Introductory Remarks
The USA has always prided itself on being a byword for the land of opportunities any person can enjoy. Such optimism may end where the issue of the minimum wage starts, as employees find themselves constrained by a salary ceiling. Forced into low-income groups of earners, there is nothing they can do except resort to aid or social programs to meet their individual or family needs. The situation round the use of aid has come to reach an alarming point judging by the scope of the issue. Employees representing fast food, home care, childcare, and part-time college faculty sectors are the active users of social assistance. The issue is fraught with multiple implications and outcomes, such as the excessive spending of taxpayers’ money, the cultivation of the culture of dependency, and the forfeiture of labor skills by employees. What follows is additional strain placed on social programs. The major solution offered is raising the level of the minimal wages, which, it is hoped, will eliminate the need to seek state support to provide for the living. Plenty of experts see the possibility to save billions. Although some sceptics may suggest saving may not be considerable, the billion is the measurement unit of such fund sparing. The point is that, in the light of enormous scope of dependency on social programs due to low salaries and potential fallouts associated with overreliance, raising minimum salaries is suggested as the major solution that will relieve social programs of their fiscal burden that appears super-excessive.
The Disturbing Scope of the Problem
The requirement that the level of salaries not be lower than a determined level will target the current enormous scope of social program dependence. Such state of affairs is unsurprising since, according to Allegretto, Doussard, Graham-Squire, Jacobs, Thompson, and Thompson (2013), the federal minimal salary of 7.25 dollars an hour does not suffice to meet healthcare, housing, food, transportation and other staple family needs. Employers providing poverty salaries leaves people with no alternative other than to resort to public programs helping them meet the vital needs. Food subsidies, income support, publicly subsidized health insurance, and earned income tax credits are said to enable working families earning the basic salary to close the gap between subsistence and paychecks. Johnson (2013) noted that increasing the minimum salary level was a better way to contract expenditure related to aid programs since higher salaries eliminate the need for aid, such as Food Stamps. There will be much to cut considering the number of Americans subsisting on the program aid.
The Wall Street Journal (2011) reported 49% of Americans to live in households composed of at least one individual who was a recipient of government benefits (as cited in Spalding, 2012). Calculating the yearly Index of Dependence on Government, the Heritage Foundation (2010) estimated the number of American beneficiaries of Social Security, Temporary Assistance for Needy Families, support for higher education and other aid programs at 67.3 million residents. At a time when the article saw print, the number of such Americans was 8% up on 2009 (as cited in Spalding, 2012). The growth in low-salary jobs with zero benefits along with the high level of unemployment for 6 years running has enhanced demand on the major safety net systems of the USA (Allegretto et al., 2013). To be more specific with regard to the percentage of industry workers who rely on social programs to ensure their living, 52%, 48%, 46%, and 25% of workers in fast-food, home care, childcare, and part-time college faculty sectors are the active recipient of social aid (Jacobs, Perry, and MacGilvary, 2015). Bivens et al. (2014) also stated that income-support and safety net programs might be said to have been battling poverty in recent decades (as cite in Cooper, 2014). This being so, the programs do all the poverty alleviating, that is, the system shoulders the entire burden of the welfare sustenance with regard to the financially vulnerable groups at this point.
The Danger of Aggravating Financial Dependence through Social Program Overreliance or the Need to Raise the Minimum Salary
The threat of aggravating financial dependence through social program overreliance may show how important it is raising the salary level, thereby cutting expenses short. In what follows, the scale of spending or the price paid by taxpayers and other dangers of static minimum wage will receive deep coverage. They will testify to it being necessary to raise the salary bar if only to relieve social programs along with whomever replenishes them of pressure. Eidelson (2013) suggested that managers from the biggest and the most profitable of corporations had taken to urging their workforce to have public aid granted to them so that they will improve their monthly income (as cite in Cooper, 2014). People engaged in the fast-food industry are much less likely to receive health benefits than those employed in other sectors are. A meagre 13% of the so-called core front-line fast food employees obtain such benefits from their employers, as against 59% of employees in general (Allegretto et al., 2013). Worse, Berkeley Labor Center (2013) noted that, in the fast-food industry, around 44% of employees received minimal salaries or below that (as cited in Johnson, 2013).
