Cost to Government
How much does low-wage work cost government? Is more money spent on social services for low-wage workers in the workforce or on individuals and families out of the workforce? Roughly how much might North Carolina be able to save should it boost the earnings of low-wage workers and get them out of certain social services programs? With North Carolina having made cuts to government programs such as unemployment insurance, Medicaid and Work First in recent years, how many low-wage workers stand at risk of seeing their benefits decrease should the government opt to further lessen its spending? We looked at Women, Infants and Children (WIC), Supplemental Nutrition Assistance Program (SNAP) and Medicaid—government social services programs with over $15 billion in combined expenditures in North Carolina in 2013—to find insight into these questions.
North Carolina’s WIC program provides financial support for women with children up to age five and/or women who are pregnant and are at nutritional risk. The program’s eligibility extends to families earning up to 185% of the federal poverty line—higher than our low wage cutoff of 150% of the federal poverty line.
The Supplemental Nutritional Assistance Program (SNAP) provides food assistance for households in financial need. The vast majority of SNAP spending goes to people not in the workforce. Despite low-wage workers representing only 12% of North Carolina SNAP recipients in 2013, these low-wage workers still accounted for $299,943,899 of government spending.
Low-wage workers and their families accounted for just 1.9% of Medicaid spending in North Carolina in 2013—a total of 74,480 people. That 1.9%, though, cost $237,495,208. According to a 2014 Raleigh News and Observer article, two-thirds of Medicaid spending in North Carolina—which reached nearly $13 billion in 2013, up from $2 billion in 2004—comes from the federal government. Even so, the program comprises 20% of the state’s total annual spending.
Our findings present two ways of thinking about Medicaid expenditures on low-wage workers. On one hand, it could be argued that low-wage workers are not receiving a fair share of Medicaid funds—1.9% is well below the proportion of jobs in North Carolina that are low wage. On the other hand, should the state find a way to increase the wages of its low-wage workers enough to lift some off of Medicaid, North Carolina could free up valuable public dollars to put towards other government programs. Given that North Carolina declined to expand Medicaid coverage with additional federal dollars in 2013, saving resources in this field could be especially critical.
Distressed Urban Census Tracts
We took a closer look at selected census tracts within North Carolina’s primary urban centers of Durham County, Mecklenburg County and Wake County. These census tracts were chosen because they were identified as “distressed” in a February 2014 report by the Center for Urban & Regional Studies at the University of North Carolina at Chapel Hill. The study defined distressed census tracts as having unemployment 50% greater than North Carolina's unemployment rate (greater than 9.7%), annual per capita income that is one-third lower than NC's per capita income ($25,256) and a poverty rate 50% greater than NC's poverty rate (16%).
This study is compatible with our work because its per capita income cutoff of $25,256 is very close to our designation of a low-wage two-person household ($23,595). The purpose of this section is to begin to understand how entrenched government assistance programs are in the state’s distressed, urban census tracts.