The government spends $152.8 billion a year supporting working families


The government spends $US152.8 billion a year to support working families, according to a new study from researchers at the University of California-Berkeley.

In a research brief released Monday, Ken Jacobs, Ian Perry, and Jenifer MacGillvary, find that 73% of enrollees in public support programs — such as food stamps — are members of working families.

The researchers blame low wages, writing: “Real hourly wages of the median American worker were just 5% higher in 2013 than they were in 1979, while the wages of the bottom decile of earners were 5% lower in 2013 than in 1979. Trends since the early 2000s are even more pronounced. Inflation-adjusted wage growth from 2003 to 2013 was either flat or negative for the entire bottom 70% of the wage distribution.”

Between the Children’s Health Insurance Program, the Temporary Aid to Need Families program, the Earned Income Tax Credit, and food stamps (formally known as the Supplemental Nutrition Assistance Program), the federal government spent $US127.8 billion a year from 2009-2011; states spent an additional $US25 billion on these programs annually, according to the report.

The report found that 56% of federal and state-level assistance goes to working families.

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This report emerges at an interesting juncture for the economy, as the unemployment rate is currently at 5.5%, its lowest level since May 2008, though data on wage growth has shown there is still limited or tepid growth in employee wages.

Average hourly earnings for all workers rose 2.1% over the prior year in March, just outpacing inflation, while production and nonsupervisory employees saw wages grow 1.8% over last year in March.

A number of major employers, including Wal-Mart and McDonald’s, have said that they will raise wages and increase benefits such as paid time off for their hourly employees. Additionally, job openings and weekly initial claims for unemployment insurance are currently at their best levels since the early 2000s.

Whether these changes will impact spending on these government programs in coming years remains to be seen, however.

The Berkeley report argues that higher wages and employer-provided insurance would, “allow all levels of government to better target how their tax dollars are used.”

It adds:

Higher wages and increases in employer-provided health insurance would result in significant Medicaid savings that states and the federal government could apply to other programs and priorities. In the case of TANF — a block grant that includes maintenance of effort (MOE) provisions that require specified state spending — higher wages would allow states to reduce the portion of the program going to cash assistance while increasing the funding for other services such as child care, job training, and transportation assistance. Higher wages would also significantly reduce federal expenditures on the EITC and SNAP.

In his latest State of the Union address, President Obama said he would push for laws that ensure equal wages for women and increase the minimum wage.

At the start of 2015, 21 states raised their minimum wage.

Read the full report at the UC-Berkeley Labour Center here »