Working poor

The working poor are working people whose incomes fall below a given poverty line. Depending on how one defines "working" and "poverty," someone may or may not be counted as part of the working poor.

While poverty is often associated with joblessness, a significant proportion of the poor are actually employed.^[1][2] Largely because they are earning such low wages, the working poor face numerous obstacles that make it difficult for many of them to find and keep a job, save up money, and maintain a sense of self-worth.^[3]

The official working poverty rate in the US has remained somewhat static over the past four decades, but many social scientists argue that the official rate is set too low, and that the proportion of workers facing significant financial hardship has instead increased over the years. Changes in the economy, especially the shift from a manufacturing-based to a service-based economy, have resulted in the polarization of the labor market. This means that there are more jobs at the top and the bottom of the income spectrum, but fewer jobs in the middle.^[4]

There are a wide range of anti-poverty policies that have been shown to improve the situation of the working poor. Research suggests that increasing welfare state generosity is the most effective way to reduce poverty and working poverty.^[5][6] Other tools available to governments are increasing minimum wages across a nation, and absorbing educational and health care costs for children of the working poor.

Conceptualizing working poverty

In the United States, the issue of working poverty was initially brought to the public's attention during the Progressive Era (1890s–1920s). Progressive Era thinkers like Robert Hunter, Jane Addams, and W.E.B. Du Bois saw society's unequal opportunity structure as the root cause of poverty and working poverty, but they also saw a link between moral factors and poverty. In his study of Philadelphia's African American neighborhoods, W.E.B. Du Bois draws a distinction between "hardworking" poor people who fail to escape poverty due to racial discrimination and those who are poor due to moral deficiencies such as laziness or lack of perseverance.^[7]

After the Great Depression, the New Deal, and World War II, the United States experienced an era of prosperity during which most workers experienced significant gains in wages and working conditions. During this period (1930s–1950s), scholars shifted their attention away from poverty and working poverty. However, in the late 1950s and early 1960s American scholars and policymakers began to revisit the problem. Influential books like John Kenneth Galbraith's The Affluent Society (1958)^[8] and Michael Harrington's The Other America (1962)^[9] reinvigorated the discussions on poverty and working poverty in the United States.

Since the start of the War on Poverty in the 1960s, scholars and policymakers on both ends of the political spectrum have paid an increasing amount of attention to working poverty. One of the key ongoing debates concerns the distinction between the working and the nonworking (unemployed) poor. Conservative scholars tend to see nonworking poverty as a more urgent problem than working poverty because they believe that non-work is a moral hazard that leads to welfare dependency and laziness, whereas work, even poorly paid work, is morally beneficial. In order to solve the problem of nonworking poverty, some conservative scholars argue that the government must stop "coddling" the poor with welfare benefits like AFDC/TANF.^[10]

On the other hand, liberal scholars and policymakers often argue that most working and nonworking poor people are quite similar. Studies comparing single mothers on and off welfare show that receiving welfare payments does not degrade a person's desire to find a job and get off of welfare.^[11] The main difference between the working and the nonworking poor, they argue, is that the nonworking poor have a more difficult time overcoming basic barriers to entry into the labor market, such as arranging for affordable childcare, finding housing near potential jobs, or arranging for transportation to and from work. In order to help the nonworking poor gain entry into the labor market, liberal scholars and policymakers argue that the government should provide more housing assistance, childcare, and other kinds of aid to poor families.^[12]

Discussions about the alleviation of working poverty are also politically charged. Conservative scholars and policymakers often attribute the prevalence of inequality and working poverty to overregulation and overtaxation, which they claim constricts job growth. In order to lower the rate of working poverty, conservatives advocate reducing welfare benefits and enacting less stringent labor laws.^[10][13] On the other hand, many liberals argue that working poverty can only be solved through increased, not decreased, government intervention. This government intervention could include workplace reforms (such as higher minimum wages, living wage laws, job training programs, etc.) and an increase in government transfers (such as housing, food, childcare, and healthcare subsidies).^{[3][5][6][11]}

