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Minimum wage debate reveals Vermonters better off on welfare

By   /   April 11, 2014  /   No Comments

By Bruce Parker | Vermont Watchdog

MONTPELIER, Vt. — A bizarre argument offered during the minimum wage debate at the Capitol this week revealed that many low-wage Vermonters are better off living off the government dole.

HIKE THE WAGE: Vermonters on track to earn a minimum wage of $10.10 after this week's House vote.

HIKE THE WAGE: Vermonters on track to earn a minimum wage of $10.10 after this week’s House vote.

While the House of Representatives voted 87-57 this week to raise Vermont’s minimum wage from $8.73 to $10.10, certain dissenting voices offered an unusual argument against the hike: Vermonters won’t be able to collect as much welfare under the higher wage.

The assertion that Vermonters may be better off working low-wage jobs is substantiated by an independent report on the minimum wage commissioned by the Legislative Joint Fiscal Office.

In a chart listed at the end of the report, single parent Vermonters who combine low-wage jobs with public assistance can earn an annual net income of up to $44,000.

According to the chart, single parents earning $9.62 an hour more than double their incomes by availing themselves of food stamps, a child care subsidy, a renter’s rebate, health insurance, fuel assistance, a child tax credit and the state and federal earned income tax credits.

Such individuals have earnings equivalent to Vermonters who make $20.43 an hour.

Moreover, the financial incentive to seek a higher-wage job becomes virtually nonexistent until wages reach $25 hourly. In fact, the government-supplemented income of single-parent Vermonters actually dips when wages rise to between $10 and $20 an hour.

REPORT: Earnings and net income: Single Parent with one child (Vermont Joint Fiscal Office, Deb Brighton Analysis)

REPORT: Earnings and net income: Single Parent with one child (Vermont Joint Fiscal Office, Deb Brighton Analysis)

These workers stand to lose the most if lawmakers hike the minimum wage.

The report warns: “Earned income growth among the lowest income workers can result in precipitous state and federal public benefit reductions, substantially offsetting and in some cases completely negating improvements in net family income from minimum wage.”

To address this issue, the report urges lawmakers to identify lost welfare opportunities that coincide with higher wages and adjust public benefit programs upward to fill the incentive gap.

More traditional arguments against wage hikes emphasize the negative impacts associated with a higher cost of labor. As reported by Vermont Watchdog, industries that employ high numbers of minimum-wage workers will be hit hard by artificial wage increases.

Such concerns fell on deaf ears this week as House members voted to raise the minimum to $10.10 by Jan 1.

State Rep. Susan Davis of Washington praised the House’s decision to raise the minimum wage.

“Businesses across the U.S. are not as concerned what their employees make, but rather how much their customers have in their pockets to spend,” she said. “I vote for a raise in the minimum wage and for putting more money directly into the pockets of our low wage workers.”

State Rep. Kurt Wright of Burlington, however, expressed concerned that raising the minimum wage would hurt low-wage workers.

“The majority position of a $1.37 increase in one year, with no consideration on the impact on the very people it is meant to help … made it impossible to support this bill.”

State Rep. Thomas Terenzini of Rutland Town said the vote would harm business.

“Small business died on the floor of the Vermont General Assembly today,” he said.

Contact Bruce Parker at bparker@watchdog.org

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Bruce Parker is a reporter for Watchdog.org. Prior to joining the organization he was a writer for a leading business publisher. His articles and case studies have appeared in books and publications by Thomson, the U.S. Chamber of Commerce and the Business Civic Leadership Center. His work has also been featured at The Daily Caller, FoxNews.com, WND, CitySearch, Human Events, The Daily Signal and Catholic Exchange.