Wage Slaves: How Americans are Paid Less than Ever

There is a hidden cost to the everyday goods Americans purchase and consume. That hidden cost is paid in taxes that fund anti-poverty programs such as Welfare and Medicaid which are used by companies to subsidize their payrolls.

When taking into account the inflation, minimum wage workers today are actually making less than their parents a generation ago. Workers in 1968 earned $1.60 an hour which is equal to just about $9.70 an hour when adjusted for inflation.

It’s no wonder today’s generation is having such a difficult time affording basic necessities such as housing and food when wages are almost a third less than a generation ago. The lower minimum wage is leading to the subsidization of low wage workers through government programs such as Medicaid, Welfare and WIC (Women, Infants, and Children).

Those who qualify for these programs are rightfully deserving of the benefits, but it leads to the question of whether employers should pay higher wages instead of relying on government programs to effectively subsidize their payroll.

Wal-Mart, the largest private employer in the United States, is notorious for paying workers low wages and providing few benefits. Of the 1.33 million employees of Wal-Mart in the U.S., 46 percent of their children are uninsured or are on Medicaid.

A study done in 2005 by UC Berkeley’s Labor Center estimated that the children of Wal-Mart workers cost $456 million to the Medicaid program nationally. This is one company that is effectively receiving half a billion dollars in subsidies from the United States government because it cannot provide a living wage or decent benefits for its workers.

The total low wage job market most likely exceeds billions of dollars in costs to the federal government through the spending in poverty reduction programs. Every time someone purchases groceries or clothes from Wal-Mart, they can thank the taxpayers for saving them a few pennies while Wal-Mart reaps the profit.

If workers were paid what they were just a generation ago, it would go a long way in reducing the dependence on government programs.

A living wage would be preferable and would help to ensure a lower poverty rate and a guaranteed standard of living for everyone who works a full-time job. A living wage is the minimum necessary wage needed to live with necessities such as housing, food and health care.

Many argue that raising the minimum wage or introducing a living wage would hurt small business and raise unemployment since employers could not afford to pay the same amount of people more. This is a false choice that puts the needs of the wealthy above those of the poor.

A study in 1994 done by David Card and Alan Krueger observed a minimum wage change in New Jersey and contrasted that change with the static eastern Pennsylvania minimum wage. The study focused on the fast food industry and surveyed 410 different establishments after New Jersey raised its minimum wage from $4.25 to $5.05.

The study found that there was statistically no significant change in employment in New Jersey and that there was a relative increase in employment among teenagers. It also showed that minimum wage increases account for little or no change in employment.

This begs the question, why is the minimum wage so low today?

The answer lies within the powerful Washington Business lobbies such as the Chamber of Commerce in which they heavily lobby members against raising the minimum wage. Both business interests and workers are affected by minimum wage increases. Nonetheless, the workers do not have much of a voice in congress and thus their side is never heard during the debate.

When adjusted for inflation, Americans are making much less than 50 years ago. | laxfan25/photobucket.com

This issue not only affects the poor, but also affects almost every wage earner in this country, since a raise in the minimum wage would help to increase the wages of those earning well above minimum wage. Wages adjusted for inflation have been stagnant for 30 years as the incomes for the wealthy have skyrocketed.

The average CEO now makes over 475 times the average worker, compared to 29 times the average worker in 1968. It seems that as wages shrink for the working poor and middle class Americans, the higher they gets for CEO’s and executives.

It’s time to start moving towards a system in which everyone can earn a livable wage for a full day’s work, rather than a system of scraping by and only being an illness or accident away from poverty. Americans deserve more than meager wages, Americans deserve the ability to work hard and live the life they desire.

Alex Caraballo can be reached at acaraballo21@gmail.com.