Here's a stark number for understanding how low-wage employers are relying on the kindness of taxpayers: $153 billion.
That's the annual bill that state and federal governments are footing for working families making poverty-level wages at big corporations such as Walmart (WMT) and McDonald's (MCD), according to a new study from the University of California Berkeley Labor Center. Because these workers are paid so little, they are increasingly turning to government aid programs such as food stamps to keep them from dire poverty, the study found.
While McDonald's has vowed to raise wages and Walmart is just this month boosting pay for many workers, that's come after intense political pressure from advocacy groups such as the Fight for $15, which is urging legislation and private-sector change to push the federal minimum wage to $15 an hour. While the cost of living has continued to rise, the baseline hourly rate has remained at $7.25 since 2009. At the same time, the post-recession years have created more low-wage jobs than higher-paid ones, adding 1.85 million more Americans to the ranks of poorly paid workers.
"When companies pay too little for workers to provide for their families, workers rely on public assistance programs to meet their basic needs," Ken Jacobs, chair of the labor center and co-author of the new report, said in a statement. "This creates significant cost to the states."
McDonald's didn't immediately return requests for comment about the research.
Walmart spokesman Brian Nick said that this study, and others like it, are missing an important point.
"We believe Walmart helps more people move off of public assistance through the jobs and opportunity for advancement we offer," he wrote in an email. "We're proud that 75 percent of our U.S. management teams began in hourly roles and last year alone we promoted nearly 200,000 people to jobs with higher pay and more responsibility. Walmart has listened to our associates and we have made a $1 billion commitment this year alone to not only raise wages, but also provide additional skills-based training to build great careers."
Walmart chief executive Doug McMillon said in February that the giant retailer would boost the entry wage for current associates to $9 an hour in April, while associates are slated to earn at least $10 an hour by next February.
Real hourly wages of the median American worker were only 5 percent higher in 2013 than in 1975, the report found. For the lowest paid workers, those in the bottom decile of earners, their wages were actually 5 percent lower than in 1975. Altogether, many middle- and low-wage American workers are suffering from stagnating or falling income.
The trend toward employer cuts in benefits is adding to the crisis, the report found. The share of non-elderly Americans receiving insurance from an employer has declined to 58.4 percent in 2013, down from 67 percent a decade ago.
When those trends are added together, it boils down to a concentration of low-paid, struggling workers, who are increasingly relying on the government to put food on the table and pay for health coverage. Almost three-quarters of enrollees in the country's biggest public support programs are members of working families, the study found.
Taxpayers come into the gap by providing more than $152.8 billion a year in funding for working families receiving four key antipoverty programs: Medicaid, Temporary Assistance for Needy Families, food stamps, and the earned-income tax credit.
While workers in a number of occupations rely on government aid to get by, three occupations have particularly high percentages of workers who need taxpayer help. About 52 percent of fast-food workers rely on public assistance, followed by 48 percent of home-care workers and 46 percent of child-care workers.
The study didn't include changes in Medicaid enrollment since the Affordable Care Act, since that data wasn't available. The expansion under ACA extended coverage to low-income adults under 65 years of age in 28 states in Washington, D.C.
Low-wage workers even include highly educated Americans, such as adjunct professors who typically earn between $20,000 to $25,000 per year and don't receive benefits or job security, despite holding advanced degrees. Labor activists are planning rallies at college campuses, as well as at fast food restaurants, on April 15 to urge employers and policy makers to raise the baseline wage.
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