Working but Poor in New York

March 8, 1999. This report from the Fiscal Policy Institute (revised in July 1999) outlines why and how to improve the economic situation of a hard-working but ignored population. Report below; also see press release.

Working but Poor in New York

Table of Contents

  1. Dedication
  2. Acknowledgements
  3. Executive Summary
  4. Working but Poor in New York
    1. Many New Yorkers Work but Remain Poor
    2. New York’s Poverty Rate Has Remained High While the National Rate Has Dropped Steadily
    3. Most Poor Families Include a Worker
    4. Many Working Families Have Incomes Just Above the Poverty Line
    5. New York’s Working Poor Defy Demographic Stereotypes
    6. The Situation Has Worsened Significantly in the Past 20 Years
    7. A Variety of Factors Explain the Persistence of Poverty Despite Work
  5. Positive Strategies to Make Work Pay
    1. Raising the Wage Floor
      1. Raise the Minimum Wage and Index It
      2. Enact Living Wage Laws
    2. Strengthening Economic
      Security Safety Net Programs 

      1. Make Welfare Reform Work
      2. Reform the Unemployment Insurance System
      3. Provide Paid Family Leave
    3. Supplementing the Incomes of Low Wage Workers
      1. Expand the Earned Income Tax Credit (EITC) and the Federal Child Credit
      2. Increase Access to Quality Health Care
      3. Improve the Availability of Affordable Child Care
  6. Conclusions
  7. Endnotes

Dedication

The publication of this edition of Working but Poor in New York is dedicated to the members and staff of the New York State Labor-Religion Coalition, and the local labor-religion coalitions with which it works, for their dedication to improving the incomes and the quality of life of the low-wage workers without whose labor our state’s economy could not function. This report is being issued in conjunction with the Labor-Religion Coalition’s 40-hour fast in support of the working poor of New York, from 8 p.m. Monday, March 8 through noon on Wednesday, March 10.

Acknowledgments

This report was prepared by Trudi Renwick who is an economist with the Fiscal Policy Institute. She has written several articles and a book on poverty measurement with a particular focus on poverty among single parent families. Earlier versions of this report were prepared by Deborah Ellwood when she served as a senior policy analyst with the
Fiscal Policy Institute. She is currently a senior researcher with the Nelson A. Rockefeller Institute of Government’s Center for the Study of the States.

Special thanks are owed to the staff of the Center on Budget and Policy Priorities, particularly Christina Smith FitzPatrick and Ed Lazere, whose compilation and analysis of Current Population Survey data made this report possible. We also wish to thank the Ford and Charles Stewart Mott Foundations and the many labor, religious, human services, community and other organizations that support, disseminate and promote the Fiscal Policy Institute’s analytical work.

The section of this report that deals with the unemployment insurance system is derived from a broader report on this subject that has been prepared by the Fiscal Policy Institute staff and which is currently undergoing final review. Individuals with questions about aspects of unemployment insurance reform that are not covered by this report on the
working poor, such as the indexing of the maximum weekly unemployment insurance benefit to the state’s average weekly wage, are encouraged to contact Trudi Renwick.

Executive Summary

Broad economic indicators tell us that the American economy is stronger than it has been in decades. However, a closer look at the economic conditions shows that the benefits of the growing economy are not being shared by all. Large numbers of New Yorkers are poor. Despite the fact that New York had the 4th highest per capita income of any state in the
nation in 1997, more than three million New Yorkers lived in poverty. This represents 16.6% of the population or one in six New Yorkers. The numbers are worse for children — one in four children or 25.4% of all children in New York were poor. This is more than 1.2 million children.

The poverty rate of the poorest families is not high because of reduced work effort. In more than half of all poor families with children in New York State (52%), at least one person worked. In the mid-1990s, this repr esented more than one-quarter of a million (252,000) families who were working but poor. More than a third of New York’s working poor families had at least one worker who worked full-time year-round but these families still had incomes below the official poverty thresholds.

