NYT: Many Low Wage Jobs Seen as Failing to Meet Basic Needs
The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.
With government defined poverty surging the past few years, the pressure on wages has created a new class of "working poor" - employed, but living in a high cost of living country. [Jan 6, 2011: Census Estimates 1 in 6 Americans Live in Poverty, 65+ Crowd Expanding Rapidly] [Sep 19, 2009: US Poverty Rises to 11 Year High - But Still Vastly Understated] For example, adjusted for (government reported) inflation, many American men now make the same wages they made in the 1970s.
During this recession and 'recovery', a huge surge in transfer payments has helped to allay part of this issue [Nov 5, 2010: USA Today - Anti-Poverty Programs Surpass Cost of Medicare] [May 25, 2010: 1 in 5.5 Dollars of American Income Now Via Government; All time High] , but if things don't dramatically improve economically and the U.S. goes back to a typical budget deficit of say 3% of GDP rather than 10% GDP anytime in the future (which is obviously not going to happen), the reality under the surface will be exposed. Looking at food stamps alone, when I started this website 1 in 11 Americans were on the program... now it is 1 in 7.
Recall, if you make $23,000 for a family of 4 - you are not in poverty per government measure. If you are single and make $14,000 you are not in poverty. Most people living in the real world who actually have to pay rent, and eat, or own a vehicle, and pay insurance probably would differ with the government cut offs.
The New York Times has an in depth look at the plight of these workers as a new study was released today showing what is a more realistic level of income to be just above poor and on the lower end of middle class. Clearly the bifurcated economy continues to create some winners, but it appears a seemingly larger lot of losers.
- Hard as it can be to land a job these days, getting one may not be nearly enough for basic economic security. Many of the jobs being added in retail, hospitality and home health care, to name a few categories, are unlikely to pay enough for workers to cover the cost of fundamentals like housing, utilities, food, health care, transportation and, in the case of working parents, child care.
- A separate report being released Friday tries to go beyond traditional measurements like the poverty line and minimum wage to show what people need to earn to achieve a basic standard of living. The study, commissioned by Wider Opportunities for Women, a nonprofit group, builds on an analysis the group and some state and local partners have been conducting since 1995 on how much income it takes to meet basic needs without relying on public subsidies. The new study aims to set thresholds for economic stability rather than mere survival, and takes into account saving for retirement and emergencies.
- According to the report, a single worker needs an income of $30,012 a year — or just above $14 an hour — to cover basic expenses and save for retirement and emergencies. That is close to three times the 2010 national poverty level of $10,830 for a single person, (that seems a lot more reasonable than the government's sub $11K threshold) and nearly twice the federal minimum wage of $7.25 an hour.
- A single worker with two young children needs an annual income of $57,756, or just over $27 an hour, to attain economic stability, and a family with two working parents and two young children needs to earn $67,920 a year, or about $16 an hour per worker. That compares with the national poverty level of $22,050 for a family of four. (while one can quibble with the $68K for 2 children, let's take that down by 25% and make it $51K - that is still more than double what the government says is poverty - I mean seriously, $22K for a family of 4?)
- Wider Opportunities and its consulting partners saw a need for an index that would indicate how much families need to earn if, for example, they want to save for their children's college education or for a down payment on a home. “It's an index that asks how can a family have a little grasp at the middle class,” said Michael Sherraden, director of the Center for Social Development at Washington University in St. Louis
- To develop its income assessments, the report's authors examined government and other publicly available data to determine basic costs of living. For housing, which along with utilities is usually a family's largest expense, the authors came up with “a decent standard of shelter which is accessible to those with limited income” by averaging data from the Department of Housing and Urban Development that identified a monthly cost equivalent for rent at the fortieth percentile among all rents paid in each metropolitan area across the country.
- They chose a “low cost” food plan from the nutritional guidelines of the Department of Agriculture, and calculated commuting costs “assuming the ownership of a small sedan.” For health care, they calculated expenses for workers both with and without employer-based benefits. Ms. Kuriansky said that the income projections do not take into account frills like gifts or meals out. “It's a very bare-bones budget,” she said.
- Obviously, the income needs change drastically depending on where a family lives. Ms. Kuriansky said the group was working on developing data for states and metropolitan areas.
- The report compares its standards against national median incomes derived from the census, and finds that both single parents and workers who have only a high school diploma or only some college earn median wages that fall well below the amount needed to ensure economic security.
- Workers who only finished high school have fared badly in the recession and the nascent recovery. According to an analysis of Labor Department data by Cliff Waldman, the economist at the Manufacturers Alliance, a trade group, the gap in unemployment rates more than doubled between those with just a high school diploma and those with at least a four-year college degree from the start of 2008 through February.
- For some of the least educated, Mr. Waldman fears that even low wages are out of reach. “Given the needs of a more cognitive and more versatile labor force,” he said, “I'm afraid that those that don't have the education are going to be part of a structural unemployment story.”
- Even for those who do get jobs, it may be hard to live without public services, say nonprofit groups that assist low-income workers. “Politicians are so worried about fraud and abuse,” said Carol Goertzel, president of PathWays PA, a nonprofit that serves families in the Philadelphia region. “But they are not seeing the picture of families who are working but simply not making enough money to support their families, and need public support.”
- In New York, Áine Duggan, vice president for research, policy and education at the Food Bank for New York City, estimates that about a third of the group's clients are working but not earning enough to cover basic needs, much less saving for retirement or an emergency. She said that among households with children and annual incomes of less than $25,000, 83 percent of them would not be able to afford food within three months of losing the family income. That is up from 68 percent in 2008 at the height of the recession.
[Dec 8, 2007: Do the Bottom 80% of Americans Stand a Chance?]
[Sep 7, 2009: Citigroup - America; A Modern Day Plutonomy]
[Oct 22, 2010: Reuters - The Haves, the Have Nots, and the Dreamless Dead]
[Sep 3, 2010: FT.com - The Crisis in Middle America]
[July 26, 2010: [Video] DatelineNBC - America's Increasing Ranks of Poor]