It stands to reason that industry workers are in want of helping at this juncture. As matters are now, 52% of fast-food workers receive assistance from public programs, such as Food Stamps (Johnson, 2013). The analysis of Temporary Assistance for Needy Families, the Earned Income Tax Credit, food stamps, and Medicaid with regard to fast-food workforce and their households showed that the combined cost of the four programs stood at 243 billion dollars a year in the years between 2007 and 2011 (Allegretto et al., 2013). Jacobs, Perry, and MacGilvary (2015) put the annual amount of tax dollars required by programs supporting working families at 152.8 billion dollars. The cost of aid for front-line industry employees was equal to 7 billion dollars per year (Allegretto et al., 2013). As found by Berkeley Labor Center (2013), 1 billion goes into Food Stamps aid (as cited in Johnson, 2013). Increasing the rate of the minimal salary will reduce the need for such programs along with costs it requires. When it will, plenty of taxpayers will sigh with relief (Johnson, 2013). Based on the source, taxpayers will breathe freely, and breathe freely they will. The National Employment Law Project (n.d.) stated that the shortage of benefits and low wages at 10 biggest American fast-food brands translates into 3.8 billion dollars in additional taxes. What McDonalds costs those paying taxes is 1.2 billion dollars on a yearly basis (as cited in Johnson, 2013). Jacobs, Perry, and MacGilvary (2015) confirmed that taxpayers bore a considerable share of hidden costs of low-salary work in the USA.
American residents oftentimes do need supporting. However, this is not to suggest that people receiving the funds cannot dispense with the government. Quite the reverse, many could live well without Pell grant, Social Security check or crop subsidy. Washington was establishing a huge culture of dependency through the American social welfare programs, and the number of people willing to receive support is on the perennial rise. If the USA flourishes, it is because it has had the culture of opportunity disdaining reliance on handouts and encouraging work (Spalding, 2012). The great number of people is allowed to subsist on state aid, the greater the will becomes for the increasing quantity of resident to be living at the expense of the state, which applies further pressure on the already overloaded system. It may be that American residents get used to being maintained by the system, which may get them discouraged from ever seeking to gain employing after they get receiving monthly payments. The eventual result will be the overloaded social support system. The opinion of Blau and Abramovitz (2010) sounds concordant with the presumption, as the researchers viewed social programs as depriving individuals of initiative, undermining self-reliance, and undercutting workers’ motivation. It is fair to presume that leaving social programs rising may only get active workers cross and distraught over having to maintain the subsistence of those who do not work although being physically able to. In separate cases, such frustration may theoretically lead to them joining the ranks of the aid recipients all the while earning untaxed shadow income. In any case, the outcome is the rising social program expenditure.
Furthermore, whoever obtains aid funds for long periods loses job skills and work habits (Spalding, 2012). Although temporary, residents on the program risk becoming permanently dependent on social program assistance, which they can by losing their professional skills. When they do, their competitive capacity on the labor market hits a low point, which can keep them unemployed due to low productive value. Therefore, they will keep putting fiscal strain on the social program until reacquiring requisite professional skills if at all. The people may remain constant dead weight pulling the system to the bottom and telling upon the social welfare and state stability. Leaving matter as they are now will only add to the social system expenses while raising the level of minimum salary will not only curb further expenditure enhanced by the currently cultivated culture of benefit dependency, but also relieve the system of its pressure. For now, the lack of such increase only multiplies the problem of social support system being overloaded.
The Real Fruits of Raising
The advocates of the increase share an understanding that the elevation will save the money of the American government in social support services. People who have their earning rise owing to the wage hike will be more unlikely to require and seek welfare benefits (National Center for Policy Analysis, 2014). Raising the level of the minimum salary seems to have already proved itself useful, and the eventual benefits are too compelling for them to go ignored. Interestingly, the Los Angeles authorities have more sense than to ignore the benefits the rate elevation has to offer. According to Palta (2015), the city council has legally confirmed its desire to increase the minimum wage to 15 dollars before 2020 in a move that will minimize dependence on social safety net institutions. UC Berkeley scholars have considered the utility of the move in retrospect only to come a number of convincing conclusions. Food stamp benefits becomes inversely proportional to an increase in the minimum salary. As the salary increases by a dollar, the value of food stamps received falls by 30%. Increasing the rate of the salary by 10% leads state spending on food stamps to fall by 2% (Palta, 2015). Following this logic and statistical correlation, raising the minimum wage from 10 to 15 dollars, which means it becomes one and a half times as much as it was in the pre-change period, will reduce state spending by 10%. Allocating even a tenth as less as the government does now can possibly bring palpable effects.
