Who are the working poor? - The Riley Institute at...

Who are the working poor?

Jessica Hennessey Department of Economics

Furman University July 22, 2014

Working poor • Formal definition

– Below federal poverty line (FPL) • 15% of the population (46.5 million)

– Working poor: in the labor force for 27 weeks during the year • Of those below the FPL, 10.6 million

• Episodically poor

– Below FPL for two or more months during 36 month period – 31.6% of the population (over 90 million)

• Broader definition

– Up to 250% of FPL – Limited economic security, precarious situation – Almost 50% of the population

Persons in family/household Poverty guideline

1 $11,670

2 15,730

3 19,790

4 23,850

5 27,910

6 31,970

7 36,030

8 40,090

2014 Federal Guidelines (FPL)

Federal Poverty Line • Developed in 1963 by Mollie Orshansky of the SSA

– In 1955, families spent 1/3 of after-tax income on food – Poverty threshold = cost of “economy food plan”x3

• August 1969: the U.S. Bureau of the Budget designated

the poverty thresholds as the federal government’s official statistical definition of poverty.

• Problems

– No cost of living difference – Uses income before tax/transfers

Population below the federal poverty line

About Tableau maps: www.tableausoftware.com/mapdata

Source: United States Census Bureau / American FactFinder. “S1701 : Poverty Status in the past 12 months.” 2008-2012 American Community Survey. U.S. Census Bureau’s American Community Survey Office, 2013.

8.40 22.30Percent below FPL




11.40 36.30

Percent below FPL

Greenville county – Census tracts with >40% below FPL

Percent of labor force below the federal poverty line



4.800 13.100Percent of labor force below FPL




6.90 25.50Percent of labor force below FPL

Greenville county – Census tracts with >25% of labor force below FPL

POPULATION BELOW THE FPL

33.9% 34.1% 35.6%

57.9% 57.5% 56.6%

8.3% 8.4% 7.8%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

United States South Carolina Greenville County

Population below the poverty line - breakdown by age

Below 18 18 to 64 Above 65

Source: United States Census Bureau / American FactFinder. “S1701 : Poverty Status in the past 12 months.” 2008-2012 American Community Survey. U.S. Census Bureau’s American Community Survey Office, 2013. Web.9 July 2014.

32.5% 35.2% 35.2%

32.5%

35.2% 33.4%

24.5%

22.6% 23.8%

10.5%7.0% 7.7%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


Population below the poverty line - breakdown by education

Less than HS High School Some College Bachelors or higher


60.5%

47.8%

59.5%

21.9% 45.5%

33.0%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


Population below the poverty line - breakdown by race

White Black or African American American Indian and Alaska NativeAsian Native Hawaiian and Other Pacific Islander Other raceTwo or more races


30.5% 31.0% 32.3%

6.2% 5.9% 5.8%

23.4% 22.2% 20.7%

39.9% 40.9% 41.2%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


Population below the poverty line - breakdown by employment

Population under 16 Full time work Part time work Did not work


2.2

4.6

5.3

7.6

8.1

9.5

10.4

14.1

15.2

0 2 4 6 8 10 12 14 16

Management and professional

Installation, maintenance and repair

Office and administrative support

Production

Sales

Transportation and material-moving

Construction and extraction

Service

Farming, fishing and forestry

Percent of workers in each industry that are below the FPL

Source: US Bureau of Labor Statistics. A Profile of the Working Poor, 2012. Report no. 1047.

Workers below poverty line • 84% of the cases are due to:

– Low earnings – Periods of unemployment – Involuntary part-time employment

• The other 16% of the cases are due to: – Short term employment – Voluntary part-time employment – Family structure that increases risk of poverty

THE ROLE OF GOVERNMENT PROGRAMS

Poverty and Public Policy

• Twice as many Americans would be impoverished if not for public safety-net programs (Kearney et al, Policies to Address Poverty in America, 2014)

• Multidimensional nature – Promoting early childhood development – Supporting disadvantaged youth – Building skills – Improving safety net and work support

Source: Kearney et al. 2014, A Dozen Facts about America’s struggling middle class, The Hamilton Project.