Measuring working poverty

Absolute

According to the US Department of Labor, the working poor "are persons who spent at least 27 weeks [in the past year] in the labor force (that is, working or looking for work), but whose incomes fell below the official poverty level."^[1] In other words, if someone spent more than half of the past year in the labor force without earning more than the official poverty threshold, the US Department of Labor would classify them as "working poor." (Note: The official poverty threshold, which is set by the US Census Bureau, varies depending on the size of a family and the age of the family members. The US Bureau of Labor Statistics calculates working poverty rates for all working individuals, all families with at least one worker, and all "unrelated individuals." The individual-level working poverty rate calculates the percentage of all workers whose incomes fall below the poverty threshold. In 2009, the individual-level working poverty rate in the US was 7%, compared to 4.7% in 2000. The family-level working poverty rate only includes families of two or more people who are related by birth, marriage, or adoption. According to the Bureau of Labor Statistics' definition of family-level working poverty, a family is working poor if the combined cash income of the family falls below the poverty threshold for a family of their size. In 2009, the family-level working poverty rate in the US was 7.9%, compared to 5.6% in 2000. Finally, the unrelated individual working poverty rate measures working poverty among those who do not currently live with any family members. In 2009, 11.7% of employed unrelated individuals were poor, compared to 7.6% in 2000.^[1][14]

Relative

In Europe and other non-US, high-income countries, poverty and working poverty are defined in relative terms. A relative measure of poverty is based on a country's income distribution rather than an absolute amount of money. Eurostat, the statistical office of the European Union, classifies a household as poor if its income is less than 60 percent of the country's median household income. According to Eurostat, a relative measure of poverty is appropriate because "minimal acceptable standards usually differ between societies according to their general level of prosperity: someone regarded as poor in a rich developed country might be regarded as rich in a poor developing country."^[15]

When conducting cross-national research on working poverty, scholars tend to use a relative measure of poverty. In these studies, to be classified as "working poor," a household must satisfy the following two conditions: 1) at least one member of the household must be "working" (which can be defined in various ways), and 2) the total household income must be less than 60% (or 50%, or 40%) of the median income for that country.^[5][6] Brady, Fullerton, and Cross's 2010 cross-national study on working poverty in high-income countries defines a household as working poor if 1) it has at least one employed person and 2) the total household income falls below 50% of the median income for that country. According to this relative definition, the US's working poverty rate was 11% in the year 2000, nearly double the rate produced by the US government's absolute definition. For the same year, Canada's working poverty rate was 7.8%, the UK's was 4%, and Germany's was 3.8%.^[6]

Prevalence and trends

Poverty is often associated with joblessness, but a large proportion of poor people are actually working or looking for work. In 2009, according to the US Census Bureau's official definition of poverty, 8.8 million US families were below the poverty line (11.1% of all families). Of these families, 5.19 million, or 58.9%, had at least one person who was classified as working. In the same year, there were 11.7 million unrelated individuals (people who do not live with family members) whose incomes fell below the official poverty line (22% of all unrelated individuals). 3.9 million of these poor individuals, or 33%, were part of the working poor.^[1][2] The cost of raising a child from birth to age 18 for a middle-income, two-parent family averaged $226,920 last year (not including college), according to the U.S. Department of Agriculture. That's up nearly 40% -- or more than $60,000 -- from 10 years ago. Just one year of spending on a child can cost up to $13,830 in 2010, compared to $9,860 a decade ago.

Using the US Census Bureau's definition of poverty, the working poverty rate seems to have remained relatively stable since 1978.^[1] However, many scholars have argued that the official poverty threshold is too low, and that real wages and working conditions have actually declined for many workers over the past three or four decades. Social scientists like Arne Kalleberg have found that the decline in US manufacturing and the subsequent polarization of the labor market has led to an overall worsening of wages, job stability, and working conditions for people with lower skill levels and less formal education. From the mid-1940s to the mid-1970s, manufacturing jobs offered many low-skilled and medium-skilled workers stable, well-paying jobs. Due to global competition, technological advances, and other factors, US manufacturing jobs have been disappearing for decades. (From 1970 to 2008, the percentage of the labor force employed in the manufacturing sector shrank from 23.4% to 9.1%.^[16][17]) During this period of decline, job growth became polarized on either end of the labor market. That is, the jobs that replaced medium-pay, low- to medium-skill manufacturing jobs were high-paying, high-skill jobs and low-paying, low-skill jobs. Therefore, many low- to medium-skilled workers who would have been able to work in the manufacturing sector in 1970 must now take low-paying, precarious jobs in the service sector.^[4]