The demographics of New York’s working poor defy common stereotypes. The working poor are not all young, poorly educated, single parents who do not have the skills to make a decent living. In fact, only a minority of working poor families fit that description. On the contrary, the growing problem of the working poor is in large part the result of broad economic forces that are beyond their control.

While nationwide the poverty rate of poor working families with children grew by 13% between the late-1980s and the mid-1990s, in New York the poverty rate for such families increased at four times that rate or 52%. In the mid-1990s, one quarter of a million New York families were poor despite work, 115,000 more working poor families than in the late-1970s.

In addition to painting a picture of working poor families in New York and describing how the situation has changed over time, this report also outlines the factors that contribute to the problem of poverty despite work and discusses specific positive strategies designed to make work pay. The report’s recommendations include:

  • raising the minimum wage and indexing it to inflation;
  • requiring firms that receive public contracts or public subsidies to pay their employees a living wage;
  • making welfare reform work better by increasing the portion of earnings that a family can keep as it moves from welfare to work, establishing transitional employment programs, and making affordable transportation alternatives more readily available;
  • making the unemployment insurance system a more effective safety net for low wage workers;
  • expanding New York’s temporary disability insurance program to cover leaves taken under the federal Family and Medical Leave Act;
  • expanding the federal and state Earned Income Tax Credits and the new federal child credit to ensure that working families do not live in poverty;
  • increasing access to quality health care, particularly for low-income adults, and
  • improving the availability of affordable and reliable child care.

Working but Poor in New York

Broad economic indicators tell us that the American economy is stronger than it has been in decades. The unemployment rate is the lowest it has been in 29 years, inflation is lower than it has been in 33 years, and the current economic expansion is the longest peacetime expansion in our nation’s history. However, a closer look at the economic conditions shows that the benefits of the growing economy are not being shared by all.

Over the past 20 years, the richest Americans have seen their incomes skyrocket but the poorest have seen their incomes plummet while wage increases of the middle class have been eaten away by inflation. Income inequality has worsened dramatically. This is unusual for the United States, where economic prosperity has traditionally been more broadly shared.

The situation is particularly stark in New York State. Its income inequality is the worst of all 50 states and has been growing more quickly than all but one state. The inequality is not worsening simply because the rich are getting richer, however. Both the poor and the middle class have seen their real incomes decline. From the late 1970s to the mid-1990s, the richest fifth of New York families with children saw their incomes increase 46% while the poorest fifth of New York families saw their incomes decline by 36% and the middle fifth of families saw their incomes drop by 4%.

Contrary to the philosophy underlying welfare reform, the incomes of the poorest families are not falling because of any reduced work effort. They are falling because the jobs that our economy offers these workers are not paying wages that keep pace with even modest increases in consumer prices. In fact, many New Yorkers work and still remain poor. This defies the commonly held value — affirmed by numerous opinion polls — that if you work hard, you should be able to provide a reasonable standard of living for your family.

The number of New Yorkers who are working but poor is large and growing. The demographics of this group defy stereotypes. The working poor are not poor because they are all young, uneducated, single parents who do not have the skills to make a decent living. In fact, only a minority of working poor families fits that description. On the contrary, the growing problem of the working poor is in large part the result of broad economic forces that are beyond their control.

The situation is now dire enough that it demands immediate attention from public and private leaders. The data is compelling and opinion surveys show that a majority of the public thinks that this is an issue society should be addressing. Fortunately, there are steps public and private institutions can take to address the situation.

This report paints a picture of working poor families in New York and describes how the situation has changed over time. It outlines the factors that contribute to the problem of poverty despite work and provides policy options for addressing the situation.

Many New Yorkers Work but Remain Poor


Large numbers of New Yorkers are poor. Despite the fact that New York had the 4th highest per capita income of any state in the nation in 1997, more than three million New Yorkers lived in poverty. This represents 16.6% of the population or one in six New Yorkers. The numbers are worse for children — one in four children or 25.4% of all children in New York were poor. This is more than 1.2 million children.

