Government Assistance & Minimum Wage

The Greensboro Minimum Wage Campaign is “working to increase the Greensboro minimum wage to $9.36/hour.” As a self-avowed “poverty warrior,” I agree with the mission of helping the poor. But the critical thinker in me is still a little skeptical that a 35% hike in the minimum wage is the best way to go. It sounds good, but I’m concerned that there will be unintended consequences.

After reading the summary of a Berkeley study that showed California WalMart employees were relying on government assistance programs (food stamps, taxpayer-funded healthcare, subsidized housing) to make up the difference between their low wages and the cost of living, I made this comment on a thread at Ed’s blog:

“Some individuals and families in the Food Stamp and Medicaid programs would be affected, as would some individuals and families in voucher or grant-based housing programs. When you raise income, some people will lose benefits. Some of the benefits may be offset by the rise in income, some may not. (Medicaid is a good example. If your income rises and you lose Medicaid, but you don’t have insurance, then you stand to lose much more than you gain.) I wonder if anyone has looked at how all this ties together? Will minimum wage workers who lose government food, medical and housing benefits make enough in increased income to help them, or will it hurt them? I’d like to know.”

And then Jill Williams wrote a post at the GMWC blog, in response to my comment, which said, in part:

“What I’ve found is that the requirements to receive benefits like Medicaid, Medicare, food stamps, etc. are such that recipients basically can not work a full time job… Affordable housing programs may be different.”

Actually, there are people working full-time and receiving Medicaid and food stamps. (And not just at WalMart in California. At low-paying jobs in Greensboro, too.) And there are working people in subsidized housing, as well.

MEDICAID

Medicare: A federal health insurance program for people age 65 and older and for individuals with disabilities.

Medicaid: A program sponsored by the federal government and administered by states that is intended to provide health care and health-related services to low-income individuals.

Medicaid is one of the benefits I’m most concerned about people losing, because it’s direct aid to the poor.

Here’s an example of my concern: A single mom, working for minimum wage ($6.15 per hour) with two children in the 6-18 age range, who has no other income (many women don’t receive child support) would earn $12,792 per year. That would make her children eligible for Medicaid, and the mom may be eligible, as well. Income limit in their situation is $17,170.

But if the minimum wage was raised to $9.36 per hour, mom would be earning $19,469 per year. No more Medicaid. And if she doesn’t have insurance (which she probably won’t, at a minimum wage job), the cost of health care for a family of three would likely be more than the increase in her wages.

And we can go further with the example. What if one of her children has a chronic illness? No Medicaid, no insurance, no medicine, no treatment. Child misses school, mom misses work. Mom gets fired, rent isn’t paid. What happens next?

Whether or not one would lose Medicaid benefits due to an increase in minimum wage is dependent upon household size and composition, but clearly, some people would be affected. The increase in income most likely would not offset the loss of healthcare benefits. Go here for more: Medicaid eligibility, Poverty guidelines.

(** See more about health coverage in follow-up post.**)

FOOD STAMPS

Similar to Medicaid, whether or not one would lose food stamp benefits due to an increase in minimum wage is dependent upon household size and composition, but it’s likely that some people would be affected, especially families with more children. The increase in income may offset the loss of food stamps. Go here for more: NC food stamp income limits.

SECTION 8

Subsidized housing programs, like the federal Section 8 program (HUD), have income limits, as well. In general, household income cannot exceed 50% of the metro area (source.) In our community, HUD figures median income at $48,775 (source.) Based on that number, it looks like our single mom earning $19,469 per year with the increased minimum wage would be within HUD’s income limit, so she would pay more for rent, but she wouldn’t lose her voucher. (Good news!)

There are other types of subsidized housing programs, including: income restricted (maximum upper-limit on tenant’s income); income-based sliding scale (sliding scale; absolute minimum and absolute maximum prices with low and high values; tenant income is primary factor in determining actual rent price); and median-income-based rent (restricted to tenants whose income is no more than a specific % of HUD’s Median Family Income.) Hopefully, the increase in income from a $9.36 minimum wage would offset any negative effects on tenants in these other subsidized housing programs. But I’d need some math help to say that for sure.

(It’s important to keep in mind that Medicaid and Section 8 are federal programs, so there’s no option to change the income eligibility thresholds at the local level to adjust for a new, increased local minimum wage. And please note that there are other factors, in addition to income, that are involved in determining eligibility for government assistance programs such as Medicaid, food stamps, and Section 8 housing.)

In conclusion (whew!), please understand that I am not advocating keeping the minimum wage low and using government benefits to subsidize the poor. Actually, my point is that we’re already doing that. I agree with the mission of helping the poor out of poverty through work. (Amen! That’s Biblical!) I’m just urging a little caution in the process. Let’s be sure that there’s a game plan for the folks who may lose other benefits that will not be replaced dollar-for-dollar by the increase in pay. (Medicaid benefits are the best example of that.)

What about an expansion of EITC? I’ve heard it discussed. It’s a wage subsidy for the working poor that doesn’t count against them when determining eligibility for assistance programs, like Medicaid. Could increasing expanding EITC be a way to help the working poor short-term, while we (hopefully!) work on expanding availability of health insurance to all Americans?

I’d like to hear more specifics about how an increased minimum wage would affect the poor and I’d like to hear more about alternatives, like EITC. I’ve been a case manager, but I’m not an expert at any of this, and I’m not an economist. I am interested in keeping the conversation going!

>> Follow-up post: “North Carolina Health Choice & Minimum Wage”