The author of a new study by the Berkeley Center for Labor Research says the low wages paid by businesses, including some of the largest and most profitable companies in the country, are costing taxpayers nearly $153 billion a year.
Ken Jacobs, the center’s chair and co-author of the study, found that nearly 75 percent of U.S. households using public assistance programs are headed by someone who is working full time or more.
“For tens of millions of Americans, their wages pay too low for them to meet basic needs on the amount they earn alone,” said Jacobs. “That’s why we now have three out of four people who receive public assistance in the U.S. are in working families.”
Jacobs writes in the report that stagnating wages and decreased benefits affect not only the low-wage workers who can’t make ends meet, but also federal and state governments that finance the assistance programs many of these workers turn to. He calls it the hidden cost of low-wage work.
The study also found that during the past 25 years, the overall median wage in the U.S. has gone up about 5 percent after adjusting for inflation.
However, Jacobs said it’s been a different story for workers at the bottom. Low-wage workers actually saw a decrease in their median wage. The trend has accelerated over over the past 10 years.
“This is been especially true if we look at just the last decade. Wages have either stagnated or declined for the bottom 70 percent of workers, with really the biggest drops in that bottom 30 percent of workers. What we’re seeing is a decline in middle-wage jobs, a rise in low-wage jobs and some more highly paid jobs at the top. It’s been a real hollowing out of the middle class,” Jacobs said.
The study highlights low-wage industries beyond the often-targeted fast-food industry, which sees more than half of its workers seeking public assistance. According to the report, 48 percent of home-care workers and 46 percent of child-care workers also rely on public assistance.
Jacobs attributes the stagnation of wages to the decline in manufacturing and deunionization. He said that in the late 1950s, 33 percent of the workforce was unionized. He compared that to today’s numbers in which 7 percent of private-sector employees are in unions, and unionized workers constitute about 11 percent of overall workers.
“That has reduced workers’ bargaining power overall,” Jacobs said.
As the economy slowly recovers from the Great Recession, Jacobs predicts some wage growth for employees at the bottom, but he added that there’s not likely to be major changes without some public policy interventions. He warned that the current levels of income inequality throughout the country threaten business growth.
“The research is making it clear that large levels of income inequality can actually reduce growth and really distort an economy,” Jacobs said. “We have seen a huge change overall in the ratio of CEO pay to the lowest-wage worker or average worker pay, and we’re up to 300 to 1 now here in the U.S. That way overshadows what you see in the rest of the world.”