Brennan Center for Justice

Cindy Richards

Higher wages can save state money

September 6, 2006

BY CINDY RICHARDS

‘Life would be great if we didn’t have to work,” my husband announced on Labor Day as we

chilled on the front porch, doing nothing more strenuous than watch the rain.

But, alas, we like to eat and since we haven’t won the lottery yet, we have to work. Fortunately,

we work at jobs that pay us wages sufficient to support our family and still allow us to enjoy a lazy

day off now and then.

That is not the case for 475,000 families in Illinois. Despite having members who work full time,

those families make so little money that not only can they ill afford an unpaid day off, they can’t

even provide the basic necessities of life without some help from us taxpayers. We supply food

stamps, child care subsidies, free health care and direct cash payments to supplement their

meager checks. 

In 90 percent of the cases, those subsidies are going to families in which the workers toil 70 or

more hours a week year-round. Those statistics are outlined in a study released Tuesday by the

Center for Urban Economic Development at the University of Illinois at Chicago and the Center

for Labor Education and Research at the University of California, Berkeley.

The study tells us something we taxpayers have long suspected: Corporations are playing us for

fools. Our largess allows companies to pay workers less and offer fewer benefits because we

pick up the slack. It gives a whole new meaning to the idea of corporate welfare.

The question now is: What are we going to do with this news?

It seems there are two possible answers. One says that we stop paying the subsidies and tell the

working folks they’re on their own. Certainly, some people in political power would opt for that.

But the other says we have implicitly agreed to support this corporate welfare with our tax dollars

and our consumer dollars. When we shop at Wal-Mart, drawn there by the low prices, we are

saying that we’re willing to support those employees through our tax dollars instead. 

People work to support their families. Employers can help them the honest way—by paying them

a living wage—or the dishonest way—by foisting their needs off on taxpayers.

This study comes at a fortuitous time. Mayor Daley has just one more week to decide whether to

veto a City Council-passed ordinance that would require huge employers—the “big-box” retailers

such as Home Depot and Wal-Mart that report $1 billion or more in annual sales—to pay workers

at least $10 an hour and provide $3 an hour in benefits by July 2010. 

While it’s still not clear what the mayor will do, this study shows that a $10-an-hour minimum

wage and a few benefits would take some pressure off taxpayers. The aptly named study, “The

Hidden Public Cost of Low-Wage Work in Illinois,” found that taxpayers funded an annual

average of $2.2 billion in government subsidies for public services for low-wage full-time workers

during 2001-2004. 

That is the cost of just six state-funded programs—the Earned Income Tax Credit, Medicaid,

child care subsidies, food stamps, the children’s health insurance program called KidCare and

Temporary Assistance for Needy Families. The study did not look at the cost of support programs

provided by the city or federal governments or private charities, which certainly would push the

subsidy total to well over $2.2 billion.

Companies with more than 1,000 employees—the same ones that like to shake down local

politicians for tax subsidies and other incentives when deciding whether to build a store in one

town or another—accounted for 33 percent of the full-time workers receiving public assistance, a

total of $715 million in annual state spending. 

As the study’s authors, Nik Theodore at UIC and Marc Doussard at Berkeley, noted, these big

companies are in a position to offer affordable health care and have more options for covering the

higher employee costs than smaller firms do. 

Forcing them to pay their workers a living wage seems like a reasonable thing to do. If it gives the

cash-strapped state budget an extra $700 million or so, that’s just a bonus.