US compared to Europe

Other high-income countries have also experienced declining manufacturing sectors over the past four decades, but most of them have not experienced as much labor market polarization as the United States. Labor market polarization has been the most severe in liberal market economies like the US, Britain, and Australia. Countries like Denmark and France have been subject to the same economic pressures, but due to their more "inclusive" (or "egalitarian") labor market institutions, such as centralized and solidaristic collective bargaining and strong minimum wage laws, they have experienced less polarization.^[4]

Cross-national studies have found that European countries' working poverty rates are much lower than the US's. Most of this difference can be explained by the fact that European countries' welfare states are more generous than the US's.^[5][6] The relationship between generous welfare states and low rates of working poverty is elaborated upon in the "Risk Factors" and "Anti-Poverty Policies" sections.

The following graph uses data from Brady, Fullerton, and Cross (2010) to show the working poverty rates for a small sample of countries. Brady, Fullerton, and Cross (2010) accessed this data through the Luxembourg Income Study. This graph measures household, rather than person-level, poverty rates. A household is coded as "poor" if its income is less than 50% of its country's median income. This is a relative, rather than absolute, measure of poverty. A household is classified as "working" if at least one member of the household was employed at the time of the survey. The most important insight contained in this graph is that the US has strikingly higher working poverty rates than European countries.

Risk factors

There are five major categories of risk factors that increase a person's likelihood of experiencing working poverty: sectoral factors, demographic factors, economic factors, labor market institutions, and welfare generosity. Working poverty is a phenomenon that affects a very wide range of people, but there are some employment sectors, demographic groups, political factors, and economic factors that are correlated with higher rates of working poverty than others. Sectoral and demographic factors help explain why certain people within a given country are more likely than others to be working poor. Political and economic factors can explain why different countries have different working poverty rates.

Sectoral tendencies
Working poverty is not distributed equally among employment sectors. The service sector has the highest rate of working poverty. In fact, 13.3% of US service sector workers found themselves below the poverty line in 2009.^[1] Examples of low-wage service sector workers include fast-food workers, home health aids, waiters/waitresses, and retail workers.

Although the service sector has the highest rate of working poverty, a significant portion of the working poor are blue-collar workers in the manufacturing, agriculture, and construction industries. Most manufacturing jobs used to offer generous wages and benefits, but manufacturing job quality has declined over the years. Nowadays, many US manufacturing jobs are located in right-to-work states, where it is nearly impossible for workers to form a union. This means that manufacturing employers are able to pay lower wages and offer fewer benefits than they used to.

Demographic factors
In her book, No Shame in My Game, Katherine Newman finds that "[t]he nation's young, its single parents, the poorly educated, and minorities are more likely than other workers to be poor" (p. 42).^[18] These factors, in addition to being part of a large household, being part of a single-earner household, being female, and having a part-time (instead of a full-time) job have been found to be important working poverty "risk factors." Immigrant workers and self-employed workers are also more likely to be working poor than other kinds of workers.^[5][6]

Economic factors
There is a widespread assumption that economic growth leads to tighter labor markets and higher wages. However, the evidence suggests that economic growth does not always benefit each part of the population equally. For example, the 1980s was a period of economic growth and prosperity in the United States, but most of the economic gains were concentrated at the top of the income spectrum. This means that people near the bottom of the labor market did not benefit from the economic gains of the 1980s. In fact, many have argued that low-skilled workers experienced declining prosperity in the 1980s.^[19] Therefore, changing economic conditions do not have as large of an impact on working poverty rates as one might expect.

Labor market institutions
Labor markets can be egalitarian, efficient, or somewhere in the middle. According to Brady, Fullerton, and Cross (2010), "[e]fficient labor markets typically feature flexibility, low unemployment, and higher economic growth, and facilitate the rapid hiring and firing of workers. Egalitarian labor markets are bolstered by strong labor market institutions, higher wages, and greater security" (p562). The United States has an efficient labor market, whereas most European countries have egalitarian labor markets. Each system has its drawbacks, but the egalitarian labor market model is typically associated with lower rates of working poverty. One tradeoff to this is that the "lowest skilled and least employable" people are sometimes excluded from an egalitarian labor market, and must instead rely on government aid in order to survive (p. 563).^[6] If the United States switched from an efficient to an egalitarian labor market, it might have to increase its welfare state generosity in order to cope with a higher unemployment rate.

