The Hidden Costs Of Low-Wage Work In America

According to a recent report from the UC Berkeley Labor Center, poverty-level wages cost U.S. taxpayers $152.8 billion each year in public support for working families.  The Labor Center used data from the U.S. Bureau of Labor Statistics' Current Population Survey (CPS) and administrative data from the Medicaid, CHIP, TANF, EITC, and SNAP programs, to calculate the cost to the federal and state governments of public assistance programs for working families.

Three quarters of the people enrolled in government assistance programs are members of working families, driven to rely on public assistance by stagnating wages and the decline in employer-provided health insurance.  Inflation-adjusted wage growth has been flat or negative: the wages of the bottom decile of earners were 5 percent lower in 2013 than in 1979, and "inflation-adjusted wage growth from 2003 to 2013 was either flat or negative for the entire bottom 70 percent of the wage distribution."  At the same time, "the share of non-elderly Americans receiving insurance from an employer falling from 67 percent in 2003 to 58.4 percent in 2013."

The federal government spends about $127.8 billion per year, and states collectively spend about $25 billion per year, on public assistance programs for working families.  "In all, more than half—56 percent—of combined state and federal spending on public assistance goes to working families," the Labor Center explains.  When working families have to rely on public assistance to make ends meet, the cost of low wages is borne by the American taxpayer.

The report concludes:
When jobs don't pay enough, workers turn to public assistance in order to meet their basic needs. These programs provide vital support to millions of working families whose employers pay less than a liveable wage. At both the state and federal levels, more than half of total spending on the public assistance programs analyzed in this report—Medicaid/CHIP, TANF, EITC, and food stamps—goes to working families.
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. Overall, higher wages and employer-provided health care would lower both state and federal public assistance costs, and allow all levels of government to better target how their tax dollars are used. (Emphasis added)

Read more: resources:
Topics At A Glance: Poverty (
Children in Poverty Course Module (
Differences in Social Class Status and Poverty Levels Among Older Adults in the United States (
Race and Poverty in the United States (
Poverty and Young Adults (
Investigating Children in Poverty (
Poverty (
Gender, Education, Family, Poverty, and Race (
Frederique Laubepin

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