Berkeley: 1 in 3 US Manufacturing Workers Get Public Aid

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Between 2009 and 2013, the federal government and the states spent $10.2 billion annually on public safety net programs for 34% of frontline manufacturing production workers and their families who were enrolled in the safety net programs. A full 50% of workers hired through a staffing agency were also enrolled in a public safety net program like Medicaid, Children’s Health Insurance Program (CHIP) or SNAP (food stamps). That rate is similar to the rate at which fast-food service workers utilize safety net programs.

In a report published in November 2014 by the National Employment Law Project, the researchers said that manufacturing production wages in the United States now rank in the bottom half of all the country’s jobs. A typical manufacturing production worker in 2013 earned 7.7% less than the median wage for all occupations and the median wage for production workers in the manufacturing industry was $15.66, and 25% of these workers earned $11.91 or less.

Researchers at the University of California at Berkeley Labor Center have just published a report on the impact of increased trade with low-wage companies on both wages and use of safety net programs in the United States. The research looked specifically at jobs held by frontline manufacturing production workers who worked at least 10 hours a week for at least 27 weeks a year in the manufacturing industry either as regular employees or contract workers supplied through staffing agencies.

Among the key findings of the Labor Center’s report is the high utilization rates of safety net usage by manufacturing production workers is primarily the result of low wages, not inadequate work hours. Of the 10 states with the highest participation rates in public safety net programs, eight are in America’s South. The other two are New York and California.

Since 1989, the number of manufacturing production workers hired through staffing agencies has risen from about 1% of all production workers to 9%, or about 580,000 jobs in 2014. This is important because staffing agency wages averaged $12.05 in 2014, compared with $16.56 for direct employees.

The program with the largest number of enrollees is the earned income tax credit (EITC) with 1.6 million, followed Medicaid/CHIP with 955,000 enrollees and 878,000 food stamp recipients. Direct payments in the Temporary Assistance for Needy Families (TANF) program went to just 67,000 enrollees and cost $190 million, according to the Labor Center report. Of the $10.2 billion annual total $4.1 billion is attributed to the EITC and nearly $3.8 million to Medicaid and CHIP.

The largest subgroup of manufacturing production workers is assemblers and fabricators, comprising about 308,000 of all jobs filled by staffing agencies. The median wage for these workers is $10.88 an hour, compared with $15.03 for direct employees.

The 10 states with the largest percentage of production workers participating in public safety net programs, along with the total cost for EITC, Medicaid/CHIP, food stamps and TANF payments are:

  1. Mississippi: 59%, at a cost of $218 million
  2. Georgia: 47%, at a cost of $427 million
  3. California: 45%, at a cost of $1.259 billion
  4. Texas: 42%, at a cost of $881 billion
  5. Arkansas: 41%, at a cost of $156 million
  6. Tennessee: 40%, at a cost of $400 million
  7. Alabama: 39%, at a cost of $269 million
  8. New York: 39%, at a cost of $507 million
  9. North Carolina: 39%, at a cost of $424 million
  10. South Carolina: 39%, at a cost of $194 million

The Labor Center study concludes:

Historically, blue collar jobs in manufacturing provided opportunities for workers without a college education to earn a decent living. For many manufacturing jobs, this is no longer true. While employment in manufacturing has started to grow again following the great recession, the new production jobs created are less likely to be union and more likely to pay low wages.

When jobs do not pay enough for workers to meet their basic needs, they rely on public assistance programs to fill the gaps. …

This public cost of low-wage work should be fully taken into account in the cost-benefit analysis of city and state subsidies. Conditioning subsidies on strong wage requirements across the workforce would reduce state and federal costs for public assistance, and allow states and local governments to better target how their tax dollars are used.