What is the “safety net?” The safety net is a system of welfare, food stamps, Medicaid, school meals, unemployment benefits, housing allowances and tax credits. They are all support benefits that are “means tested.” Only people below a certain income level can use the safety net benefits.
Our country has always believed that people can and will strive to improve themselves. It has been assumed that, as incomes go up, the need to use the safety net programs will go down.
For most Americans, wages have been their primary means of financial support. However, in recent years, wages have stayed low. Huge companies like McDonald’s and Walmart stay in business by keeping their workers’ wages down. This allows them to charge lower prices than competitors for the things they sell.
In recent years, workers in low-wage jobs have begun to use safety net programs. For example, using food stamps to help stretch their dollars. Many people feel full-time workers should not need food stamps. They think the safety net programs are helping the companies continue to pay low wages.
This is the American dilemma. Walmart is a good example. Walmart tries to pay as little as they can for the things they buy to sell to their customers. They do this by buying things made in foreign countries where the wages are lower than in the United States. American workers suffer from the loss of jobs as a result.
Competition causes companies to purchase goods at low cost in order to sell them at low prices. The result is that sometimes the wages of Americans are so low that workers are eligible for government safety net benefits. The companies know this. The government knows this.
It seems to be working. Low-wage workers, helped by public benefits, are managing to get by. Only the companies are happy with this outcome. There is a great push here and abroad to raise wages.
Some experts believe higher wages could mean higher prices for consumer goods. That is called inflation. Inflation means the daily cost of living goes up. But if wages go up along with the cost of living, the system can stay in balance.
However, none of the rules about economics are ironclad. Government benefits that supplement low wages are something new. Most people do not like the idea. However, until higher wages come along, safety net benefits will help workers keep their heads above water.
Source: The New York Times April 12, 2015