Wihbey (2015) stated that an increase could make some ventures axe their jobs to pay the remaining employees more than they used to previously. The Congressional Budget Office (2014) reported that raising the salary to 10.10 dollars would result in there becoming 500.000 fewer jobs than before, yet 16.5 million low-salary workers would feel their earning to increase while a 9-dollar increase will put 100.000 workers out of job in addition to improving the welfare of 7.6 million workers from the low-salary category. At the macro level, a considerable increase in the federal minimum salary is expected to have ripple effects throughout the economy, with 30% of the US workers feeling their salaries stimulated (Wihbey, 2015). Johnson (2013) agreed that elevating the level also enhances other salaries. Thus, for example, low-salaried supervisors of minimum-wage workers are sure to get an increase too (Johnson, 2013). The ripple effect will probably make itself felt sometime after the increase. Therefore, as follow from the opinion before last, between 7.6 and 16.5 million workers or as many as 30% of the workforce, as per other estimates, will stop putting pressure on social programs reducing the amount of its regular expenses. Although generating the unemployed, as employers may be made to give some of their employees the walking papers, an increase will not multiply apathy in the workforce or in the ranks of the population of the working age, which does not deduct from social program burden increasing it instead.
Sceptics may claim that the move will be of little effect due to social programs assisting the population not of the working age; however, it may not necessarily be so. Moses (2011) revealed that the disabled and the elderly constituted a large cluster of the recipient of low-income public benefit programs. An estimated 36% of households obtaining food aid under the Supplemental Nutrition Assistance Program and another 65% receive support under Medicaid as of 2008 include these two categories (Moses, 2011). It is not that raising the wage requirement will drive the program out of existence. Raising the bar will not liquidate what provides the means of life for the elderly. Rather, it will relieve the system of unnecessary burden that will keep the mechanism able to provide funds to categories that cannot maintain themselves otherwise, such as the physically handicapped or the elderly. The raising should relieve the nutrition and healthcare programs by 64% and 35% respectively.
However, the move is unlikely to render all 64% or 35% of current recipients independent on the two programs since it may meet some of their needs unmet once granted, but then again, there is no claiming that social programs, when made accessible to the family, provide them with whatever it is that they need. Therefore, raising the bar of the minimum wage will hurt low-income working families no more than social aid does. In any case, the potential of reducing the bloated social programs is enormous. Allegretto, Doussard, Graham-Squire, Jacobs, Thompson, and Thompson (2013) suggested that working families receive what is close to 63% of all public benefits. Around 73% of enrollees in the key US public support programs are working family members. An estimated 74%, 61%, 36%, and 32% of poor working families use Educational Improvement Tax Credit Program, Medicaid/The Children’s Health Insurance Program, The Supplemental Nutrition Assistance Program, and Temporary Assistance for Needy Families in that order (Jacobs, Perry, and MacGilvary, 2015). The Economic Policy Institute (2014) noted that government savings would run into billions after the salary bar being raised. Such savings are worth funneling into other social safety net programs that remain underfunded with an aim of reducing poverty rather than cutting the social program budgets (as cited in Short, 2014). It does not matter how the country will decide to handle the savings; what does is that introducing the change will be a money-saver.
There are researchers claiming the effect of the minimal rate elevation to be insignificant. The Economic Policy Institute (n.d.) noted that an increase to 10.10 dollars an hour would reduce the 200 billion dollars’ worth of aid budget expenditure by 7.6 billion dollars (as cited in National Center for Policy Analysis, 2014). It may rise to 15 dollars as often requested by people. Kasperkevic and Cohen (2016) agreed that people throughout the USA were clamoring for the rise of their salaries to 15 dollars an hour. Around 300 cities across the USA have yet to achieve the minimum salary increase despite New York and California having fought a winning battle, with the authorities set to introduce the change before 2022 (Kasperkevic and Cohen, 2016). Under the universal 15-dollar increase scenario, the amount of savings will rise to over 11 billion, which will be 5% of the overall aid budget claimed to be 200 billion dollars. Even given the figures provided by rate elevation sceptics, the social program expenditure still goes down. To paraphrase an old adage, it may be said that a cent saved will be a cent earned.
