Should taxpayers pay hundreds of billions of dollars to subsidize businesses that rake in profits but pay their workers inadequate wages?
Almost every fast-food burger or big-box-store bargain is just a little bit cheaper thanks to invisible subsidies from US taxpayers to the fast-food, retail, and other low-wage industries. While McDonald’s, Walmart, and other corporations don’t get direct handouts from the federal government, they are able to cut costs and increase profits by implicitly shifting labor costs to the US Treasury to the tune of an estimated $243 billion a year.
These companies may claim that the poor, not they, benefit from government anti-poverty programs. These programs do benefit the poor: 47 million Americans use food stamps; 58 million people are enrolled in Medicaid; and 26 million households benefit from the Earned Income Tax Credit, which lowers taxes and increases tax refunds for low-income working families.
Yet, most who receive these benefits are not the indigent, the disabled, or the elderly; in fact, they are hard-working Americans who want to build a better future for themselves and their families. They are front-line fast-food workers whose median pay is about $8.70 per hour. They are retail associates, home health-care workers and tens of millions of other American workers who earn $8, $10, or $12 per hour. Many are heads of households. Some can’t get full-time jobs. And most do not receive health insurance, pension plans, or paid leave from their employers. These low-paying jobs account for most recent employment growth.
As President Obama proposed in his State of the Union address, one straightforward way to raise wages for up to 30 million workers — and simultaneously reduce government spending on benefits — would be to increase the federal minimum wage from $7.25 to $10.10 per hour. Seventy-six percent of Americans, including 58 percent of Republicans, support an increase to the minimum wage, according to a November Gallup poll.
It all comes down to questions of fairness: Should hard-working Americans earn enough money at full-time jobs to meet their basic needs, or should the government and taxpayers pay hundreds of billions of dollars to subsidize businesses that rake in profits but pay their workers inadequate wages? While some smaller employers may find it hard to pay higher wages, shouldn’t multibillion-dollar companies be held to a higher standard as employers and corporate citizens? Shouldn’t the price of a burger accurately reflect the costs of making it?
Food stamps, Medicaid, the earned income tax credit — these subsidies, which many businesses rely on to top up their workers’ incomes — are not your daddy’s “corporate welfare,” the $150-billion-a-year in government tax breaks for business. This corporate welfare is a slate of anti-poverty programs designed to help hard-working Americans make ends meet that also help not-so-needy industries, such as the $660-billion-a-year restaurant industry; 45 percent of America’s 10 million restaurant workers receive government benefits. Ask workers in low-wage jobs if they’d rather receive a living wage or have to turn to government assistance and I doubt that many wouldn’t prefer a decent paycheck.
These are service industries, which cannot claim they need to keep wages low to compete in the global market. A worker in India isn’t going to cook that burger or take care of an aging parent. As Sylvia Allegretto, a University of California economist said, “The expectation that taxpayers pick up the tab becomes an indispensable part of these industries’ business plans.” This is at a time when corporate profits are at record levels.
Although some say that raising the minimum wage would result in job cuts, recent studies find that small increases have little or no effect on employment.
Since two of America’s major challenges are growing inequality and long-term debt, raising the minimum wage would help address both. Increasing earnings for one-fifth of the workforce would reduce the disparities that have made the United States the world’s most unequal rich country, and reduce federal spending on social programs that were never intended to support people who work hard — and should be earning a decent living.
There are many good arguments for raising the minimum wage: it would provide fair pay and dignity for tens of millions of working Americans, reduce the injustices of poverty and inequality, and increase workers’ purchasing power to stimulate the economy. Add to that list: Stop taxpayer handouts to employers who don’t pay a living wage.