Who are the working poor? Jessica Hennessey Department of Economics Furman University July 22, 2014

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2 Who are the working poor? Jessica Hennessey Department of Economics Furman University July 22, 2014

3 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

4 2014 Federal Guidelines (FPL) Persons in family/household Poverty guideline 1 $11, , , , , , , ,090

5 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

6 DATA

7 Population below the federal poverty line Percent below FPL About Tableau maps: Source: United States Census Bureau / American FactFinder. S1701 : Poverty Status in the past 12 months American Community Survey. U.S. Census Bureau s American Community Survey Office, 2013.

8 Population below the federal poverty line Percent below FPL About Tableau maps: Source: United States Census Bureau / American FactFinder. S1701 : Poverty Status in the past 12 months American Community Survey. U.S. Census Bureau s American Community Survey Office, 2013.

9 Population below the federal poverty line

10 Greenville county Census tracts with >40% below FPL

11 Percent of labor force below the federal poverty line Percent of labor force below FPL About Tableau maps: Source: United States Census Bureau / American FactFinder. S1701 : Poverty Status in the past 12 months American Community Survey. U.S. Census Bureau s American Community Survey Office, 2013.

12 Percent of labor force below the federal poverty line Percent of labor force below FPL About Tableau maps: Source: United States Census Bureau / American FactFinder. S1701 : Poverty Status in the past 12 months American Community Survey. U.S. Census Bureau s American Community Survey Office, 2013.

13 Percent of labor force below the federal poverty line

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

15 POPULATION BELOW THE FPL

16 100% Population below the poverty line - breakdown by age 8.3% 8.4% 7.8% 90% 80% 70% 60% 57.9% 57.5% 56.6% 50% 40% 30% 20% 33.9% 34.1% 35.6% 10% 0% United States South Carolina Greenville County Below to 64 Above 65 Source: United States Census Bureau / American FactFinder. S1701 : Poverty Status in the past 12 months American Community Survey. U.S. Census Bureau s American Community Survey Office, Web.9 July 2014.

17 100% 90% Population below the poverty line - breakdown by education 10.5% 7.0% 7.7% 80% 24.5% 22.6% 23.8% 70% 60% 50% 32.5% 35.2% 33.4% 40% 30% 20% 10% 32.5% 35.2% 35.2% 0% United States South Carolina Greenville County Less than HS High School Some College Bachelors or higher Source: United States Census Bureau / American FactFinder. S1701 : Poverty Status in the past 12 months American Community Survey. U.S. Census Bureau s American Community Survey Office, Web.9 July 2014.

18 100% Population below the poverty line - breakdown by race 90% 80% 33.0% 70% 21.9% 45.5% 60% 50% 40% 30% 60.5% 59.5% 20% 47.8% 10% 0% United States South Carolina Greenville County White Black or African American American Indian and Alaska Native Asian Native Hawaiian and Other Pacific Islander Other race Two or more races Source: United States Census Bureau / American FactFinder. S1701 : Poverty Status in the past 12 months American Community Survey. U.S. Census Bureau s American Community Survey Office, Web.9 July 2014.

19 100% Population below the poverty line - breakdown by employment 90% 80% 39.9% 40.9% 41.2% 70% 60% 50% 23.4% 22.2% 20.7% 40% 30% 6.2% 5.9% 5.8% 20% 30.5% 31.0% 32.3% 10% 0% United States South Carolina Greenville County Population under 16 Full time work Part time work Did not work Source: United States Census Bureau / American FactFinder. S1701 : Poverty Status in the past 12 months American Community Survey. U.S. Census Bureau s American Community Survey Office, Web.9 July 2014.

20 Percent of workers in each industry that are below the FPL Farming, fishing and forestry 15.2 Service 14.1 Construction and extraction 10.4 Transportation and material-moving 9.5 Sales 8.1 Production 7.6 Office and administrative support 5.3 Installation, maintenance and repair 4.6 Management and professional Source: US Bureau of Labor Statistics. A Profile of the Working Poor, Report no

21 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

22 THE ROLE OF GOVERNMENT PROGRAMS

23 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

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

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

26 EARNED INCOME TAX CREDIT (EITC)

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

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

29 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

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

31 MEDICAID

32 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

33 Federal Medicaid Multiplier Source:

34 Median Medicaid/CHIP Eligibility Thresholds, January % 185% Minimum Medicaid Eligibility under Health Reform - 138% FPL ($24,344 for a family of 3 in 2012) 61% 37% 0% Children Pregnant Women 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.

35 Source: accessed 10 July 2014

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

37 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

38 MINIMUM WAGE

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40 Regional Price Parities All Items About Tableau maps: Source: Bureau of Economic Analysis, Regional Price Parities for 2012, released 2014.

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42 Men, 16 to 19 years Women, 16 to 19 years Men, 16 to 24 years Women, 16 to 24 years Men, 25 years and older Women, 25 years and older Percent of hourly workers paid at or below federal minimum wage White Black or African American Asian Hispanic or Latino Full time Part time Less than HS HS graduate Some college Bachelor's degree and higher Source: US Bureau of Labor Statistics, Characteristics of Minimum Wage Workers, 2013.

43 Minimum wage jobs Production, 3.2 Installation, maintenance and repair, 0.6 Construction and extraction, 1.2 Transportation and material moving, 5.2 Management and professional, 4.8 Healthcare support, 2.6 Protective service, 1.8 Farming, fishing and forestry, 1.1 Office and administrative support, 5.9 Sales, 14.5 Food preparation and serving, 46.7 Personal care and service, 6.9 Building and groundcleaning, 5.5 Source: US Bureau of Labor Statistics, Characteristics of Minimum Wage Workers, 2013

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

45 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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