 

 

 

New York’s Poverty Rate Has Remained High While the National Rate Has Dropped Steadily


The poverty rate in New York has remained high while the national poverty rate has dropped steadily. Between 1993 and 1997 the national poverty rate fell from 15% to just more than 13% while the New York State poverty rate hovered between 16.5% and 17%. While historically New York’s poverty rate was lower than the national rate, since 1989 the state’s poverty rate has exceeded the national poverty rate. In 1997 the New York State poverty rate was nearly one fourth higher than the national rate.

 

 

 

Most Poor Families Include a Worker


It is commonly believed that people are poor because they do not work. But large numbers of New York families remain poor despite the fact that someone in the family works for wages.(1)

Work does not guarantee a decent standard of living in New York. In more than half of all poor families with children in New York State (52%), at least one person worked outside the home. In the mid-1990s, this represented more than one-quarter of a million (252,000) families who were working but poor.

In addition, there were 194,000 additional non-elderly families and individuals without children who were poor despite work. In terms of individual people, a total of 1,189,000 New Yorkers in the mid-1990s lived in poor families where at least one person worked. More than half a million New York children (531,000) lived in poor families where someone worked — 39% of poor children in New York.


The workers in these poor families were not merely tangentially attached to the labor force. Many of these poor families had a family member who worked full time throughout the year.(2) In fact, 130,000 poor New York families had at least one full-time, full-year worker, including 93,000 families with children. Many of the parents that did not work full time or full year wanted to be employed full-time. Over two fifths (42.2%) of all working parents in poor families worked part-time or part-year involuntarily. In fact, growing numbers of workers were involuntarily employed in the “contingent” (temporary or part-time) labor market.

Working poor families also worked most weeks of the year: the average number of weeks worked by poor families with children in the mid-1990s was 39, or roughly nine months of the year. Non-elderly poor families and individuals without children worked an average of 34 weeks. Forty-three percent of working families with children worked more than 13 weeks. While most poor families received some public cash assistance, 42.1% of New York State’s poor families of children relied on earnings for the majority of their annual income. Even among families who receive public assistance, 43% of these families also worked in 1997.

Many Working Families Have Incomes Just Above the Poverty Line

In addition to those families living below the official poverty line, another quarter of a million families – 223,000 – live just above the poverty line, with incomes between 100% and 150% of the poverty line. Most – 89% – of these near-poor families have a worker in the family and 58% of these families have a full-time, year-round worker. Another 155,000 non-elderly families and individuals without children are also classified as near-poor and 92% of these families include a worker. Near-poor families may still lack sufficient resources to provide for their basic needs. In recognition of the need of families classified as “near-poor” many programs, especially for health and nutrition, use increments above the poverty level to establish eligibility.

New York’s Working Poor Defy Demographic Stereotypes

Another common misconception is that families that have low earnings are headed by young, nonwhite, uneducated, single parents. In fact, neither age nor race nor education nor marriage guarantee against poverty.

Only 13% of the family heads of working poor families were less than 25 years old. Two-thirds of the household heads of working poor families with children were in their prime working years, 25-44. Even among childless families and individuals, only 20% of the individuals were under 25.

More working poor families with children in New York are headed by non-Hispanic whites than any other racial category. Only one fourth of working poor families with children are headed by an African American, while almost 30% of family heads are classified as Hispanic. Among childless working poor families and individuals, almost two-thirds (62.5%) are non-Hispanic whites while only 12% are African American and 19% are Hispanic.

A vast majority — over two-thirds — of the family heads of working poor families with children had at least a high school diploma or GED. More than a quarter of these family heads had some college education or a college degree.

