News Politics

Report: Minimum Wage Hike Would Save Federal Government $7.6 Billion Annually

Emily Crockett

A new Economic Policy Institute report and "Fight for 15" protests have a common theme: Because employers pay their workers too little to live on, workers have to rely on government assistance to get by and taxpayers foot the bill.

Raising the minimum wage to $10.10 per hour would save millions in spending on public assistance programs, according to a report released Thursday.

The report was unveiled just as low-wage Walmart workers and activists with the “Fight for 15” movement took the streets in New York City and Washington, D.C. to protest poverty wages and demand a raise to a living wage of $15 per hour.

The report and the protests had a common theme: Bosses aren’t paying their fair share, leaving full-time workers to rely on government assistance to get by, and taxpayers foot the bill.

The report from the Economic Policy Institute finds that because businesses today are effectively paying workers 25 percent less than they did in the 1960s, government has had to take up the slack to help reduce poverty, effectively shifting a financial burden from the private sector to the taxpaying public. 

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A raise in the minimum wage to $10.10 per hour, as has been proposed by Congressional Democrats but blocked by Republicans, would allow nearly 2 million people to get off of public assistance and save $7.6 billion annually, according to the report.

The current federal minimum wage is $7.25 an hour. It hasn’t kept up with inflation, which makes the dollar worth less over time, but more importantly it hasn’t kept up with average wages or rising productivity.

If the minimum wage had grown as much as the average wage, it would be $10.89 by now, slightly more than Democrats and the EPI report authors are currently pushing for.

If it had grown as much as productivity, or how much we can produce on average from an hour’s worth of work, the minimum wage would be more than $18 per hour, well above what “Fight For 15” activists are pushing for.

The report’s author, David Cooper, told reporters on Thursday that the $7.6 billion savings figure is actually a conservative estimate.

Cooper told Rewire that this report doesn’t look into exactly how much more money workers would have in their pockets overall, given that they would get less money in public assistance benefits as their wages rise.

But since public assistance programs are designed to gradually phase out as workers earn more, workers would still experience a net gain if they saw a raise resulting from an increased minimum wage.

Women and people of color are disproportionately represented among low-wage workers. Today’s report doesn’t go into details about race and gender, Cooper said, but those numbers will be out in a subsequent report.

One-fifth of workers would get a raise if the minimum wage were lifted to $10.10 per hour, the report says. About half of all public assistance dollars go to workers who currently make less than $10.10, and about half of workers who make less than $10.10 receive some public assistance. Every dollar in rising wages means 24 cents of savings in safety net spending, according to the report.

The $7.6 billion in savings on public assistance programs could go to federal expenditures like the Earned Income Tax Credit for childless adults or to creating jobs and improving infrastructure by building and improving roads, bridges, and schools, Cooper said.

“The bottom line is, that’s money that has been acting as a subsidy to low-wage employers who arguably haven’t been doing their fair share in the social contract—the understanding that in American society, if you work hard, you should be paid enough to make ends meet,” Cooper said.

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