Does Minimum Wage Create Underemployment

by Bill on December 6, 2013

Minimum Wage Creates Underearning

Minimum wage being news often isn’t new. The news now points to how people on minimum wage are being supported by government assistance. Does this mean that the minimum wage creates underemployment?

December 6, 2013 marks a highlight in this year’s debate over minimum wage. Thousands of fast food workers walk the streets in protest over requests for a standard living wage across the country.

They are seeking an increase to $15 per hour. President Obama is aiming at $10 per hour.

The strikes and rallies stretched across the country from cities such as Pittsburgh and Los Angeles, through Iowa and other suburban states. Labor groups helped organize the campaign with the backing of the Service Employees International Union.

Today’s fast-food worker is typically over 20, often raising a child, and 68 percent are the primary wage earners in their families, according to a report by the University of Illinois and the University of California, Berkeley.

A story from the Atlantic Magazine  published in October shed light on how this year’s struggle may have begun. A video published by labor groups detailing a McDonald’s worker seeking help and being supplied with information on how to apply for federal assistance via the company helpline, was supplied to the magazine.

According to a joint report created by the University of Illinois and the University of California at Berkley 52 percent of fast food workers utilize some form of public assistance. This is verified using information from both public benefit programs and the latest census.

It is estimated that $7 billion annually is provided in federal assistance of some type to fast food workers. The fast food industry contends that cost cannot be absorbed by them because of their low profit margins per restaurant.

Low Wages Creating Welfare Class Among Bank Employees

An article in the Washington Post business section brings to light a large discrepancy between bank profits and what some employees earn. According to the Committee for Better Banks, via research from UC Berkley, millions of dollars are spent on some form of public assistance for bank tellers and their families.

Between food stamps, Earned Income Tax credits, Medicaid and the Children’s Health Program close to $900 million annually are paid out to bank tellers to supplement their income. The study provides New York City as an example where 39 percent of bank tellers need a form of public assistance.

Bank profits generated $141.3 billion in 2012, according to SNL Financial. In comparison, bank tellers earn a median yearly income of $24,100 according to the U.S. Department of Labor. This equates to bank tellers earning a gross hourly wage of $11.59 before taxes.

According to a poll conducted for the report, the most common issues among bank tellers are the lack of overtime pay, lack of holiday pay, and the pressure to maintain quotas.

The banking industry contends it is still dealing with effects from the recession, along with unfavorable interest rates and new regulations lowering profit margins.

The difference between minimum wage and living wage requires someone to ask why human life seems to be so little valued. Minimum wage creates underemployment.

Here’s an idea to up the minimum wage; give all the employees stock in the company for free. Then at least they know where the profits are and that they might see some of it.

What’s your take on this?

William Swan, writer

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Anthony December 7, 2013 at 4:24 pm

Bill, good article but one thing I would like to know. These low paid people who have bank jobs, fast food jobs, are they single parents of multiple children? I would suspect they are and they have spent time having kids in and out of the work force. You dont qualify for assistance without the additional burden of children that you really are not ready to have!


Anthony D

Bill December 9, 2013 at 3:56 pm

Hey Anthony,

Yes, I agree that many people working low-wage jobs have kids. But where I disagree is the fact that people with money are the ones capable of having children. I have known many parents working dollar stores, fast food and Walmart who can’t find other work due to schedules and/or immediate needs. Yes there are single parents out there; but there are also families with two parents struggling with two minimum wage jobs.

And to answer your comment at the end concerning qualifying for assistance without children; from experience, no this is not the case. Most people on minimum wage, especially those who can only find under 40 hours work per week, usually qualify for some form of aid. Most large retailers (Walmart, Dollar General) don’t schedule over 35 hours per week per person on purpose. That reason alone can bring a low-income worker within welfare guidelines depending on the state they live in.

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