In New York, a working poor family was less likely to be headed by a single woman — less than half (46.4%) of the working poor families in New York were headed by single women. More than half the working poor families were headed by nonmarried men or married couples.

Characteristics of Poor Working Families



The Situation Has Worsened Significantly in the Past 20 Years

Rapidly changing economic conditions throughout the country continue to put downward pressure on wages for most workers. But workers at the bottom end of the pay scale are hit hardest. The number and proportion of poor families with a worker in the labor force has grown dramatically in the last 17 years.


When comparing two similar points in the business cycle — the late-1970s and the mid-1990s — we find that there were 115,000 more working poor families in New York in the mid-1990s than in the late-1970s. This 84% increase is substantially larger than the 2% increase in the total New York population over that time period and substantially larger than the increase in working poor families nationally.

 

 

 


The poverty rate of working families with children who are poor grew substantially from 6.4% in the late-1970s to 7.7% in the mid-1980s to 11.7% in the mid-1990s. The percent change in the poverty rate for New York’s working poor families was much greater than the percent change in the poverty rate of these families nationwide. While nationwide the poverty rate of poor working families with children grew by 13% between the mid-1980s and the mid-1990s, in New York the poverty rate increased at four times that rate or 52%.

The educational attainment of working poor families has changed too. In the late-1970s, more than half (52%) of the heads of all working poor families with children had a high school diploma or GED. By the mid-1990s, 68% of the heads of working poor families had a high school diploma or GED. At the other end of the spectrum, 15% of all heads of working poor families had at least some college education in the late-1970s while by the mid-1990s, 31% of the heads of working poor families had attended college.

A Variety of Factors Explain the Persistence of Poverty Despite Work

Numerous studies have documented the decline in real wages among the lowest income American workers. Between 1989 and 1996, hourly wages for low-wage workers in New York State fell 8.3%, after adjusting for inflation. Over this same period, the inflation-adjusted wages of low wage workers nationally declined by 2.3%. (3)


Although nationally the wages of low-wage workers grew strongly in 1998, the rate of growth in the wages for such workers in New York was well below the national average. Nationally the wages of such workers grew by 6% between 1996 and 1998 while the wages of New York’s low-wage workers grew by only 2.2%. Overall, for the period 1989 to 1998 wages of these lower income workers in New York fell by 6.3% while nationally wages for this group of workers increased by 3.5%.(4)

For some time many families were able to make up for the declining wages by sending a second worker into the labor force or by working more hours outside the home. But now they can no longer keep up.

While economists continue to grapple with explanations for falling wages and widening wage inequality, a number of factors appear to account for most of the shifts in the wage structure. These include:

  • severe drops during the 1980s and 1990s in the number (and bargaining power) or unionized workers;
  • an erosion through the 1980s in the inflation-adjusted value of the minimum wage, which has only been partially corrected in the 1990s;
  • the decline in higher-wage manufacturing jobs and the corresponding expansion of low-wage, service sector employment;
  • the increasing globalization of the economy through immigration and trade; and
  • the growth in contingent (temporary and part-time) and other nontraditional work arrangements.(5)


While wages in the service sector vary widely — from, for example, high paying investment banking jobs to low-wage restaurant jobs — the average hourly wage in the service sector is 30% lower than the average wage in the goods-producing sector. Since most of the employment growth in the 1980s was in the service sector, economists argue that this is an important contributor to the stagnation of wages among the lowest wage workers.(6)

This is particularly true for New York State. Between 1982 and 1998, New York State lost 435,700 manufacturing jobs, a decrease of 32.2%, while service sector employment was up 52.8%. During the current recovery, from November 1992 to December 1998, the number of nonfarm jobs in New York increased by more than 500,000 but almost 90% of this growth was in the service sector. The manufacturing sector continued to deteriorate, shedding almost 100,000 jobs while another 100,000 middle income jobs in banking, public and private hospitals and government also disappeared.


