The Government Spends $152.8 Billion a Year Supporting Workers Who Are Paid So Little They're Still Poor
American workers still need help from the government to make ends meet.
According to a new study from researchers at the University of California-Berkeley, the government spends $152.8 billion a year to support working families.In a research brief released Monday, Ken Jacobs, Ian Perry, and Jenifer MacGillvary find that 73% of enrollees in public support programs - such as food stamps - are members of working families, which the study defines as families with at least one member working 27 or more weeks per year and 10 hours or more per week.
The researchers blame low wages for this need, writing: "Real hourly wages of the median American worker were just 5% higher in 2013 than they were in 1979, while the wages of the bottom decile of earners were 5% lower in 2013 than in 1979. Trends since the early 2000s are even more pronounced. Inflation-adjusted wage growth from 2003 to 2013 was either flat or negative for the entire bottom 70% of the wage distribution."
Between the Children's Health Insurance Program, the Temporary Aid to Needy Families program, the Earned Income Tax Credit, and food stamps (formally known as the Supplemental Nutrition Assistance Program), the federal government spent $127.8 billion annually between 2009 and 2011 on working families; states spent an additional $25 billion on these programs annually for working families, according to the report.
The report found that 56% of federal and state-level assistance went to working families.
This report emerges at an interesting juncture for the economy, as the unemployment rate is at 5.5%, its lowest level since May 2008, though data on wage growth has shown there is still limited or tepid growth in employee wages.
Average hourly earnings for all workers in March rose 2.1% over the prior year, just outpacing inflation, while production and nonsupervisory employees saw wages in March grow 1.8% over last year.
Numerous major employers, including Wal-Mart and McDonald's, have said they will raise wages and increase benefits such as paid time off for their hourly employees. Additionally, job openings and weekly initial claims for unemployment insurance are at their best levels since the early 2000s.
Whether these changes will affect spending on these government programs in coming years remains to be seen.
The Berkeley report argues that higher wages and employer-provided insurance would "allow all levels of government to better target how their tax dollars are used."
It adds (emphasis ours):
In his latest State of the Union address, President Obama said he would push for laws that ensure equal wages for women and increase the minimum wage.
Higher wages and increases in employer-provided health insurance would result in significant Medicaid savings that states and the federal government could apply to other programs and priorities. In the case of TANF - a block grant that includes maintenance of effort (MOE) provisions that require specified state spending - higher wages would allow states to reduce the portion of the program going to cash assistance while increasing the funding for other services such as child care, job training, and transportation assistance. Higher wages would also significantly reduce federal expenditures on the EITC and SNAP.
At the start of 2015, 21 states raised their minimum wage.
> Read the full report at the UC-Berkeley Labor Center here