Tax Credit – are often the lifeline for working families when they aren’t paid a living wage. And these programs should absolutely be there for these workers and their families. But this also means that taxpayers are, in effect, giving a huge subsidy to employers who pay low wages. The authors of the report call this “the hidden cost of low-wage work in America,” and found that cost to be nearly $153 billion each year.

At both the state and federal levels, more than half of total spending on public assistance programs goes to working families. These costs were as high as $3.7 billion in California and $3.3 billion in New York. This is a big load for already-squeezed state budgets.

Companies need to step up to ensure we have a better balance of public and private responsibility than we have now. This can be accomplished both by higher wages and better benefits, and also by businesses paying their fair share in taxes. Some employers have started to feel pressure and have already raised wages, although by very modest amounts compared to their profits and executive pay scales. And not all employers have taken this step.

Sen. Patty Murray (D-WA) and Rep. Robert Scott (D-VA) are expected to introduce a bill soon that would increase the federal minimum wage from its current level of $7.25 to $12 by 2020. If passed, this bill would roughly restore the minimum wage to its purchasing power in the late 1960s. Many states have already passed higher minimum wage laws, and protests and strikes demanding higher wages took place across the country on April 15.

Some states are looking at going after the employers directly to make up for the cost of low wages to the state coffers. According to The New York Times, a proposal in Connecticut would require large employers to pay a fee to the state for each worker who earns less than $15 an hour. Next year, California will start publishing the names of employers who have more than 100 employees receiving Medicaid, and will reveal how much the companies are costing the state in public assistance. These policies are two examples of other ways to redress the imbalance left when employers don’t pay living wages.

We know that higher wages would lift millions of workers out of poverty. Higher wages and employer-provided health care and other benefits would also lower state and federal costs on these programs, allowing those dollars to be spent elsewhere or reach more families who need them.

[Photo Credit: Michael Fleshman via Flickr]

Earned Income Tax Credit
home health care
Labor and Employment
Low Income Home Energy Assistance Program (LIHEAP)
minimum wage
Poverty and Income
Temporary Assistance for Needy Families