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UC Berkeley faculty present research brief on high public costs of low wages in US

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APRIL 14, 2015

The UC Berkeley Center for Labor Research and Education released a research brief this month that presents the high public costs that low wages bring, suggesting higher wages and increases in employer-provided health insurance as a way of lowering these costs.

The brief, authored by Ken Jacobs, Ian Perry and Jenifer MacGillvary, aimed to examine the amount spent each year on four public assistance programs. It reveals the federal government spent, annually, $226.8 billion — in 2013 dollars — on the four programs from 2009 to 2011.

Fifty-six percent of the spending went to working families, which are defined by the report as “those that have at least one family member who works 27 or more weeks per year and 10 or more hours per week.” The annual federal cost for working families in California is $13,736 million, 58 percent of the state’s cost.

The four programs examined were Medicaid and the Children’s Health Insurance Program, Temporary Assistance for Needy Families, Earned Income Tax Credit and the Supplemental Nutrition Assistance Program.

Raising the incomes of workers, according to the brief, would lower public assistance costs and allow the government to better target how tax dollars are used.

According to Perry, a research and data analyst at the center, the report does not necessarily provide an opinion as to the appropriate amount of spending on public assistance programs.

“The extent of our role is to weigh how all the factors come together,” Perry said. “We’re just showing people the amount of money from taxpayers that go to people who are working.”

Perry indicated that the eligibility for some assistance programs such as TANF is based on income levels.

The center’s publications and production coordinator, MacGillvary, further explained that when low-wage workers get a pay increase, they are more likely to put money back into the economy — as opposed to higher-wage earners, who might be more likely to save the extra money.

MacGillvary felt the report is “very relevant” to the city of Berkeley.

In October, the city of Berkeley officially instated a $10-per-hour minimum wage, which surpassed state and federal minimums. An $11 minimum wage will go into effect Oct. 1 of this year, and a $12.53 minimum wage will begin Oct. 1, 2016.

Prior to the vote to raise the wage, some Berkeley small business owners criticized the change for endangering their ability to keep their businesses afloat or keep from raising prices; meanwhile, efforts continue to raise the wage up to $15.

“There is currently a lot of movement in Berkeley regarding minimum wage,” MacGillvary said. “And we think this study can be part of the conversation about whether there is a need to raise the minimum wage.”

Contact Jessie Qian at [email protected] and follow her on Twitter @jessieq96.

APRIL 16, 2015