Federal Pell Grants vs Corporate Subsidies: Taxpayers Must Reform Education System

The governmental Pell Grant system provides assistance to lower-income individuals so they can receive education to climb the corporate ladder. However, this rose has its thorn. Rather than helping students, the system harms them. 

The outlook is bleak for middle-income wage earners without a college education or technical training. Only a few years ago, jobs paying wages that afforded a middle-class lifestyle were plentiful, even for those without a college education. Now, the market is proliferated by low-wage jobs that have to be subsidized by the American public. Yet the employers paying said low wages are making billions of dollars in profits. What is wrong with this picture?

Olivera Perkins of Cleveland’s Plain Dealer examined the vanishing middle-class in America. She found that “Six of the 10 occupations losing the most jobs were moderate or higher-paying. They included executive secretaries and administrative assistants; business operation specialists, including brokers; and most secondary-school teaching positions. The two fastest-growing occupations were lower-paying: food preparation and serving workers, with a median hourly pay of $8.71, and home health aides, at $9.18 an hour.” Many of these vanishing professions did not require a college education, and they paid a living wage.

Without a college education, low-wage jobs will be the only option for someone looking for employment. What is even more troubling is that the low-paying jobs replacing the middle-wage jobs are being subsidized by American taxpayers. Gene Carroll of Cornell’s School of Industrial and Labor Relations (NYC) addressed this issue at the Sixth Dusseldorf Forum for Labor Relations:

“Many Wal-Mart workers are ineligible for health coverage from their employer or choose not to purchase what is available, because it is too expensive or too limited in scope. These workers often turn to taxpayer-funded health programs such as Medicaid. In February 2006, the Department of Job and Family Services, in response to requests from Policy Matters Ohio and others, released a report on those employers with the largest number of workers participating in the Medicaid, food stamps and Ohio Works First (cash assistance) programs. For Medicaid, Wal-Mart was first with 12,184 employees. For food stamps, Wal-Mart was second (behind McDonald's) with 7,327 employees.”

Herein lies a vicious and unfortunate cycle. Low-income workers will rely on public health care, burdening the taxpayer, because it’s the only affordable plan. These workers can achieve better health care if they receive a higher education. However, these workers will not obtain this higher education because it requires money they don’t have.

Government help, such as Pell Grants, work-study programs and tuition tax credits, have helped provide some assistance to the low-income students striving to make a better future. These programs, however, prove more idealistic than workable, a discrepancy best summarized by Andrew G. Biggs in his report in the the Atlantic. 

Biggs reports, “Recent economic research suggests that colleges siphon off a significant portion of federal education aid rather than lowering costs to students.” Rising tuition rates or reductions in student assistance evidences this systemic abuse in some of these institutions. Biggs continues by stressing, “[t]he 75 percent difference in tuition between aid-eligible and ineligible for-profit colleges —an amount comparable to average per-student federal assistance —suggests that institutions may indeed raise tuition to capture the maximum grant aid available." This is certainly disturbing news.

The absurdity of it all. Multi-billion dollar corporations like Wal-Mart the nation’s biggest recipients of food stamps and Medicaid, for-profit colleges the biggest recipients of financial aid, and the taxpayers are stuck paying the bill.

Perhaps it is time that we, the American public, charge these corporations that refuse to pay employees a living wage and use public assistance as “benefits” for its employees. Perhaps it is time that we, the American public, provide strict guidelines for aid-eligible institutions, insisting that they provide quality educations for students and maintain a high graduation rate.

The losers in this scheme are the people of this country, whose chosen professions have vanished, and the taxpayer who expects the money they pay, in part and as dedicated for such use, to be used to subsidize health care and provide food to those in need. 

As Benjamin Franklin once said, “An investment in knowledge pays the best interest.” It is time to take Mr. Franklin’s words to heart, and invest in educating the American population.

How likely are you to make Mic your go-to news source?

Susan Porter

Rising senior - nontraditional student at Cornell's ILR School in Ithaca (NY) and Summer Fellow at The Worker Institute (NYC & Ithaca)

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