A Slightly Higher Minimum Wage Could Save Taxpayers Billions

February 5th 2016

One of the most striking consequences of low-wage work — beyond the hardship that it creates for workers — is the bill for taxpayers.

But a substantial portion of that cost — an estimated $17 billion per year — could be reclaimed with small, incremental increases to the minimum wage, new research found.

Boosting the minimum wage over the next four years to $12 per hour "would unambiguously reduce net spending on public assistance," and boost the government's ability to address economically disadvantaged populations, according to a report by the Economic Policy Institute released on Wednesday.

"When employers pay wages so low that working people have to turn to public assistance to make ends meet, they're effectively receiving a subsidy from taxpayers," the report's author, David Cooper, said in a statement. "Policies that raise wages would free up resources that could then be used to strengthen anti-poverty programs or make investments in any number of other policy priorities."

Minimum wagePaulCowan

Research into the public costs of low-wage work has produced some staggering figures tallying the public cost of assistance programs used by low-wage workers. A 2015 study from the University of California, Berkeley found that low-wage jobs cost taxpayers an estimated $127.8 billion each year at the federal level to support programs for the families of workers and $25 billion each year at the state level.

One reason those costs are so high is the number of working adults enrolled in government assistance programs. More than two-thirds of all public assistance benefits are used by "non-elderly" families in which at least one adult is working full-time, according to the EPI report.

But raising the wage by even small amounts for workers in the bottom three earning brackets, which the report describes as "those who earn up to $12.16 an hour," could reduce the amount taxpayers spend on those programs. Per the report:

"For every $1 that wages rise among workers in the bottom three wage deciles, spending on government assistance programs falls by roughly $5.2 billion. This estimate is conservative, as it does not include the value of Medicaid benefits."

The movement to raise the minimum wage has garnered a historic amount of attention in recent years, with low-wage workers nationwide calling for wage hikes and a $15 per hour minimum. Some 2016 presidential candidates have also adopted the movement as a central platform issue. In November, Democratic leader Hillary Clinton proposed a $12 minimum wage at the federal level. Vermont Sen. Bernie Sanders has called for a $15 minimum wage.

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