Between 1992 and 1998 the two fastest growing industries in New York State were services and retail trade — the two sectors with the lowest average weekly wages.

Working poor families are disproportionately employed in these lower paying sectors of the economy. One in five working poor families had hourly earnings in 1997 that on a full-time basis would produce annual earnings below the poverty line for a family of four. Two-thirds of these working parents were employed in either the service sector or retail trade. Perhaps most disturbing is the fact that the percent of working poor family heads with low hourly earnings has almost doubled since the late-1970s – growing from 9.9% to 19.4%.

Positive Strategies to Make Work Pay

The decline in wages and incomes for people at the low-end of the pay scale is due to fundamental changes in the economy. Reversing the trend will require the development and implementation of creative, comprehensive strategies at both the federal and state level. But there are some steps that can be taken to ameliorate the situation. This section highlights some of the policies that federal, state, and local governments have already implemented and discusses what they can do to build on what has been achieved.

Raising the Wage Floor

The most important direct cause of our growing income inequality and the increasing poverty rates of working families is the deterioration of the wages of the lowest income workers. The real wages of New York workers in the lowest decile of the wage distribution fell by 15% between 1979 and 1997. Nothing has contributed to this decline more than the erosion of the minimum wage as a floor beneath the low wage job market.

1. Raise the Minimum Wage and Index It: The Value of the Federal Minimum Wage has Fallen Significantly.

In 1996, the U.S. Congress raised the minimum wage from $4.25 to $5.15 per hour. The increase was phased in over two years with 1998 the first full year of the $5.15 per hour rate. This was the first increase in the federal minimum wage in five years.

Despite the recent increase in the federal minimum wage, a person earning $5.15 per hour will earn only 72% of the federal poverty line for a family of three. In the 1960s and 70s, the earnings of a full-time, year round worker receiving the minimum were enough to lift a family of three above the poverty line. The real value of the federal minimum wage is lower in 1998 than it was during the entire 1961 through 1984 period. Even with the latest increase, the purchasing power of the minimum wage in 1998 was only 69% of the purchasing power of the minimum wage in 1968.

Contrary to popular belief, a majority of minimum wage workers are adults, not teenagers, and increasing the minimum wage does not adversely affect employment. Less than 30% of all minimum wage workers are teenagers while nearly half are age 25 or older. Indeed, it is clear that the decline in the value of the minimum wage has severely hurt many families. Since minimum wage workers account for 54% of their household earnings on average, the inflation-adjusted drop in the minimum wage has contributed to an increase in the number of working poor families and to the widening wage inequality. Economists David Card and Alan Krueger of Princeton University recently analyzed the employment impacts of an increase in the minimum wage in California and New Jersey. They found no evidence that employment declined in either state in response to the increases.(7)

The 1999 Economic Report of the President noted that while many studies have examined this issue, the “weight of the evidence suggests that modest increases in the minimum wage have had very little or no effect on employment.”(8)

New York’s State Minimum Wage is Now 17% Below the Federal Minimum.

New York has recognized the importance of the minimum wage by establishing its own
minimum wage law and applying it to more types of workers than are covered by the federal
law. For example, workers employed by small businesses not engaged in interstate commerce
are covered by the New York State law but not the federal law.

Historically, New York has almost always increased the New York State minimum wage in
tandem with increases in the federal minimum wage. During two periods (1967 and 1970-1974)
New York’s minimum wage actually exceeded the federal rate. Unfortunately, New York did
not increase the state minimum wage when the federal minimum wage was increased in 1996
and still has not done so. The result is that workers covered by the New York State
minimum wage but not the federal minimum wage are only guaranteed $4.25 per hour instead
of the $5.15 guaranteed to most workers.

