As minimum wage workers strike throughout the U.S., demanding fair wages for their labor and an increase to the minimum wage, a new study confirms that in more than half the states throughout the nation, government assistance programs provide more adequate support than minimum wage salaries.
In 33 states, an $8 an hour job isn’t enough to pay the bills — and it isn’t enough to beat the living expenses disbursed to those receiving assistance from government programs.
“To be clear: There is no evidence that people on welfare are lazy. Indeed, surveys of them consistently show their desire for a job. But they’re also not stupid. If you pay them more not to work than they can earn by working, many will choose not to work,” CATO Institute’s commentary on the report states.
The CATO Institute, a libertarian organization, is using the report to lobby for cuts to welfare programs, claiming there should be stronger “work requirements” for welfare programs to encourage Americans to move away from the welfare system and into the workforce.
Yet, without a living wage, there’s little wiggle room for Americans to leave the need for assistance behind.
According to the Associated Press, more than 15 million workers earn minimum wage, which equates to roughly $15,000 a year — that’s $50 under the federal poverty line for a two person family.
Do low wage jobs help or hurt welfare programs?
An $8 an hour wage — higher than the federal $7.25 minimum wage — pays less than welfare packages in 40 states throughout the U.S, according to the report.
In California, low wages for Wal-Mart employees cost taxpayers an estimated $86 million in government services for low-income residents, according to a 2004 University of California-Berkeley study, “Hidden cost of Wal-Mart Jobs.”
This year, Congressional Democrats echoed that notion with the release of their own report, which served as an update for the 2004 UC Berkeley analysis.
“Rising income inequality and wage stagnation threaten the future of America’s middle class,” the report states. “While corporate profits break records, the share of national income going to workers’ wages has reached record lows.”
An analysis of one Wal-Mart Superstore in Wisconsin indicates it collectively costs taxpayers between $904,542 and $1,744,590 a year in government assistance programs for its workers, equating to roughly $5,815 per employee.
“When low wages leave Wal-Mart workers unable to afford the necessities of life, taxpayers pick up the tab. Taxpayer-funded public benefit programs make up the difference between Wal-Mart’s low wages and the costs of subsistence,” the report states. “This public subsidization of the low-wage model of companies like Wal-Mart received significant attention in the early 2000s. With wage stagnation, income inequality, and federal budget deficits increasing concern to public policy, the issue is due for re-examination.”
Wal-Mart fired back against the report, claiming that its low prices save Americans at the cash register, including those in low-income brackets.
“Every month more than 60 percent of Americans shop at Wal-Mart and we are proud to help them save money on what they want and need to build better lives for themselves and their families,” Wal-Mart Spokesman Brooke Buchanan told the Huffington Post in a statement. “We provide a range of jobs — from people starting out stocking shelves to Ph.D.’s in engineering and finance.”
The big box retailer is the largest private employer in the nation, with a workforce of more than 1.4 million in the U.S. alone.
Stuck on minimum wage
According to Wal-Mart, the average hourly wage is around $12, yet that factors in all Wal-Mart employees. According to Glassdoor, the average wage for a Wal-Mart sales associate is $8.86. The average cashier hourly wage is $8.66. The average Wal-Mart pharmacist earns $58.43 an hour.
Wal-Mart’s CEO Michael Duke earned $20.7 million in 2012 — it would take the “average” Wal-Mart employee 785 years to earn his yearly salary.
In a summary of the CATO Institute report, Michael Tanner indicates government involvement in wage increases would have a dismal impact on the overall unemployment figures, leaving more people out of work.
“There should be a public-policy preference for work over welfare,” Tanner wrote. “And while it would be nice to raise the wages of entry-level service workers, government has no ability to do so. (Studies have shown that attempts to mandate wage increases, such as minimum-wage hikes, primarily result in higher unemployment for the lowest-skilled workers.)”
While the “lowest-skilled” worker tag insinuates it’s a steppingstone for American workers, reserved for high school students and first-time job applicants, half of the minimum wage jobs in the U.S. are held by adults over the age of 25.
A 2005 Center for Economic and Policy Research (CEPR) report indicates one-third of minimum wage workers are stuck in that position for at least three years — and that was before the Great Recession.
“Moving into a job that pays more than the minimum wage is critical for families trying to become part of the middle class,” Heather Boushey, CEPR economist and author of the report, said in a press release. “However, many prime-wage minimum wage workers remain stuck in low-wage jobs.”
Others argue that paying higher wages would help the economy, putting more money back in the hands of American consumers. That’s the belief of Economic Christ Benner of the University of California, who told The Associated Press that raising the minimum wage would not likely lead to the sweeping job loss critics are concerned about.
“There may be some job impact in those small businesses themselves,” Benner told The Associated Press. “But in the entire economy, when you increase income to low-wage workers, it creates jobs because those workers are likely to spend their additional income and that increases demand for goods and services.”
Can the economy afford higher wages?
For companies like Wal-Mart, the largest big box retailer in America, there’s a question over whether a mandated wage hike would leave the company high and dry.
In July, the Washington D.C. City Council ruffled Wal-Mart’s feathers when it passed a “living wage” law that mandated large employers, including Wal-Mart, pay a minimum $12.50 an hour.
Titled the “Large Retailer Accountability Act,” the measure was intended to ensure the company provide wages that would allow workers to meet the city’s basic needs. Explaining the rationale, the Act indicates large retail businesses can afford to pay living wage costs.
“Large retailers are becoming an important source of jobs for local residents,” the Act states. “Some larger retailers pay very low wages and do not provide their workers affordable health benefits. Without safeguards, large retailers threaten to erode both living standards for working families in the District, especially given the cost of living in the District. By adopting living wage standards for large retailers, the District can ensure that economic development better meets the community’s need for family-supporting jobs.”
According to The New York Times, those in favor of the measure brushed off Wal-Mart’s complaints, highlighting the corporation’s 2012 revenue of $469 billion.
“Their net income was $17 billion,” Councilman Vincent Orange said at the meeting, according to the Times. “You don’t want to share a little bit with the citizens? Come on.”
This involvement on behalf of government bodies, however, is in direct conflict with the conservative argument, which is relying on ways to reform the welfare system — including stronger work requirements — to draw down the nation’s annual budget for such programs.
“If Congress and state legislatures are serious about reducing welfare dependence and rewarding work, they should consider strengthening work requirements in welfare programs, removing exemptions and narrowing the definition of work,” Tanner wrote.