Business

Low-wage employers often pass along costs to taxpayers

Denise Hill, a home health care worker who makes $9.50 an hour and often works seven days a week, in Durham. Hill says there is little left for other expenses after paying her rent. “It’s a crazy dilemma,” she said. A University of California study found that taxpayer money is effectively subsidizing employers who pay at or around the minimum wage.
Denise Hill, a home health care worker who makes $9.50 an hour and often works seven days a week, in Durham. Hill says there is little left for other expenses after paying her rent. “It’s a crazy dilemma,” she said. A University of California study found that taxpayer money is effectively subsidizing employers who pay at or around the minimum wage. NYT

A home health care worker in Durham; 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 such as McDonald’s and Wal-Mart 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 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.

The report estimates that state and federal governments spend more than $150 billion a year on four key anti-poverty programs used by working families: Medicaid, Temporary Assistance for Needy Families, food stamps and the earned-income tax credit, which is specifically aimed at working families.

This disparity has helped propel the movement to raise the minimum wage and prompted efforts in a handful of states to recover public funds from employers of low-wage workers. In Connecticut, for example, a legislative proposal calls for large employers to pay a fee to the state for each worker who earns less than $15 an hour. In 2016, California will start publishing the names of employers that have more than 100 employees receiving Medicaid, and how much these companies cost the state in public assistance.

“The low-wage business model practiced by many of the largest and most profitable employers in the country not only leaves many working families unable to afford the basics, but also imposes significant costs on the public as a whole,” Sarah Leberstein, a senior staff lawyer with the National Employment Law Project, testified recently before Connecticut lawmakers.

Other states, as well as several cities, including Washington, have moved to raise the minimum wage above $10, while local activists in fast food, retailing, home care, airport services and other low-wage industries have organized protests to demand $15 an hour. Organizers of the Fight for 15 movement held a nationwide wave of protests and strikes on Wednesday, which included rallies in Durham and Raleigh.

Adriana Alvarez, a cashier at a McDonald’s in Chicago, is among the people pushing for higher wages. After five years with the fast-food giant, Alvarez, 22, earns $10.50 an hour, well above the federal minimum wage of $7.25. Still, she depends on food stamps, Medicaid and a child-care subsidy to help get through the week.

“He eats a lot,” Alvarez said of her 3-year-old son, Manny, with a laugh. He also drinks a lot of milk, she said – “a half-gallon every two days” – and because he is lactose intolerant, he requires a more expensive brand, using up most of her $80 allotment of food stamps.

Most everyone else she works with – including many 10-year-plus veterans of the franchise – receives food stamps, said Alvarez, who started working at McDonald’s full time when she was in high school.

She depends on Medicaid for her family’s health care and receives a subsidy for the day care center where she drops off Manny on her way to work.

‘Crazy dilemma’

Denise Rush, a home health care worker in Durham, often works seven days a week, returning home near midnight after her two teenagers have gone to bed. At $9.50 an hour, her biweekly paycheck totals just over $700, or the cost of her monthly rent. There is little left for other expenses.

“It’s a crazy dilemma,” she said. “Do I pay the whole bill, or do I gas up the car to go to work?”

Despite receiving coverage for her children’s health care from Medicaid as well as about $300 a month in food stamps, Rush, 41, is still struggling. “We’re talking about basic needs,” she said, including such staples of modern life as a cellphone to keep in touch with work and her children, and a home Internet connection to allow her children to do their homework.

Her paycheck also fails to pay for the uniforms and fees for the lacrosse, basketball and soccer teams that Rush says she believes are essential to keep her son and daughter occupied and out of trouble while she is working. Fortunately, she said, the school has helped pick up that tab.

About 48 percent of home health care workers are on public assistance, the Berkeley researchers found. So are 46 percent of child care workers and 52 percent of fast-food workers.

Even some of the nation’s best-educated workers have turned to taxpayers for support; a quarter of the families of part-time college faculty members are on public assistance, the Berkeley researchers found.

“I’m very proud of my doctorate, it was well-earned, but in terms of the workforce, it’s a penalty,” said Wanda Brewer, who lives in Mayfield, a Chicago suburb, and teaches at DeVry and Concordia colleges. She is paid $2,700 for each 15-week course she teaches. She and her 4-year-old daughter are both on Medicaid; they also receive $390 a month in food stamps and a child care subsidy.

She has applied for other jobs at chains like Wal-Mart, Home Depot and Menard’s but says she can’t even get a call back because such employers consider her overqualified.

“When I apply for anything outside education, they laugh at me,” Brewer said. “The term professor immediately commands respect. The assumption is you’re making a fair wage, a living wage, but that is not necessarily so.”

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