While it would be most appropriate for the federal government to enact such
legislation, New York’s high cost of living relative to the rest of the nation makes it
logical for New York to take this step now. Recognizing the need to raise the minimum wage
to maintain minimal living standards, seven other states and the District of Columbia
already have enacted minimum wages above the federal minimum wage — Alaska, California,
Connecticut, Hawaii, Massachusetts, Oregon and Vermont. A successful 1998 ballot measure
in Washington State will index their minimum wage to the Consumer Price Index beginning in
2001.

Recommendations

  1. The U.S. Congress should support Senator Edward Kennedy’s proposal to increase the
    minimum wage in three steps and then index it to inflation. Increasing the minimum wage is
    one important way that policymakers can ensure that wages of the lowest income Americans
    do not continue to deteriorate. Increasing the minimum wage has broad support among the
    general public. President Clinton recently called for a two-step $1 increase in the
    minimum wage.
  2. New York State should immediately increase the state minimum wage to at least equal the
    current federal minimum wage and should consider further increasing the state minimum wage
    and indexing it to inflation. It is important to index the minimum wage to inflation
    because without regular revisions, the value of the minimum wage quickly erodes with
    increasing costs pushing more families back into poverty. Indexing the minimum wage to
    inflation can ensure that minimum wage earners do not lose ground every year the minimum
    wage is not legislatively increased.

2. Enact Living Wage Laws

The decline in wages for low-income workers and the failure of the federal government to take stronger steps to address the problem have led to efforts to raise wages through legislation at the state and local level. These efforts, commonly referred to as “living wage campaigns,” have been launched by grass-roots coalitions of community organizations, religious groups and labor unions – led in many cases by the AFL-CIO’s state labor federations and local central labor councils and the Association of Community Organizations for Reform Now (ACORN). Living wage ordinances have been passed in seventeen cities and organizing campaigns are underway in two dozen states and municipalities.(9)

In contrast to minimum wage legislation, many living wage campaigns are intended to raise wages to the level necessary to keep the family of a full-time worker above the poverty line. Some of the proposals would raise the minimum wage in a state or municipality to its peak historical value under federal law ($7.74 per hour in 1998 dollars, achieved in 1968) and thereafter index it to inflation. Other proposals mandate health insurance benefits to low-wage workers while some proposals set wages according to local cost of living levels. The California Liveable Wage Coalition, for example, took the high cost of living in that state into account when setting its minimum wage goal above the federal level.

Most living wage campaigns do not seek to increase the minimum wage across the board in a particular location. Instead they focus on employers who receive public subsidies or public contracts. State and local programs that provide subsidies, tax abatements and other benefits to private employers for the purpose of job creation and retention rarely distinguish between high and low-wage employment. Nor do most cities and states that contract with private corporations for the provision of public services impose any pay and benefits standards on contract recipients. As a result, many companies receiving public subsidies and/or public contracts pay wages well below the poverty level. The argument behind living wage laws is that governments should not be using tax dollars to create or subsidize poverty-wage jobs, but rather should set a positive example by requiring employers who receive public funds to pay a living wage.

In July 1996, New York City enacted a law which is similar in some regards to a living wage law. The City Council ordinance requires that employees of city contractors for security, temporary cleaning and food services be paid the applicable prevailing wage for the industry to be determined by the City Comptroller. The amendment to the City Code was passed on July 11, 1996, and vetoed by Mayor Giuliani on August 7, 1996 but the Council overrode the veto on September 11, 1996. Unfortunately this ordinance has not been fully implemented.

Recommendations

  1. New York State should adopt a living wage statute that requires firms that receive contracts or subsidies from the state government or any of its public benefit authorities (e.g. MTA, Port Authority, etc.) to pay employees a living wage and provide health insurance coverage. Any employer receiving any form of economic development incentive should be subject to the living wage statute, including companies enjoying the benefits of lower cost power from the New York Power Authority.
  2. Local governments should enact ordinances requiring the firms with which they contract to pay a living wage. Such ordinances should also include firms that receive economic development incentives.

