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
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
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.