Op-ed: Taxpayers Must Know how Much They Subsidize Low-Wage Companies

Income-inequality and the minimum wage have been topics of much debate in New York State and throughout the country. While this debate has made it clear that stagnant wages have left millions of New Yorkers stuck in a perpetual cycle of poverty to pad the profits of companies, less attention has been placed on how the status quo is also causing taxpayers a substantial financial burden.

In an effort to shed light on businesses and industries that are notoriously paying their employees meager wages and relying on the public to make up the difference, we have introduced the Public Assistance Disclosure Act in the New York State legislature. This bill would simply require the New York State Department of Labor to annually identify those businesses operating in the state that have more than 50 employees receiving some forms of public assistance. Next year, California will be implementing a similar provision for businesses operating in that state, and we should do the same here.

While some might think that this proposal is “thoughtless” or simply an attempt to score political points by “jumping on the income-inequality bandwagon,” the fact of the matter is that New York taxpayers are subsidizing hugely profitable corporations that are intentionally taking advantage of public support systems to keep their wages low. This transparency would ideally spark action by said companies to pay higher wages to their employees instead of having them rely on public assistance to make ends meet.

We believe the New York taxpayer has the right to know where and how every dollar of our taxes is spent, and it is our obligation as policymakers to pass legislation that provides them with that information.

The scope of the problem was recently highlighted when the University of California Berkeley’s Center for Labor Research and Education published a report analyzing state and federal spending for Medicaid/Children’s Health Insurance Program, Temporary Assistance for Needy Families (TANF), the Supplemental Nutrition Assistance Program (SNAP) and the Earned Income Tax Credit (EITC). The report found that the American taxpayer in general, and the New York State taxpayer in particular, are subsidizing companies that pay low wages to its employees to an alarming degree.

Between 2009 and 2011, the federal and state governments spent about $153 billion per year combined on these four programs. In all, 56 percent of state and federal spending on public assistance went to working families. In New York alone, $3.3 billion of public assistance went to working families.

While the struggle to increase wages in New York State continues, our bill would add much-needed transparency to how our taxes are spent. We intentionally do not identify small mom and pop businesses, which are the backbone of our economy. Most of these enterprises don’t have 50 employees, let alone 50 on public assistance. The law would help identify industries and larger companies in our state that use public assistance at an alarming rate to subsidize the cost of their workforce and should be seen as a complement to Governor Cuomo’s implementation of a Wage Board to examine wages in the fast-food industry.

The reasons behind these massive public subsidies and our bill are clear: The American economy no longer works for everyone. Nearly half of all New York City residents live at or near the poverty line. New York State has the second highest income disparity in the country – second only to Washington, D.C. Since 1983, 75 percent of all wealth in the United States accrued to the richest 5 percent of Americans, while the bottom 80 percent actually lost ground. Wages for the average worker have been stagnant for decades despite significant increases in productivity, and fewer businesses are providing health insurance for their employees.

Social programs like Medicaid, food stamps and the Earned Income Tax Credit were put in place for those who slipped through the cracks in our market economy. They were never designed to perpetually subsidize corporations that do not provide a living wage or health care. The problem is not identifying the types of public assistance we choose to include in our legislation. The problem is that our safety net is strained because we currently have an economy that doesn’t work for all.

We welcome a debate about these realities, but let’s be clear: our legislation seeks to provide information to resolve the crisis. It is not the cause of it.

Senator Gustavo Rivera and Assemblyman Michael Blake are Bronx Democrats.