How the Potency of Social Wages Can Beat Back Neoliberalism

If President Biden’s American Families Plan becomes law as he proposed it, my grand-niece Harri will finally have a ​“modest yet adequate” standard of living based on a new commitment from the federal government to provide social wages.

Harri is a 30-year-old single mother of two, one 3-year-old and one in school. As an assistant manager at Walmart, she makes about $47,000 a year, but about $8,000 of that goes for day care for her preschooler. She recently started getting $550 a month in a Child Tax Credit (CTC), but that’s just a temporary boost for the next year that was part of the Democrats’ March stimulus package. If the Families Plan — part of what Biden describes as ​“human infrastructure” — becomes law, she’ll get that CTC money for another five years and her preschooler will get free pre-K public education, freeing Harri from paying for day care.

Add it all up, and Harri’s income will be topped up by $6,600 and she’ll be saving $8,000 a year on day-care costs. She’ll go from having $47,000 a year in reported income to having $53,600, but with the absence of day-care costs, her real spending income will be enhanced by $14,600, a 37% increase. Where she lives, in central Pennsylvania, the Economic Policy Institute figures that with no child care costs, she would need about $49,000 to have a modest yet adequate standard of living. Harri will have a little more than that. Bringing in $53,600 will not provide her with a life of luxury, but the magnitude of that change should be transformative for Harri and her children. Harri will get more than parents with fewer kids or fewer pre-schoolers, but she’ll get less than parents with more kids or more than one preschooler. 

The point is that the combination of the CTC and public pre-K (plus an additional program where parents of one- and two-year-olds will pay no more than 7% of their income for day care) will make a dramatic difference in most parents’ and children’s lives. It is often said that the CTC by itself will cut child poverty in half. But the whole combination will do much more than that for many more families, including those who are not poor but struggle to get by.

Beyond its variety of impacts on different American families, Biden’s Families Plan is a breakthrough commitment to the concept of social wages, a concept that has even wider application. Along with other Biden initiatives, there appears to be a firm Democratic recognition that most workers are paid too little in market wages to get by and that the government has a responsibility to change that.

Social wages are different from the commonly (and loosely) used phrase ​“social safety net.” Safety-net programs, like unemployment compensation and Temporary Assistance for Needy Families, are for people who have fallen on hard times for one reason or another. Like a net, they keep people from falling farther by providing temporary income until they can get back on their feet. 

Social wages, on the other hand, are more permanent, less means-tested, and available for much larger groups of people. They either subsidize essential workers by increasing their pay or reduce costs of common goods and services. Among Biden’s various plans, for example, are wage subsidies for home care and day care workers who now average $23,000 and $22,000 a year respectively. Obamacare subsidies and the Earned Income Tax Credit do this for a broader group of low-wage workers. Many cities with strong labor movements, like New York, have long had reduced transit fares and rent control to keep costs affordable for low- and moderate-wage workers, though better-paid workers benefit as well. In the postwar years, the Amalgamated Clothing Workers Union established cooperative housing and even a non-profit bank to reduce their members’ and other workers’ cost of living.

Increased income or reduced costs increase human freedom by providing a higher standard of living that gives people the chance to choose how to spend money, not just struggle to pay the bills. Harri should have nearly $4,000 in discretionary income if the Families Plan becomes law, something she has never had before. Disposable income is your income after taxes, and almost everybody has some. Discretionary income is the income you have left after all your ordinary expenses are met, the money you can actually choose how to spend. It’s anything over that modest yet adequate amount that the Economic Policy Institute has estimated for your family in the place you live.

Biden’s Families plan will affect my niece’s family and its prospects much more than it will for many other families. A family with one school-age child, for example, will get only $250 a month with the CTC and no savings for child care. Or, a single mother with two children, like Harri, will get the same amount in CTC and in child-care savings, but because she earns only $20,000, she’ll end up with a mere $26,600 and free day care — no longer in official poverty but still a long way from a modest but adequate income.

But the concept of social wages is just as important as the specific result of any particular program. It means that the federal government accepts its responsibility to make sure that ​“nobody who works full time should live in poverty.” It also represents the transfer of money from our super-wealthy to workers who make less than a modest but adequate living. Biden proposes to pay for his plans with increased taxes on corporations and on individuals who earn more than $400,000 a year — though it would be even fairer if the Walton family had to pay Elizabeth Warren’s proposed wealth tax on their $247 billion in wealth since Harri and her co-workers helped produce some of that.

I’m as surprised as anyone at how sweepingly progressive Biden’s initiatives are, but none of them came full-blown from the head of Biden. They are all programs that have been developed and advocated for by progressive activists and academics in opposition to a seemingly impregnable public commitment to neoliberalism — all that movement and electoral politics of the past several decades, all those Fight for $15 actions and the doors Berniecrats knocked on.

As an academic, I am especially inspired by the intellectual work that contributed to this process. Efforts to establish ​“modest but adequate” levels of family income, for example, had begun in the postwar period by the U.S. Bureau of Labor Statistics — at a time when unions represented one of every three workers and that Henry Wallace aspirationally dubbed ​“the century of the common man.” That statistical series was ended in the early years of the Reagan administration, signifying that the federal government no longer gave a shit about what was adequate for common people. A decade or so later, a more sophisticated effort to establish adequate income levels was undertaken first by Wider Opportunities for Women and then by the Economic Policy Institute. The Reagan administration didn’t want us to be able to measure how inadequate most family incomes would become. But now we know, and we have one of our political parties at least rhetorically aspiring to adequacy.

The fate of Harri and her kids and millions like them will be determined in the next few weeks as the Democrats cajole, negotiate with, and debate each other about what will be in the final budget reconciliation bill. Let’s hope they do enough to decisively turn the page on four decades of neoliberal indifference to the people who do essential work we all depend upon.

This story was first posted at Working-Class Perspectives.