Conclusion
The scope of the American social dependence on aid programs, such as Social Security, Temporary Assistance for Needy Families, and Medicaid, to name but three, is enormous, which cannot but look disturbing, for potential implications are highly negative. Taxpayers bear the enormous financial burden, and employers representing private capital seem to take advantage of social programs support to assign low salaries to their talents. The whole situation only cultivates the culture of reliance of social aid, which multiplies the number of those seeking to receive state funds. Of course, some do need living provided, yet others may do well without state money. Plenty of those working may follow in the footsteps of programs’ participants abandoning jobs to lay hands on aid funds. Money recipients may lose their professional skills, which deducts from their labor market value. They may never leave the category of those dependent on state assistance as a result. Thus, the federal minimum wage does little other than generate the army of social aid recipients leading the budget to continue rising. Elevating the minimum salary seems a variable solution, as it analysts hope will relieve financial burden of social programs that look overloaded. Billions of dollars are possible to save given the change. The authorities of New York and California already promised to introduce the increase in the years to come. The elevation of the minimal level will relocate the burden from the shoulders of the state and place it where it belongs, which is on the shoulders of employers, such as big business corporations.
References
Allegretto, S., Doussard, M., Graham-Squire, D., Jacobs, K., Thompson, D., and Thompson J. (2013, October 15). Fast food, poverty wages. The public cost of low-wage jobs in the fast-food industry. Los Angeles, California: UC Berkeley Labor Center. Retrieved from: http://laborcenter.berkeley.edu/pdf/2013/fast_food_poverty_wages.pdf
Blau, J., and Abramovitz, M. (2010). The dynamics of social welfare policy. Oxford University Press. Retrieved from: https://books.google.com.ua/books?id=9c1MAgAAQBAJ&pg=PA150&dq=over+reliance+of+social+programs+weakens+the+state&hl=uk&sa=X&redir_esc=y#v=onepage&q=over%20reliance%20of%20social%20programs%20weakens%20the%20state&f=false
Cooper, D. (2014, October 16). Raisin the federal minimum wage to $10.00 would save safety net programs billions and help ensure businesses are doing their fair share. Economic Policy Institute. Retrieved from: http://www.epi.org/publication/safety-net-savings-from-raising-minimum-wage/
Jacobs, K., Perry, I., and MacGilvary, J. (2015, April 13). Low wage cost US taxpayers 152.8 billion each year in public support for working families. UC Berkeley Labor Center. Retrieved from: http://laborcenter.berkeley.edu/the-high-public-cost-of-low-wages/
Johnson, D. (2013, December 3). Want to cut food stamp spending? Raise the minimum wage. Campaign for America’s Future. Retrieved from: https://ourfuture.org/20131203/raising-the-minimum-wage-cuts-food-stamp-and-other-government-spending
Kasperkevic, J., and Cohen, R. (2016, April 14). Fight for $15 protesters across US demand living wage in day of action. The Guardian. Retrieved from: http://www.theguardian.com/us-news/2016/apr/14/fight-for-15-protests-fair-minimum-wage
Lessley, S. (2016, April 4). Is California’s new minimum wage a boon for workers or a financial disaster for the state? Los Angeles Times. Retrieved from: http://www.latimes.com/opinion/readersreact/la-le-minimum-wage-15-big-disaster-20160404-story.html
Moses, J. (2011, December 16). The facts about Americans who receive public benefits. Misperceptions about poverty in our country complicate effective policymaking. Center for American Progress. Retrieved from: https://www.americanprogress.org/issues/economy/report/2011/12/16/10767/the-facts-about-americans-who-receive-public-benefits/
National Center for Policy Analysis. (2014, December 5). Would raising the minimum wage reduce welfare spending? NCPA. Retrieved from: http://www.ncpa.org/sub/dpd/index.php?Article_ID=25140
Palta, R. (2015, June 1). LA’s higher minimum wage could reduce reliance on social programs, study finds. KPCC. Retrieved from: http://www.scpr.org/news/2015/06/01/52067/minimum-wage-increase-could-impact-social-programs/
Short, K. (2014, October 16). $10.10 minimum wage would save the US government $7.6 billion a year. Huff Post Business. Retrieved from: http://www.huffingtonpost.com/2014/10/16/minimum-wage-public-assis_n_5992458.html
Spalding, M. (2012, September 21). Why the US has a culture of dependency. CNN. Retrieved from: http://edition.cnn.com/2012/09/21/opinion/spalding-welfare-state-dependency/
Wihbey, J. (2015, October 19). Effects of raising the minimum wage: Research and key lessons. Journalist’s Resource. Retrieved from: http://journalistsresource.org/studies/economics/inequality/the-effects-of-raising-the-minimum-wage
