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  • Raising the minimum wage to $10.10 would save the US Government $7.6 Billion

    The value of the minimum wage has been so severely eroded by inflation that businesses today are paying minimum wage workers 25 percent less than they were in the 1960s. Policymakers’ failure to raise the wage floor has contributed to decades-long wage stagnation and caused an increasing number of full-time workers to turn to public assistance programs to make ends meet.

    While Gov. Paul LePage of Maine relentlessly trys to cut back on assistance to low wage earners he fails to understand how raising the minimum wage could to that job for him, while giving workers a stronger sense of well being.

    In Raising the Federal Minimum Wage to $10.10 Would Save Safety Net Programs Billions and Help Ensure Businesses Are Doing Their Fair Share, economic analyst David Cooper finds that if the minimum wage were raised to $10.10 an hour, 1.7 million Americans would no longer rely on government assistance. This would reduce government spending on current income-support programs by more than $7.6 billion per year, allowing this money to be re-purposed into either new programs or expansions of existing programs to fight poverty. The public saves 24 cents for every additional dollar paid by employers to workers under a minimum wage increase to $10.10.

    “Essentially, low-wage employers are being subsidized by the taxpayer. Prices are going up, but paychecks are not, and taxpayers are making up the difference,” said Cooper. “We’ve long known that raising the minimum wage would help millions of workers and give the economy a boost—now we know it’s a winning idea for taxpayers, too.”

    Cooper examines workers who receive benefits from at least one of the seven primary means-tested public assistance programs: the Earned Income Tax Credit (EITC); the Supplemental Nutrition Assistance Program (SNAP), also known as food stamps; the Low Income Home Energy Assistance Program (LIHEAP); the Supplemental Nutrition Program for Women, Infants, and Children (WIC); the Section 8 Housing Choice Voucher program; Medicaid; and the Temporary Assistance for Needy Families program (TANF) or equivalent state and/or local cash assistance programs. Approximately half of workers in the bottom 20 percent of wage earners rely on at least one public assistance program.

    For millions of Americans struggling to make ends meet, policies to boost incomes should always be a top priority. Yet the way we structure that boost—whether it is the result of higher wages, or of increased government assistance—is critical to how we define the social contract in America. Taxpayer-funded public assistance programs are vital components of a safety net that protects millions of families from undue material hardship, and if anything, these programs are in need of expansion. Many of the individuals and families who rely on public assistance would benefit greatly from increased investment in these programs—such as enacting the Medicaid expansion under the Affordable Care Act in all states, expanding EITC eligibility to childless adults, and increasing benefit amounts for food stamp recipients. Indeed, given the extraordinarily high rates of poverty and child poverty that persist in the wake of the Great Recession, there is every reason to think that current levels of spending on these programs are woefully inadequate to truly combat poverty and lift living standards for program participants.


    Yet as American businesses achieve record profit levels, we have to question whether it is appropriate to rely more and more heavily on safety net programs as the sole policy tool to raise working individuals’ incomes, or whether we should expect more from the businesses that employ them.


    Raising the minimum wage would lift incomes for millions of working Americans and their families, while providing budgetary savings in means-tested public assistance programs—savings that should be repurposed into either new programs or expansions of existing programs to further leverage the poverty-fighting impact of this spending. Raising the minimum wage is one simple and long-overdue step toward rebalancing the social contract so that the private and public sectors are more equal participants in improving living standards for American workers.


    —  David Cooper is an economic analyst with the Economic Policy Institute.