Strengthening Economic Security Safety Net Programs

A second category of reforms which would help the working poor are those that would strengthen economic security safety net programs. While these programs are designed to provide economic security to all New Yorkers, working poor families and individuals are more likely to turn to these safety net programs to make ends meet.

1. Make Welfare Reform Work

In developing state policies to assist the working poor, particular attention should be given to people who are making the transition from welfare to work. Recent federal welfare legislation and state and local legislative and administrative changes have pushed large numbers of welfare recipients into the job market. The following three policy proposals represent some initial steps to address the needs of this important group of low-income families. The availability of affordable and reliable child care, as discussed later in this report, is also essential to facilitate the transition from welfare to work.

Recommendations

  1. Liberalize the earned income disregard. One way states can help welfare recipients to move successfully from welfare to work is by allowing them to keep more of their welfare benefits when they do work. Under standard federal welfare rules prior to the 1996 welfare reform, many families found that when their work expenses were taken into account, their disposable income declined after taking a job. Welfare recipients’ public assistance grants were reduced by 66 cents for every dollar earned during the first 12 months of work and dollar for dollar (except for the first $90) after one year of work. In 1997, New York took steps to ease this problem. It adopted an earned income disregard of 42% which was increased in 1998 to 45%. This means that a welfare recipient’s benefits are reduced 55 cents with every dollar.(10)While the recent increase in the state’s earned income disregard is an improvement over the past, it still means that welfare recipients face a marginal tax rate of 55% — a much higher rate than any other citizen. New York already has a more realistic earned income disregard for participants of the Child Assistance Program, its alternative welfare program. CAP participants face a 90% earned income disregard, the equivalent of a 10% marginal tax rate. New York should adopt the 90% earned income disregard for all public
    assistance recipients.
  2. Make affordable transportation alternatives readily available. Another significant barrier to moving from welfare to employment for many New York families, particularly those outside of New York City, is the lack of affordable transportation. In many upstate counties there is no public transportation available and many poor families cannot afford to own and maintain a reliable car. Even where transportation is available, the cost may demand too great a portion of income to really offer a viable choice. The State should fund transportation initiatives to support welfare-to-employment, including Reverse Commute programs, van services, JOBLINKs, car-buying clubs and community garage programs.
  3. Establish transitional employment programs. Many welfare recipients will have great difficulty finding employment in the regular private labor market because of a lack of opportunities, lack of skills and/or lack of adequate work experience. Research shows that closely-supervised community service jobs increase the earnings potential of welfare recipients and their chances of finding work. New York State should invest in a jobs program designed to create jobs for the individuals who need extra assistance in entering the labor market.A coalition of labor, community and hunger advocates have developed the Empire State Jobs Program. This five-year demonstration project would provide employment experience of 18 to 24 months for individuals who have been unable to find unsubsidized employment. These jobs, despite being transitional positions, would provide participants with real exposure to the world of work. Program participants would have the status of “employees” not work experience participants and therefore they will learn the responsibilities and
    duties of work. All positions would have clearly defined work responsibilities and reporting responsibilities with adequate orientation, training and supervision. Participants in the proposed Empire State Jobs Program would earn approximately $7.50 per hour in New York City and $7.20 upstate, or the prevailing wage for employees doing the same work in the same location. Employees will get the same vacation and sick leave as other employees in that agency. Workers will have the same rights as non-transitional workers, including overtime and the right to join a union. Eligible individuals will continue to receive transitional benefits such as Medicaid and child care assistance throughout the duration of their participation in the program.A jobs program like the Empire State Jobs program can provide valuable services to communities throughout the state. Public and nonprofit organizations hiring these transitional workers will be able to expand their ability to provide services in a wide array of areas such as housing, child care, public health and environmental protection. In order to leverage resources for such a program, incentives should be built in to give preference to employers who access other programs for support services and training.
  4. Increase welfare grant levels. Welfare grant levels are important to working poor families for several reasons. First, many working poor families rely on public assistance to support their families when they are unable to work or their earnings are not sufficient to support their families. Two-thirds of the 252,000 poor New York families with children with a worker in the mid-1990s also received some public assistance. Second, an increasing portion of the adults receiving public assistance are working — whether for wages or in workfare programs in which their incomes are set at the level of the welfare grant. Finally, by allowing the real value of the welfare grant to decline by more than 50% over the last 24 years, New York state has placed significant downward pressure on the wages of New Yorkers in the lowest paid jobs. The public assistance grant in New York State has not been increased since 1990. For a typical family of three, the grant has fallen from 110% of the federal poverty level in 1975 to 50% of the poverty level in 1999. Even when combined with food stamps, such a family’s income has declined from 125% to 74% of the federal poverty level over this period. New York should immediately increase the welfare grant by the amount necessary to bring its purchasing power to the 1990 level. The state should also establish a system of regular, periodic increases in grant levels to reflect increases in the cost of living. In addition, an examination should be commissioned by the legislature, as soon as possible, to determine if further increases are necessary to provide families with sufficient income to meet basic needs.

