How Americans Subsidize Companies that Pay Low Wages

While this article came out on tax day in the Washington Post in response to the national protests for a living wage, the facts still remain relevant until the issue is resolved, so we post the story here.

The facts speak for themselves; workers cannot subsist on the wages paid to most workers in the retail industries, including food service industry.  We have become accustomed to the convenience and abundance of cheap goods and cheap food but at what price? While this article focuses on Wal-Mart and McDonald’s, two the highest profile retail marketers in the country, almost the entire retail sector relies on a business model that passes their payroll cost onto the taxpayer.  Unlike the ideal “free market” of yore where companies compete on their own merits based on their pure wits and abilities, large companies have modeled their business enterprises on how well they can con consumers and con taxpayers into helping them to carry the burden of their cost of doing business — while they keep the profits for themselves.

Americans are spending $153 billion a year to subsidize McDonald’s and Wal-Mart’s low wage workers

How the minimum wage hurts us all.

Image from Wa-Po article, Andrew Burton, Getty Images

By Ken Jacobs

The low wages paid by businesses, including some of the largest and most profitable companies in the U.S. – like McDonald’s and Wal-Mart – are costing taxpayers nearly $153 billion a year.

After decades of wage cuts and health benefit rollbacks, more than half of all state and federal spending on public assistance programs goes to working families who need food stamps, Medicaid, or other support to meet basic needs. Let that sink in — American taxpayers are subsidizing people who work — most of them full-time  (in some case more than full-time) because businesses do not pay a living wage.

Workers like Terrence Wise, a 35-year-old father who works part-time at McDonald’s and Burger King in Kansas City, Mo., and his fiancée Myosha Johnson, a home care worker, are among millions of families in the U.S. who work an average of 38 hours per week but still rely on public assistance. Wise is paid $8.50 an hour at his McDonald’s job and $9 an hour at Burger King. Johnson is paid just above $10 an hour, even after a decade in her field. Wise and Johnson together rely on $240 a month in food stamps to feed their three kids, a cost borne by taxpayers.

The problem of low wages and the accompanying public cost extends far beyond the fast-food industry. Forty-eight percent of home care workers rely on public assistance. In child care, it’s 46 percent. Among part-time college faculty—some of the most highly educated workers in the country—it’s 25 percent.

Ebony Hughes is paid $7.50 an hour as a home care worker in Durham, N.C., and has a second job at a local KFC. While the home care industry has the fastest growing number of jobs in America, these workers are some of the lowest paid in the country – earning, on average, $13,000 a year. To get enough hours to pay the bills, Hughes works from 6 a.m. to 11 p.m. But she and her daughter still rely on public assistance to make ends meet.

UC Berkeley’s Center for Labor Research and Education, which I chair, has analyzed state spending for Medicaid/Children’s Health Insurance Program and Temporary Assistance for Needy Families, and federal spending for those programs as well as food stamps and the Earned Income Tax Credit.

Keep Reading at the Washington Post: Americans are Spending…

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