EARNED INCOME TAX CREDIT (EITC)

Source: Hoynes, Building on the Success of the Earned Income Tax Credit, The Hamilton Project, 2014.

Source: Tax Policy Center, Online briefing book, EITC, accessed 17 July 2014.

Impact of EITC • Income

– Kept 6.5 million (including 3.3 million children) out of poverty in 2011

• Labor Supply – Income/Substitution effects – Evidence

• Labor force participation – Increases for single mothers – Slight decrease for married women

• Hours of work: no effect

• Other effects – Improvement in child test scores – Reduction in low-birth-weight births – Improved health indicators for mothers

Source: State Earned Income Tax Credits, Center on Budget and Policy Priorities, 2 Jan 2014.

MEDICAID

Medicaid • Federally mandated but administered by the

states – Financed on a shared basis out of general revenues – States determine the type, amount, duration, and

scope of services within broad federal guidelines.

• Eligibility

– Income – Family structure

Federal Medicaid Multiplier

Source: http://kff.org/medicaid/state-indicator/federal-matching-rate-and-multiplier/#

http://kff.org/medicaid/state-indicator/federal-matching-rate-and-multiplier/












235%

185%

61%

37%

0%

Children PregnantWomen

Working Parents

Jobless Parents

Childless Adults

SOURCE: Based on the results of a national survey conducted by the Kaiser Commission on Medicaid and the Uninsured and the Georgetown University Center for Children and Families, 2013.

Median Medicaid/CHIP Eligibility Thresholds, January 2013

Minimum Medicaid Eligibility under Health Reform - 138% FPL ($24,344 for a family of 3 in 2012)

Source: http://kff.org/health-reform/slide/current-status-of-the-medicaid-expansion-decision/ accessed 10 July 2014

http://kff.org/health-reform/slide/current-status-of-the-medicaid-expansion-decision/

Source: The Coverage Gap: Uninsured Poor Adults in States that Do Not Expand Medicaid, The Henry J. Kaiser Family Foundation, 2 April 2014

Medicaid and poverty • Finkelstein et al (2012) use the Oregon Health

Experiment to show that Medicaid results in: – higher health care utilization – better self-reported mental and physical health – lower out-of-pocket medical costs and medical debt

• Sommers and Oellerich (2013) estimate that

Medicaid decreases poverty rates • 1.0 percent among children • 2.2 percent among disabled adults • 0.7 percent among the elderly

MINIMUM WAGE

Regional Price Parities


Source: Bureau of Economic Analysis, Regional Price Parities for 2012, released 2014.

86.40 118.20

All Items

0 5 10 15 20 25

Bachelor's degree and higher

Some college

HS graduate

Less than HS

Part time

Full time

Hispanic or Latino

Asian

Black or African American

White

Women, 25 years and older

Men, 25 years and older

Women, 16 to 24 years

Men, 16 to 24 years

Women, 16 to 19 years

Men, 16 to 19 years

Percent of hourly workers paid at or below federal minimum wage

Source: US Bureau of Labor Statistics, Characteristics of Minimum Wage Workers, 2013.

Management and professional , 4.8 Healthcare support, 2.6

Protective service, 1.8

Food preparation and serving, 46.7

Building and groundcleaning, 5.5

Personal care and service, 6.9

Sales, 14.5

Office and administrative support, 5.9

Farming, fishing and forestry, 1.1

Construction and extraction, 1.2

Installation, maintenance and repair, 0.6

Production, 3.2 Transportation and material moving, 5.2

Minimum wage jobs

Source: US Bureau of Labor Statistics, Characteristics of Minimum Wage Workers, 2013

Source: Neumark, Employment Effects of Minimum Wages, IZA World of Labor, 2014.

Increase Minimum Wage to $10.10? • CBO February 2014 report: “The Effects of a Minimum-Wage

Increase on Employment and Family Income”

• Income security (+) – $31 billion more in earnings

• 19% goes to families below FPL • 29% goes to families earning more than 3xFPL

• Labor market (-)

– $10.10 minimum wage decreases jobs by 500,000

• Net effect – Overall real income would rise by $2 billion – Move about 900,000 people above the poverty threshold

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