(Bloomberg Opinion) -- Millions of Americans work full time yet are still impoverished, their wages so low that they qualify for federal health care and food assistance programs even though many of them are employed by the biggest and most profitable U.S. companies. Because those companies don’t pay their workers a living wage, taxpayers are forced to foot the bill for daily necessities those employees can’t afford to buy themselves.
In short, corporate America is pawning off the cost of rock-bottom wages on taxpayers.
And one of the most prominent companies socializing the cost of substandard wages is Amazon.com Inc., according to a study from the Government Accountability Office. Amazon figured prominently in a Senate Budget Committee hearing Wednesday that looked at the human and economic perils of income inequality in the U.S.
Income inequality isn’t merely an academic issue. As more and more workers find it difficult to stay afloat, their purchasing power decreases, which stunts economic growth. It’s also inequitable and inefficient to have taxpayers opening their wallets when the corporate till is filled to the brim.
Consider Amazon, a $1.6 trillion conglomerate the stock market considers to be the fourth-most-valuable business in the world. It’s also one of the most profitable. It earned $21 billion last year, more than all but six of the companies in the S&P 500 Index. Its success has made founder Jeff Bezos, with a net worth of $184 billion, the wealthiest person in the world.
Amazon can afford to lift its workers out of poverty, so why does it rely on taxpayers to fill in the blanks?
Senator Bernie Sanders, chairman of the Senate Budget Committee, would have undoubtedly asked Bezos that question during Wednesday’s hearing, but Bezos declined the senator’s invitation.
Jennifer Bates, an Amazon worker in a fulfillment center in Bessemer, Alabama, did testify at the hearing. She confirmed what has already been widely reported about working conditions at Amazon warehouses: Workers toil under harsh conditions for miserly wages. A living wage for a family of four in Bessemer, by the way, is $31.40 an hour ($19.22 an hour if both parents are working), well above Amazon’s minimum wage of $15.
Bates said that workers in Bessemer are organizing a push for improved working conditions and better pay, but Amazon has moved to crush the effort. She described a blitz of anti-union literature posted in the warehouse and bathrooms where she works, as well as anti-union texts Amazon has sent to its workers’ phones. Amazon required workers to attend “union education,” Bates said, where “the company would just hammer on different reasons why the union was bad.”
Bates said that she and other workers want the right to negotiate for a living wage, not just a minimum one. “We’re living paycheck to paycheck,” she testified.
The GAO report, commissioned by Sanders, examined data for workers enrolled in Medicaid or the Supplemental Nutrition Assistance Program in 11 states. About 8,400 Amazon employees are included in the numbers, which isn’t a precise figure. Some workers may be counted twice because they qualify for both Medicaid and SNAP, and some may not work full time. The GAO report also probably undercounts the total number of full-time Amazon employees who qualify for federal assistance because it excluded dozens of states in its analysis.
Amazon, which added 500,000 workers in 2020, now employs about 1.3 million people. We’re assuming only a small portion of those workers receive assistance. Extrapolating from 8,400 workers in 11 states that the GAO identified based on 2018 data, we estimate at least 38,000 Amazon workers nationally rely on government assistance. We also assume their pay would have to be doubled to push them above the federal poverty level of $26,500 for a family of four. That would cost Amazon an additional $500 million a year or so, which is just 2.4% of the $21 billion in profits it hauled in last year. If we bump that up to 100,000 workers, the additional cost to Amazon would amount to 6.2% of its profits last year.
As it stands, that marginal cost is borne by taxpayers. That reality is all the more vexing given that Amazon reported an income tax expense of $2.9 billion last year, or just 14% of its income — well below the already low corporate tax rate of 21%.
Without answers from Amazon or Bezos, the logical conclusion is that the company sticks taxpayers with its bills simply because it can.
Congress could demand that Amazon reimburse taxpayers for the cost of assistance to its workers. It could compel Amazon to give workers a seat on its board so they have a greater say in compensation matters. It could also craft minimum-wage legislation that would require large companies to pay full-time workers a living wage adjusted for where they reside.
Amazon isn’t alone, of course. The GAO report catalogs many big, highly profitable companies, such as Walmart Inc., McDonald’s Corp. and Home Depot Inc., that rely on taxpayers to sustain their workers. Taken together, they provide a devastating glimpse of millions of full-time workers whose contributions to broader economic growth are being undermined — and who earn so little they can’t pay for food, shelter and health care.
Even if you don’t think the U.S. is mired in a wage crisis, are you happy opening your wallet or purse so the world’s richest companies can keep their payrolls low?
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Nir Kaissar is a Bloomberg Opinion columnist covering the markets. He is the founder of Unison Advisors, an asset management firm. He has worked as a lawyer at Sullivan & Cromwell and a consultant at Ernst & Young.
Timothy L. O'Brien is a senior columnist for Bloomberg Opinion.
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