Centralized wage bargaining is a key component of egalitarian labor markets. In a country with centralized wage bargaining institutions, wages for entire industries are negotiated at the regional or national level. This means that similar workers earn similar wages, which reduces income inequality. Lohmann (2009) finds that countries with centralized wage bargaining institutions have lower rates of "pre-transfer" working poverty.^[5] The "pre-transfer" working poverty rate is the percentage of workers who fall below the poverty threshold based on their earned wages (not counting government transfers).

Welfare state generosity
Cross-national studies are in agreement that the most important factor affecting working poverty rates is welfare state generosity. A generous welfare state spends a higher proportion of its GDP on things like unemployment insurance, social security, family assistance, childcare subsidies, healthcare subsidies, housing subsidies, transportation subsidies, and food subsidies. Studies on working poverty have found that these kinds of government spending can pull a significant number of people out of poverty, even if they earn low wages. Lohmann's 2009 study shows that welfare state generosity has a significant impact on the "post-transfer" rate of working poverty.^[5] The "post-transfer" rate of working poverty is the percentage of working households that fall below the poverty threshold after government aid has been taken into account.

Different types of transfers benefit different kinds of low-wage families. Family benefits will benefit households with children and unemployment benefits will benefit households that include workers with significant work experience. Transfers such as old-age benefits are unlikely to benefit low-wage households unless the elderly are living in the same household. Sometimes, even when benefits are available, those who qualify do not take advantage of them. Migrants in particular are less likely to take advantage of the available benefits.^[5]

Obstacles to uplift

The working poor face many of the same daily life struggles as the nonworking poor, but they also face some unique obstacles. Some studies, many of them qualitative, provide detailed insights into the obstacles that hinder workers' ability to find jobs, keep jobs, and make ends meet. Some of the most common struggles faced by the working poor are finding affordable housing, arranging transportation to and from work, buying basic necessities, arranging childcare, having unpredictable work schedules, juggling two or more jobs, and coping with low-status work.

Housing
Working poor people who do not have friends or relatives with whom they can live often find themselves unable to rent an apartment of their own. Although the working poor are employed at least some of the time, they often find it difficult to save enough money for a deposit on a rental property. As a result, many working poor people end up in living situations that are actually more costly than a month-to-month rental. For instance, many working poor people, especially those who are in some kind of transitional phase, rent rooms in week-to-week motels. These motel rooms tend to cost much more than a traditional rental, but they are accessible to the working poor because they do not require a large deposit. If someone is unable or unwilling to pay for a room in a motel, they might live in his/her car, in a homeless shelter, or on the street. This is not a marginal phenomenon; in fact, according to the 2008 US Conference of Mayors, one in five homeless people are currently employed.^[20]

Of course, some working poor people are able to access housing subsidies (such as a Section 8 Housing Choice Voucher) to help cover their housing expenses. However, these housing subsidies are not available to everyone who meets the Section 8 income specifications. In fact, less than 25% of people who qualify for a housing subsidy receive one.^[12]

Education
The issue with education starts many times with the working poor from childhood and follows them into their struggle for a substantial income. Children growing up in families of the working poor are not provided the same educational opportunities as their middle-class counterpart. In many cases the low income community is filled with school that are lacking necessities and support needed to form a solid education.^[21] This follows students as they continue in education. In many cases this hinders the possibility for America's youth to continue on to higher education. The grades and credits just are not attained in many cases, and the lack of guidance in the schools leaves the children of the working poor with no degree. Also, the lack of funds for continuing education causes these children to fall behind. In many cases, their parents did not continue on into higher education and because of this have a difficult time finding jobs with salaries that can support a family. Today a college degree is a requirement for many jobs, and it is the low skill jobs that usually only require a high school degree or GED. The inequality in available education continues the vicious cycle of families entering into the working poor.

