New Report: Taxpayers Subsidize $153.8 Billion In Corporate Profits Due To Low Wages

New Report: Taxpayers Subsidize $153.8 Billion In Corporate Profits Due To Low Wages

Strikers march outside a Wendy's restaurant in Boston
Generosity, or largesse, is a desirable trait for most Americans in the habit of giving freely of their assets to aid other Americans in need without expecting anything in return. As a virtue, charity has always been widely accepted as one of the most cherished virtues throughout history. However, one of the primary requirements of generosity, besides giving without expecting anything in return, is that the recipient is “in need.” If American taxpayers realized their largesse was going to those who need it least, highly-profitable corporations, they would likely put an end to their generous ways in a heartbeat.

While most American taxpayers do not object to, and in fact are supportive of, their tax dollars going to help other Americans in need, most taxpayers would recoil at charitable giving to those who need for nothing. Likely most taxpayers are unaware they are spending over $153.8 billion annually to subsidize corporate profits due to low wages that keep millions and millions of American workers on public assistance programs. It is that lack of awareness that prevents massive outrage against Republicans for  opposing raising the minimum wage.

This week on tax day, April 15, workers across America are planning to protest for higher pay and union representation for low-wage workers living in poverty and reliant on social safety nets to survive. The higher minimum wage protests are being organized by Fight for 15, a national worker movement engaged in the uphill struggle against Republicans to raise the federal minimum wage to $15 an hour. The federal minimum wage is a pathetic $7.25 an hour that prevents a person working full-time at that rate from bringing in enough income over the course of a year to live above the federal poverty line for a family of two; with any children the poverty level is below dire. Subsequently, workers earning minimum wage cannot survive without depending on at least one form of government assistance if they are extremely frugal and pool their resources with another family.

The poverty wages Republicans claim are more than sufficient for Americans, or too high according to Republicans who want the minimum wage abolished, is an abomination and an insult to highly productive American workers. They are also costing taxpayers over $153.8 billion each year according to a recently released report from the University of California, Berkeley. The reason taxpayers are being tasked to supplement worker wages, and provide corporate welfare subsidies for profitable corporations, is because when hard working families are forced to subsist on low-wage jobs just to survive, they have little option but to depend on government social programs. These include Medicaid, the Children’s Health Insurance Program (CHIP), Earned Income Tax Credit (EITC), Temporary Aid to Needy Families (TANF or welfare), and food stamps low-wage workers rely on just to make ends meet, barely.

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The new Berkeley report examined how much the states and federal government spends on social safety net programs and discovered that the federal government spends about $127.8 billion per year, and states collectively spend about $26 billion per year on assistance programs for working families. Now, that $153.8 billion a year is not only being spent to help other Americans live, something most Americans are willing to provide for their struggling fellow citizens, it is yet another instance of taxpayer-funded corporate welfare. American taxpayers should not have to subsidize businesses that are already reaping profits on the backs of their highly-productive and low-paid workers and Americans’ tax dollars as well.

The study, “The High Public Cost of Low Wages” found that besides stagnant and poverty-level wages, the dearth of employer-provided benefits mean that minimum-wage workers in the United States are even more reliant on federal and state-run public assistance programs than previously thought. What that means for taxpayers is that their tax dollars are taking up the slack and subsidizing highly-profitable corporate employers who refuse to pay a living wage; that and only that reason is why there is a need for a federal minimum wage in the first place. Many employers, particularly large corporate employers will never pay decent wages without a federal minimum requirement and since  Republicans refuse to even entertain raising the minimum, it is left to taxpayers to “bear a significant portion of the hidden costs of low-wage work in America” according to the report’s authors Ken Jacobs, Ian Perry, and Jenifer MacGillvary.

The report revealed that 73 percent of Americans enrolled in the nation’s major assistance programs are members of working families. It is noteworthy that the $153.8 billion of taxpayer money spent annually is on “working families” and not, as Republicans claim, lazy moochers who need to learn the culture and value of hard work. After the 73 percent of Americans receiving some assistance who are working at low-wage jobs, the rest are children, the elderly and disabled Americans.

What is telling is that despite the recovering economy, record corporate earnings, and robust Wall Street gains, millions of workers are not being compensated at a rate commiserate with economic gains at the top. According to the report’s research, when adjusted for inflation, wage growth from 2003 to 2013 was either flat or negative for the entire bottom 70 percent of the wage distribution. To make matters worse, and cost to taxpayers higher, the number of non-elderly Americans receiving insurance benefits from their employer fell from 67 percent to 58 percent in 2013. One of the study’s co-authors and chair of the Berkeley Labor Center said “When companies pay too little for workers to provide for their families, workers rely on public assistance programs to meet their basic needs. This creates significant cost to the states.” And, a significant savings to corporations that translates into higher corporate earnings and greater compensation packages for CEOs.

Many Americans may think only fast food workers impact social safety net spending, but the study revealed that dependence on public assistance “spans a diverse range of occupations, including fast-food workers (52%), childcare workers (46%), home care workers (48%), and part-time college faculty (25%).” Add in retail employers such as Walmart and Target, and it is easy to understand why taxpayers are subsidizing corporations to the tune of $153.8 billion annually.

A few low-wage employers, like Walmart and McDonald’s, have announced pay raises in recent months to go into effect in the next year or so, but workers say it is not enough and they are hardly exaggerating. For example, McDonald’s plan to raise minimum wage by a whopping 10 percent that still will only affect a very small percentage of the company’s workers. Increasing the minimum wage by 10 percent will mean a worker will earn $7.98 per hour; that will still keep an employee in dire poverty and taxpayers on the hook for $153 billion annually as opposed to $153.8 billion. McDonald’s claims it has no control over how much its franchises pays their workers, but the corporation is a staunch opponent of raising the federal minimum wage and a major Republican donor.

The majority of  Americans do not oppose their hard-earned tax dollars going to help those who need assistance and many believe Republicans are barbaric for cutting what little low-wage earners receive now. However, it is highly likely they oppose those tax dollars going to subsidize payrolls of large profitable corporations that happily take the $153.8 billion in savings as higher earnings. It is a travesty that corporate mainstream media is not reporting where taxpayer dollars funding social safety net and assistance programs is really going, because if they did the outrage against Republicans refusing to consider raising the minimum wage would certainly produce results.

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