Subsidizing Low Wages in Wisconsin

You'll often hear complaints about poor people using social service programs for their livelihoods, which usually alludes to images of welfare kings and queens sitting at home doing nothing but collecting a state check.

But the reality of the situation -- as is the case with most stereotypes -- couldn't be further from the perception.

A recent report by the Center on Wisconsin Strategy (COWS) shows that on average between 2001 and 2004, there were 178,133 working families who received annual aide from at least one of the largest five social service programs in Wisconsin -- health care, food stamps, earned income tax credits, Wisconsin Works, and subsidized child care.

Out of these working families, nearly 80 percent (140,423) had at least one member working full-time for at least 50 weeks out of the year. And 12 percent of those families (16,571) had more than one full-time wage earner.

In total, the 178,133 working families ran up an annual tab of over $837 million on those five state programs on average between 2001 and 2004. The families with full time wage earners accounted for more than $580 million of that total.

The program that accounts for the largest share of the tab is BadgerCare, which provides health care to low income families in Wisconsin. The total average annual cost for BadgerCare between 2001 and 2004 was just over $805 million. Out of that total, working families accounted for over 1/3 of the cost ($315 million).

As the COWS report explains: "Clearly, year-round work is not sufficient to secure employer-provided health insurance and BadgerCare is becoming not only a safety net for the unemployed, but a key support for some year-round working families as well."

And the key word in that is "becoming," since it wasn't always the case in Wisconsin.

According to the COWS report, there has been a significant drop in employer provided health insurance coverage in Wisconsin, just as there has been throughout the nation. While close to 65 percent of private employers in the state provided health insurance to employees between 1985 and the late 1990s, the number began to drop sharply to 57 percent by 2004.

Not surprisingly, this drop in private employer health insurance has coincided with an increase in the number of working families who rely on publicly funded health insurance programs like BadgerCare.

Here's what the COWS report has to say about why:

What is going on? In part, businesses are finding ways to compete in key sectors and provide jobs without the benefits that firms have traditionally offered. These players, carrying lower labor costs, can undercut prices of the other firms. Those providing insurance then have less incentive to do so, and may even need to shed insurance to stay competitive.

Some might say that this is simply the market at work: low costs are winning out. But the firms are not generating these cost savings through efficiency. Rather, they are generating the savings by externalizing the cost of health insurance; by not offering the benefit, they have found a way to pass the cost of health care back to the community. And the community, in fact, picks up this cost -- through our Medicaid budget, through community and public health systems, in food pantries and shelters.

This tells a good portion of the why question, but it actually doesn't get at it all. After all, health care costs are straining employers -- public and private -- who aren't a part of the same type of low cost drive as industries such as retail (which is the second-largest employer of working families on social service programs in Wisconsin, according to the COWS report).

But what the COWS report nails is the point that in addition to fundamental health care reform that lowers costs across the board, an eye also needs to be placed on addressing the low wages that have been a staple of supposedly growing economy.

Indeed, total income in the United States has continued to grow over the past thirty years – 27 percent, in fact, since 1979. But, according to a recent analysis by University of California – Santa Cruz professor G. William Domhoff, the top 1 percent has seen its share of total income increase by over 7 percent since 1982, while the next 19 percent remained fairly steady, and the bottom 80 percent watched its share drop by nearly 7 percent.

Citing a November 2006 study by the New York Times, Dumhoff writes: “Although overall income has grown by 27% since 1979, 33% of the gains went to the top 1%. Meanwhile, the bottom 60% were making less: about 95 cents for each dollar they made in 1979. The next 20% - those between the 60th and 80th rungs of the income ladder -- made $1.02 for each dollar they earned in 1979.”

An even starker telling of the story comes from Dumhoff’s examination of average CEO pay in relation to average manufacturer worker pay over the past 45 years. While the ratio between the two remained fairly steady from 1960 to 1980 at about 50:1, it’s jumped to 411:1 in the last 25 years.

So, it seems clear that the wealth exists in this nation to provide working families living wages that include necessities like affordable access to health care. It’s about time a reasonable distribution of that wealth becomes a matter of not just economics, but also patriotism.

UPDATE: Also recommended is a new COWS report on TIFs. You can read more on that report in One Wisconsin Now's Forward Report from today.