Research

Employment, the Retail Sector, and Usage of the Social Safety Net

14471215477_dcf82c2aa6_k

Executive Summary

U.S. businesses, retailers in particular, are frequently accused of being “subsidized” because some of their workers receive social safety net benefits. If so, we should expect businesses to take advantage of this subsidy by increasingly moving workers onto the safety net.

Using recent labor market data we find exactly the opposite:

•      Between 2012 and 2013, the fraction of those who were employed and used social safety net programs fell 0.9 percentage points, compared to the 0.1 percentage point decline among non-workers.

•      That is, employers diminish usage of the social safety net instead of taking advantage of it.

•      The results for retailers are even more striking; their 1.3 percentage point decline exceeded employers as a whole, despite the fact that retail sales workers typically have less education and skills than other workers.

Introduction

It is frequently asserted[1] that U.S. businesses – especially retailers like Wal-Mart and fast food franchises like McDonalds – are “subsidized” by the taxpayer because some of their workers receive social safety net assistance like food stamps, Medicaid, or other support. This notion has tenuous logical foundations, at best.[2]  Indeed, a more rigorous analysis suggests that the social safety net forces employers to pay higher – not lower – wages to their workers.[3]

Still, the urban legend persists. In this short paper, we approach the debate from another angle. We examine labor market data to see if retailers, and employers more generally, “take advantage” of the taxpayer-funded social safety net by shifting increasing number of workers onto it.

To anticipate the results, we find exactly the opposite. Between 2012 and 2013, the fraction of those who were employed and used social safety net programs fell 0.9 percentage points, compared to the 0.1 percentage point decline among non-workers. In general, employers diminish usage of the social safety net. The results for retailers are even more striking; their 1.3 percentage point decline exceeded employers as a whole.

Methodology

The focus of our analysis are data for 2012 and 2013 contained within the 2008 Panel of the Survey of Income and Program Participation[4] (SIPP).[5] We focus on the most recent data because as the recovery matures, it is more likely that the data reveal “typical” usage of the social safety net compared to the elevated levels in the Great Recession.

It is important to note that in this sample the same individuals were interviewed in 2012 as well as 2013. As a result, we are able to examine how safety net assistance among the same individuals changed over time. The qualifications for a person to be considered receiving social safety net assistance is someone receiving any sort of family public assistance payments as well as noncash benefits including food stamps, WIC, Medicaid, rent for public housing, lower rent due to government subsidy, government energy assistance, free or reduced-price lunches, and free or reduced-price breakfasts.

Furthermore, individuals were only included if they were in the same category for both periods. For example, when examining retail sales workers, individuals would only be included if they worked in retail sales in both periods but would not be if they worked in only one period. The same goes for the all workers and all non-workers’ categories. This helps determine the effect of working in retail sales on receiving public assistance over time and how it compares to other workers and non-workers.

Results

The basic results are shown in Table 1 (below). As shown, 32 percent of retail sales workers used some sort of social safety net assistance in 2012, somewhat above the rate (23.9 percent) for workers as a whole. This is roughly consistent with the common accusation of retail being subsidized. Note, however, that this is still well below the 37.8 percent rate for non-workers.

A more important issue is whether employers increased their workers’ usage of social safety net assistance. We can determine this by comparing how these numbers evolve over time. Among non-workers, the fraction of those receiving assistance fell by 0.1 percentage point between 2012 and 2013, just what one might expect as the economy improved. However, employers did not “take advantage” of the social safety net and shift toward greater reliance on it through benefit cuts, poor raises, or other methods. Instead, social safety net usage among all workers fell by 0.9 percentage point – more than for non-workers.

Table 1

Percentage of Individuals Using the Social Safety Net

Year

Retail Sales Workers

All

Workers

Non-workers

2012

32.0%

23.9%

37.8%

2013

30.7%

23.0%

37.7%

Percentage Point Decrease

1.3

0.9

0.1

The results are even more striking in looking at the retail sector. While large retailers like Wal-Mart are the primary target of this “subsidy” assertion, the retail sector was even more successful in moving its workers off the social safety net; the 1.3 percentage point decrease in people getting assistance is greater than both the 0.9 percentage point decrease in workers and the 0.1 percentage point decrease in non-workers. So rather than creating  reliance on saftey net programs, it appears that retailers help their workers to exit public assistance.

This is even more striking because retail workers tend to be less skilled, and thus more likely to be reliant on saftey net programs in the first place. One way to see this is in Table 2, which compares education levels in 2012.

Table 2

Distribution of Educational Attainment, 2012

Education Level

Retail Sales Workers

All Workers

Non-workers

Less than High School

10.8%

7.5%

24.6%

High School Degree

28.4%

23.0%

30.4%

Some College, Vocational Certificate, Associate Degree

45.2%

34.8%

28.2%

Bachelor’s or more

15.6%

34.6%

16.9%

In 2012, educational attainment among retail sales workers tended to be much lower than all workers. Compared to all workers, retail workers more frequently never completed high school and only attained a high school degree. Specifically, while 10.8 percent of retail workers never completed high school and 28.4 percent only obtained a high chool degree, 7.5 percent of all workers never completed high school and 23.0 percent only obtained a high school degree. In addition, the portion of retail workers with a bachelor’s degree or greater (15.6 percent) was less than half of the portion of all workers at that education level (34.6 percent). Meanwhile non-workers had the lowest attainment levels, with 24.6 percent not completing high school and 30.4 percent only obtaining a high school degree.

Yet despite low education levels, retail sales workers still decreased their dependency on safety net programs the most between 2012 and 2013. This indicates that jobs in retail do not force individuals onto the public assistance programs. Rather, the experience of retail jobs by low-skilled workers is associated with less reliance on the social saftey net.

Conclusion

Work is a successful route to eliminating reliance on the social safety net. Indeed, while retail sales workers on average are less skilled and have a higher likelihood of receiving public assistance, they make greater transitions off public assistance programs than either workers as a whole or non-workers.

 


[5] For the purposes of this study, we looked at waves 13 and 16 which include months in the years 2012 and 2013 respectively.

Disclaimer