|Trends and Challenges for Work in the 21st Century|
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Problems Facing the Working Poor
Department of Labor Studies and Employment Relations
This paper was presented at an Economic Policy Institute symposium on June 15, 1999. The symposium was funded by grants from the United States Department of Labor and the Alfred P. Sloan foundation. Opinions and views in the paper are those expressed by the author and in no way are they to be taken as expressions of support for these particular positions by the Department of Labor, the Alfred P. Sloan foundation, or the Economic Policy Institute.
Problems Facing the Working Poor
Today, despite strong labor markets with record low unemployment rates, there are millions of Americans who work but remain poor. In 1998, which is the most recent data available, nine million Americans worked sometime during the year but fell below the official poverty level. Of these nine million, two million worked full-time and year-round. The number of the working poor have remained stubbornly constant over the last ten years, despite vast changes in the labor market. In this chapter, I'm going to discuss the problems the working poor and their families face.
Before doing so, however, let me discuss why we should care about the working poor. First, most o f the working poor (56%) live in families with children, so that the poverty of these workers affects many others as well. Second, working poverty is likely to be much more widespread than the official count of 9 million Americans that I just cited. The estimate of 9 million counts as poor anyone whose family income falls below the government's official poverty level, which in 1999 is $16,700 for a family of four and $13,880 for a family of three.
But many people suggest that the official poverty level is too low. When John Schwartz and Thomas Volgy use an alternative measure of poverty, for example, they estimate that 6 million people worked full-time and year-round but fell below self-sufficiency.
Because these workers supported other family members, 18 million full-time year-round workers and their family members were affected by working poverty. When they examined the total number of workers (not just those who worked full-time and year-round), the number of workers and their family members who were poor according to their definition of poverty numbered 30 million.
Third, the probability of becoming a member of the working poor is dangerously high. A recent study of young baby boomers (those between the ages of 23 and 37) found that one-third fell into working poverty during the ten years (from 1985 to 1995) examined. Fourth, the working poor-are the fastest-growing segment of the poverty population. Given recent changes in welfare programs, the number of those working but remaining poor are expected to continue to grow.
Fifth, it is important to examine the working poor because they can inform us about policy. By examining a population that is doing their best to rise out of poverty by working and the problems they are facing, we can see to what extent policy is helping or failing to help these workers, and what additional policies, if any, are needed.
Problems Facing the Working Poor
The working poor face a variety of obstacles, many of which serve to keep them in poverty.
1. The working poor hold the lowest-paying, most unstable jobs.
Not surprisingly, the working poor tend to be clustered in low-paying jobs that offer few opportunities. As Figure 1 shows, the working poor are crowded into two industries--retail trade and services. Thirty seven percent of the working poor are employed in the service sector, and another thirty percent work in retail trade. They are also more prevalent in certain occupations; 30% are employed in service occupations, and 15% work in sales (see Figure 2).
|Click Figure 2 to Enlarge and for Text Version|
Figures 3 and 4 show more clearly how working poverty is linked to the job one holds. As Figure 3 illustrates, 16% of all agricultural workers were poor and 29% fell below 150% of poverty. Poverty rates for those in personal services were also high: 15% livedbelow the official poverty line and 28% fell below 150% of the poverty threshold. In retail trade, 12% of all workers were poor and 22% lived below 150% of poverty.
Figure 4 examines the extent of working poverty by occupation. Workers with the highest rates of poverty are in private household service occupations, which includes child care workers in someone's home, cleaners, and launderers. Of these workers 28% were poor and 42% fell below 150% of the poverty level. Farming, fishing, and forestry occupations also faced high rates of working poverty: 18% of these workers were poor and 31% lived below 150% of the poverty level. Services other than private household and protective services have the next highest rates of poverty. These jobs include waitresses, food service workers, Licensed Vocational Nurses, and janitors. Of such workers, 16% were poor and 29% lived below 150% of the poverty level.
2. The working poor lack full-year employment.
The working poor are less likely to work full-time and year-round compared to other workers. As Figure 5 illustrates, 26% of the working poor work full-time year-round, compared'to 67% of all workers. Notice that most of the working poor (59%) work full-time, defined as 35 or more hours per week. Of those who do not work full-time, about half state that they are working part time because they cannot find full-time work. Thus the working poor face the problem of involuntarily working part time to a greater extent than other workers. Approximately 20% of the working poor are employed involuntarily part-time.
A big problem for the working poor is lack of full-year work. The working poor work on average two thirds of a year, rather than year-round. This can partly be explained by the type of jobs the working poor hold. The working poor are over-represented among agricultural workers and machine operators, work that often involves seasonal employment.