Transportation
Given the fact that many working poor people do not own a car or cannot afford to drive their car, where they live can significantly limit where they are able to work, and vice versa.^[3] Given the fact that public transportation in many US cities is sparse, expensive, or non-existent, this is a particularly salient obstacle. Some working poor people are able to use their social networks—if they have them—to meet their transportation needs. In a study on low-income single mothers, Edin and Lein found that single mothers who had someone to drive them to and from work were much more likely to be able to support themselves without relying on government aid.^[11]

Basic necessities
Like the unemployed poor, the working poor struggle to pay for basic necessities like food, clothing, housing, and transportation. In some cases, however, the working poor's basic expenses can be higher than the unemployed poor's. For instance, the working poor's clothing expenses may be higher than the unemployed poor's because they must purchase specific clothes or uniforms for their jobs.^[3] Also, because the working poor are spending much of their time at work, they may not have the time to prepare their own food. In this case, they may frequently resort to eating fast food, which is less healthful and more expensive than home-prepared food.^[3]

Childcare
Working poor parents with young children, especially single parents, face significantly more childcare-related obstacles than other people. Often, childcare costs can exceed a low-wage earners' income, making work, especially in a job with no potential for advancement, an economically illogical activity.^[11][12] However, some single parents are able to rely on their social networks to provide free or below-market-cost childcare.^[11] There are also some free childcare options provided by the government, such as the Head Start Program. However, these free options are only available during certain hours, which may limit parents' ability to take jobs that require late-night shifts.The U.S. "average" seems to suggest that for one toddler, in full-time day care, on weekdays, the cost is approximately $600.00 per month. But, that figure can rise to well over $1000.00 per month in major metro areas, and fall to less than $350 in rural areas.The average cost of center-based daycare in the United States is $11,666 per year ($972 a month), but prices range from $3,582 to $18,773 a year ($300 to $1,564 monthly), according to the National Association of Child Care Resource & Referral Agencies (NACCRRA).^[22]

Work schedules
Many low-wage jobs force workers to accept irregular schedules. In fact, some employers will not hire someone unless they have "open availability," which means being available to work any time, any day.^[3] This makes it difficult for workers to arrange for childcare and to take on a second job. In addition, working poor people's working hours can fluctuate wildly from one week to the next, making it difficult for them to budget effectively and save up money.^[3]

Multiple jobs
Many low-wage workers have to work multiple jobs in order to make ends meet. In 1996, 6.2 percent of the workforce held two or more full- or part-time jobs. Most of these people held two part-time jobs or one part-time job and one full-time job, but 4% of men and 2% of women held two full-time jobs at the same time.^[23] This can be physically exhausting and can often lead to short and long-term health problems.^[3]

Low-Status Work
Many low-wage service sector jobs require a great deal of customer service work. Although not all customer service jobs are low-wage or low-status,^[24] many of them are. Some argue that the low status nature of some jobs can have negative psychological effects on workers,^[3] but others argue that low status workers come up with coping mechanisms that allow them to maintain a strong sense of self-worth.^[18][25] One of these coping mechanisms is called boundary work. Boundary work happens when one group of people valorize their own social position by comparing themselves to another group, who they perceive to be inferior in some way. For example, Newman (1999) found that fast food workers in New York City cope with the low-status nature of their job by comparing themselves to the unemployed, who they perceive to be even lower-status than themselves.^[26] Thus, although the low-status nature of working poor people's jobs may have some negative psychological effects, some, but probably not all, of these negative effects can be counteracted through coping mechanisms such as boundary work.

Anti-poverty policies

Scholars, policymakers, and others have come up with a variety of proposals for how to reduce or eliminate working poverty. Most of these proposals are directed toward the United States, but they might also be relevant to other countries. The remainder of the section outlines the pros and cons of some of the most commonly proposed solutions.

