Wednesday, October 16, 2013

Low Wages Are Really Expensive

The argument against raising the minimum wage from conservatives and other people unfamiliar with the basics of economic theory is that it will cost jobs and hurt the economy.  The logic goes something like this: if you raise the salaries, the employers have to hike up the prices on their products to cover the additional pay.  There’s no empirical evidence of that, and any good business person knows that you structure your business so that it has a built-in margin to cover the cost of the payroll and then some.  It’s Capitalism 101.

These people also don’t consider the cost to them and the economy of not paying people enough.  The current minimum wage is $7.25 per hour.  That means that if someone works full-time — 40 hours a week — at that rate, they will earn $15,080 a year… before taxes.  That is not enough for one person to live on in 2013 unless you live with your parents.  If you have a family, it’s even worse.  People who live on the minimum wage have to make up the difference somehow.  They have to rely on public assistance for food stamps, Medicaid, and other programs.  And they’re not free: we all pay for it.

According to a study from the University of California at Berkeley of the minimum wage in the fast-food industry, public assistance costs a lot.

1. More than half (52 percent) of the families of front-line fast-food workers are enrolled in one or more public programs, compared to 25 percent of the workforce as a whole.

2. The cost of public assistance to families of workers in the fast-food industry is nearly $7 billion per year.

3. At an average of $3.9 billion per year, spending on Medicaid and the Children’s Health Insurance Program (CHIP) accounts for more than half of these costs.

4. Due to low earnings, fast-food workers’ families also receive an annual average of $1.04 billion in food stamp benefits and $1.91 billion in Earned Income Tax Credit payments.

5. People working in fast-food jobs are more likely to live in or near poverty. One in five families with a member holding a fast-food job has an income below the poverty line, and 43 percent have an income two times the federal poverty level or less.

6. Even full-time hours are not enough to compensate for low wages. The families of more than half of the fast-food workers employed 40 or more hours per week are enrolled in public assistance programs.

That’s just in fast-food.  It’s not the only minimum-wage service industry.  Think of the people working at the big-box stores, the ice cream stand in the food court, the copy center, or the supermarket.

So would you rather pay an extra dime for that combo platter, or would you rather pay for it through your taxes?

You want fries with that?

One bark on “Low Wages Are Really Expensive

  1. For those I know, the most important thing is to prevent the freeloaders from getting a nickel of their tax money. They are immune to the kind of logic that you have voiced, because their opinions are thoroughly backed up by the conservative sound machine and decades of “Welfare Queen” talking points. There is a large component of racial bias involved, of course, but we don’t talk about that. Ignorance – willful ignorance among the better educated sorts – is the problem we need to overcome; ignorance and a complete lack of empathy for their fellows.

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