UC Berkeley News
Today's news & events
News by email
For the news media
Calendar of events
Top stories
Untitled Document
Press Release

UC Berkeley Press Release

UC Berkeley study documents taxpayer costs to help working poor

– Two million California families in which one or more family members works rely on publicly funded safety net programs - at a cost to taxpayers of $10 billion a year, according to a University of California, Berkeley, study being released today (Thursday, May 20).

"Low-wage workers are relying on public assistance to make ends meet. Low-wage employers are essentially shifting their labor costs onto the public," said report lead author Carol Zabin, research director of the UC Berkeley Center for Labor Research and Education.

"California's 'new economy' has produced an hourglass pattern of job distribution, fostering growth of high- and low-wage jobs, but little in between," she said.

The researchers report that small improvements in wages could move many families off public programs. If all workers in the state earned a minimum of $8 an hour, assistance program costs would be reduced by $2.7 billion, the report concludes. And an increase to $14 per hour would reduce expenditures by $5.6 billion. Likewise, Zabin said, if jobs included health benefits, even at current wage levels, $2.1 billion in expenditures could be put to other uses.

The report, "The Hidden Public Costs of Low-Wage Jobs in California," was written by Zabin and fellow center researchers Arindrajit Dube and Ken Jacobs for the Oakland-based National Economic Development & Law Center (NEDLC). They analyzed the participation in 2002 of working families in the 10 largest statewide safety net programs, including Medi-Cal, CalWorks, the federal Earned Income Tax Credit, food stamps and housing vouchers.

The report found:
* Half of all public assistance dollars dispersed based on recipient income qualifications are going to families who are working. In 2002, almost half - $10.1 billion - of public assistance dollars in the state went to families in which at least one person worked at least 45 weeks per year.

* Most workers on public assistance earn close to the minimum wage, and more than $5 billion in support goes to families of workers earning below $8 an hour.

* More than 75 percent of the benefits to working families went to households in which all earners worked full-time.

* More than one of four workers in working families that receive assistance works for a business with 1,000 or more employees.

* Public assistance to working families is distributed disproportionately to those working in a few industry sectors. Workers in the retail industry received about $2 billion in public assistance, more than twice the amount received by workers in any other jobs sector. Other top sectors included business services and construction.

* Seventy-one percent of workers receiving public assistance are employed in sectors of the economy that do not face significant international or out-of-state competition, including retail, transportation, business services such as janitorial and security work, and construction.

* More than half of the working family members receiving assistance-1.1 million-live in the greater Los Angeles area.

"When wages are kept low, taxpayers make up the difference," said Art Pulaski, secretary-treasurer of the California Labor Federation. "We need better paying jobs with benefits. It's good for our families, our communities and taxpayers."

"We need a long-term vision for our state, not just short-term cuts and Band-Aids," said State Sen. Richard Alarcón (D-Los Angeles).

"The answer is to expand the middle class by creating good jobs and investing in training," added Alarcón, author of Senate Bill 1639. That bill would expand access to higher education for low-income people, including those on public assistance.

"California doesn't have a lot of extra money right now, so we need to invest our public dollars with an eye to the future," said report sponsor Tse Ming Tam of the National Economic Development & Law Center. "The stability of our economy requires that we help low-wage workers move toward higher skills and earnings, and not just use public subsidies to perpetuate a low-wage economy."

The report was commissioned by NEDLC with support from the William and Flora Hewlett Foundation. It is the second in a series of white papers informing policy solutions to working poverty in California.

The report did not include data on local programs such as general assistance or county children's health programs because necessary data was not available, researchers said.

"Thus, our estimates of taxpayer costs from inadequate wages and employer benefits are lower than their true magnitude," the researchers write in the report. "Our estimate of the subsidies that currently support working families in California is ... quite conservative."