In addition, the working poor suffer from involuntary layoffs. They are over-represented among those who suffer from layoffs in employment. Although some people believe that the problem of working poverty would be solved by providing full-time year-round work, this does not appear to be true. Most (52%) of the working poor would not b e able to work their way out of poverty even if they held full-time year-round employment because their wages are too low. In addition, of the working poor who would be able to lift themselves out of poverty by working such hours, many are unable to do so because of health problems, which will be discussed below.
3. The working poor lack higher educations
As Figure 6 shows, the working poor are less likely to hold high school and college degrees. Eight percent of the working poor hold college degrees, compared to 26% of all workers. Although two-thirds of the working poor hold high school degrees, this proportion is much lower than the 88% of all workers who old high school degrees. The consequence of not holding a-high school degree is often poverty. Nineteen percent of workers who do not hold high school degrees fell below the official poverty level and 34% fell below 150% of the poverty level.
There is some evidence that the working poor are less likely to receive job training from their employers. The combination of less education and training compared to other workers make it difficult for the working poor to climb out of poverty.
4. The working poor 'have health constraints.
A recent study by Jay Zagorsky at Ohio State has found that fully one-third of the working poor have health limitations or other serious conditions that may limit their ability to rise out of poverty. He found that those who suffer from such conditions are more likely to become members of the working poor, and that the working poor who have such conditions stay in poverty longer and earn less money once they finally leave poverty. Almost half (48%) of the working poor with serious health conditions stay in poverty for five or more years. Thus the working poor face not only the problem of holding jobs that pay adequate wages and provide steady earnings, but also more difficult problems of having health conditions that limit their ability to work.
5. The working poor are less likely to be in two parent families.
Only 30% of the working poor lived in married couple families, compared to 65% of all workers (see Figure 7). Single female headed families are especially over-represented among the working poor. Among the working poor, 49% live in families headed by a single woman. Of those who live in families headed by a single female, 28% work but live below 150% of the poverty level. In addition, almost half (46%) of all single parents who work and have children under six years old are in poverty. Workers who were never married or those who were once married also face relatively high rates of working poverty. Twenty percent of workers who have never been married and 21% of those who were divorced, widowed, or separated lived below 150% of the poverty level.
6. The working poor have less access to health care.
The working poor are less likely to be covered by health insurance by their employers. Only 18% of the working poor are covered by health insurance available through their employer or their union, compared to 55% of all workers. Most likely, the jobs these workers hold are less likely to offer health insurance.
7. The working poor do not participate in welfare programs to the extent that they qualify, even though they need this assistance.
Although many of the working poor qualify for food stamp benefits, few receive them. Of those who qualify for these benefits, two-thirds do not receive them. It is unclear why the working poor do not receive these benefits, but lack of need does not seem to be the reason. Qualitative research suggests that the working poor do not know that they qualify for these benefits. In addition, welfare administrators in some states incorrectly tell applicants, especially men, that they do not qualify for these programs. Finally, often local agencies create added barriers to discourage welfare participation. The City of New York, for example used to require that applicants return to the welfare office for a second visit in order to apply for food stamps. This requirement was eliminated only recently because of a court order.
8. The working poor face many hurdles in lifting themselves out of poverty.
As this paper has illustrated, the working poor face a number of difficulties: low wages, insufficient hours, layoffs, lack of skills, and health and other conditions that may limit the work performed. Thus prescribing one solution is not likely t o solve the problem of working poverty. The working poor need higher wages and jobs that offer full-year employment, wage supplements such as the Earned Income Tax Credit and access to services such as health care and child care. Most importantly, we should not assume that we can solve the problems of working poverty without income supports. Because many of the working poor are disabled or suffer from other serious health limitations, some workers may not be able to work more hours or in higher paying jobs and must rely on income supports in order to survive above the poverty level.
Who are the working poor?
Working poverty does not affect everyone to the same extent. Certain segments of our population are more likely to become members of the working poor. These include workers who are most likely to be allocated to the low wage jobs that fail to provide full-year employment.
Women: Women make up a greater share of the working poor than do men, probably because on average they earn lower wages and work fewer hours. Although women comprise 47% of workers between the ages of 18 and 56, 56% of the working poor are women.
Non-citizens: Those who are not citizens of the United States are also disproportionately represented among the working poor. Fifteen percent of such workers live below poverty, and 30% live below 150% of the poverty level.
Blacks and Hispanics: Working poverty affects people of color to a much greater extent than it does white Americans (see Figure 8). A surprisingly large number of blacks and Hispanics work below the poverty level. Twelve percent of all blacks who work fall below the poverty level, and twenty three percent fall below 150% of the poverty level. Among working Hispanics, the poverty rates are even higher: 14% live below the poverty level and 29% of Hispanic workers fell below 150% of the poverty level (see figure 9).