The Hidden Cost of Low-Wage Jobs

While the direct impact of low-wage jobs on individual employees is often discussed, what hasn’t received as much attention is the true “cost” of these jobs to the American taxpayer and the economy more broadly. The Berkeley Center for Labor Research and Education at the University of California released a study this week that revealed that nearly three-quarters of the people helped by government assistance programs aimed to helping the poor are members of a family headed by a worker. By underpaying their workforce and pushing these hardworking Americans onto government assistance, corporations such as Walmart and McDonald’s are receiving what amounts to a massive subsidy from the taxpayer.

The Patriotic Millionaires believe that companies should bear the actual costs – rather than the subsidized costs – of doing business.  Workers produce revenue for companies and the responsibility for covering the costs associated with generating that revenue should be shouldered by the company itself, not the American public.  By subsidizing wages and benefits for companies who thrive due to the labor of their workforce, the American taxpayer is essentially financing the bonuses paid to top executives.  Executives who reap the benefits of these bonuses should be required to carry the actual costs of producing the revenue that makes such bonuses possible.

When taken in aggregate, higher wages for regular Americans will boost the economy by creating growth and prosperity for the country as a whole. The Patriotic Millionaires support a substantially higher federal minimum wage of at least $12 an hour from the current level of $7.25. The Patriotic Millionaires support a wage of at least $15 per hour in high cost areas and believe that any new legislation should index wages to either the median wage or to productivity.

From The New York Times:

“A home health care worker in Durham, N.C.; a McDonald’s cashier in Chicago; a bank teller in New York; an adjunct professor in Mayfield, Ill. They are all evidence of an improving economy, because they are working and not among the steadily declining ranks of the unemployed.

Yet these same people also are on public assistance — relying on food stamps, Medicaid or other stretches of the safety net to help cover basic expenses when their paychecks come up short.

And they are not alone. Nearly three-quarters of the people helped by programs geared to the poor are members of a family headed by a worker, according to a new study by the Berkeley Center for Labor Research and Education at the University of California. As a result, taxpayers are providing not only support to the poor but also, in effect, a huge subsidy for employers of low-wage workers, from giants like McDonald’s and Walmart to mom-and-pop businesses.

 ‘This is a hidden cost of low-wage work,’ said Ken Jacobs, chairman of the Berkeley center and a co-author of the report, which is scheduled for release on Monday.

Taxpayers pick up the difference, he said, between what employers pay and what is required to cover what most Americans consider essential living costs.”

Click here to read the full article. The full study from the Berkeley Center for Labor Research and Education is available here.

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