Welfare state generosity

Cross-national studies like Lohmann (2009) and Brady, Fullerton, and Cross (2010) clearly show that countries with generous welfare states have lower levels of working poverty than countries with less-generous welfare states, even when factors like demography, economic performance, and labor market institutions are taken into account. Having a generous welfare state does two key things to reduce working poverty: it raises the minimum level of wages that people are willing to accept, and it pulls a large portion of low-wage workers out of poverty by providing them with an array of cash and non-cash government benefits.^[5] Many think that increasing the United States' welfare state generosity would lower the working poverty rate. A common critique of this proposal is that a generous welfare state would not work because it would stagnate the economy, raise unemployment, and degrade people's work ethic.^[10] However, as of 2011, most European countries have a lower unemployment rate than the US. Furthermore, although Western European economies' growth rates can be lower than the US's from time to time, their growth rates tend to be more stable, whereas the US's tends to fluctuate relatively severely. Individual states offer financial assistance for child care, but the aid varies widely. Most assistance is administered through the Child Care and Development Block Grants. Check here to find the contact information for your state. Many subsidies have strict income guidelines and are generally for families with children under 13 (the age limit is often extended if the child has a disability). Many subsidies permit home-based care, but some only accept a day care center, so check the requirements. If you need to use an authorized provider, ask if they will put you in touch with an agency that can help you find one.

Some states distribute funds through social or health departments or agencies (like this one in Washington State). For example, the Children's Cabinet in Nevada can refer families to providers, help them apply for subsidies and can even help families who want to pay a relative for care. North Carolina's Smart Start is a public/private partnership that offers funding for child care. Check the National Women's Law Center for each state's child care assistance policy.^[27]

Wages and benefits

In the conclusion of her book, Nickel and Dimed (2001), Barbara Ehrenreich argues that Americans need to pressure employers to improve worker compensation.^[3] Generally speaking, this implies a need to strengthen the labor movement. Interestingly, cross-national statistical studies on working poverty suggest that generous welfare states have a larger impact on working poverty than strong labor movements. The labor movements in various countries have accomplished this through political parties of their own (labor parties) or strategic alliances with non-labor parties, for instance, when striving to put a meaningful minimum wage in place. The federal government offers a Flexible Spending Account (FSA) that's administered through workplaces.

If your job offers an FSA (also known as a Dependent Care Account), you can put aside up to $5,000 in per-tax dollars to pay for child care expenses. If both you and your spouse have an FSA, the family limit is $5,000 -- but you could get as much as $2,000 in tax savings if your combined contributions reach the maximum. ^[28]

Education and training

Some argue that more vocational training, especially in growth industries like healthcare and renewable energy, is the solution to working poverty. To be sure, wider availability of vocational training could pull some people out of working poverty, but the fact remains that the low-wage service sector is a rapidly growing part of the US economy. Even if more nursing and clean energy jobs were added to the economy, there would still be a huge portion of the workforce in low-wage service sector jobs like retail, food service, and cleaning. Therefore, it seems clear that any significant reduction in the working poverty rate will have to come from offering higher wages and more benefits to the current, and future, population of service sector workers.

Child support assurance

Given the fact that such a large proportion of working poor households are headed by a single mother, one clear way to reduce working poverty would be to make sure that children's fathers share the cost of child rearing. In cases where the father cannot provide child support, scholars like Irwin Garfinkel advocate for the implementation of a child support guarantee, whereby the government pays childcare costs if the father cannot. Child support is not always a guarantee if the father or mother does not work. For example, if the parent without custody is not working then the parent with custody does not receive any child support unless the non working parent is employed at their job longer than 90 days, excluding if the non begins to work for its a city or government. Also, the government does not pay for childcare cost if you make more than the cut off range (your gross, per county or state.)

Marriage

Households with two wage-earners have a significantly lower rate of working poverty than households with only one wage-earner. Also, households with two adults, but only one wage-earner, have lower working poverty rates than households with only one adult. Therefore, it seems clear that having two adults in a household, especially if there are children present, is more likely to keep a household out of poverty than having just one adult in a household. Many scholars and policymakers have used this fact to argue that encouraging people to get married and stay married is an effective way to reduce working poverty (and poverty in general). However, this is easier said than done. Research has shown that low-income people marry less often than higher-income people because they have a more difficult time finding a partner who is employed, which is often seen as a prerequisite for marriage.^[29] Therefore, unless the employment opportunity structure is improved, simply increasing the number of marriages among low-income people would be unlikely to lower working poverty rates.

Ultimately, effective solutions to working poverty are multifaceted. Each of the aforementioned proposals could help reduce working poverty in the United States, but they might have a greater impact if at least a few of them were pursued simultaneously.

See also

Notes and references