2. Reform the Unemployment Insurance System


A large number of workers fall into poverty when they experience a spell of unemployment. The unemployment insurance system was created to prevent this by replacing a portion of an unemployed family’s earnings while the unemployed person is looking for a new job. Unfortunately, many workers do not receive unemployment benefits when they lose their jobs. In New York State, only one third of the unemployed received benefits in 1997. If the recipiency rate in 1996 remained as it was in 1970, roughly 125,000 more people would have received unemployment insurance. Even in the group of “job losers” (defined as workers who lost a job involuntarily or were on temporary layoff) only 72% received benefits.

In 1998 New York State approved an unemployment insurance reform package. The maximum weekly benefit was increased from $300 to $365 and will increase again in September 2000 to one-half the average weekly wage. This was an important step ensuring some New York workers sufficient benefits to keep a family’s income above the poverty line. The 1998 reforms also established what is known as a “moveable base period” which defines the base period so that the most recent earnings are included in the eligibility determination.

New York’s unemployment insurance law is better than the law of most other states in that it permits benefits for those who find themselves without work for reasons not directly related to their employer. In New York workers who lose their jobs due to domestic violence, the need to care for family members or an inability to find decent affordable child care can sometimes secure unemployment benefits.

Recommendations

  1. Eligibility rules for unemployment insurance should be revised to increase the percentage of the unemployed who actually receive benefits. Many low wage workers do not qualify for benefits because they have not earned $1600 in a single quarter. In order to ensure equitable treatment of low wage workers, eligibility rules should be revised to require a minimum number of hours per quarter rather than an earnings threshold.
  2. Although New York’s unemployment insurance law is better than the law of most other states in that it permits benefits for those who find themselves without work due to personal circumstances, the statute does not explicitly discuss these “compelling individual circumstances” and many low wage workers, particularly women, may be denied benefits due to unduly narrow and inconsistent interpretations of the law by program administrators. New York should explicitly recognize that compelling domestic circumstances, health-related reasons, marital obligations and domestic violence constitute “good cause” justifying a voluntary separation from work.
  3. For those workers who do receive benefits, the weekly benefit is often not sufficient to keep their families’ incomes above the poverty line. For workers earning the minimum wage, the weekly unemployment insurance benefit set at one half of the average weekly wage falls far below the poverty threshold. Consideration should be given to setting the benefit level at more than 50% of the average weekly wage for those who have worked full-time at the minimum wage for six months or more.

3. Provide Paid Family Leave

Over the last twenty-five years, the numbers of people that work and also care for children and parents have increased dramatically. To respond to this situation, Congress passed the Family and Medical Leave Act (FMLA) in 1993 which required employers to provide leave to care for one’s own serious health condition, including pregnancy, and to care for a new child or a seriously ill child, spouse or parent. While the FMLA protects an employee’s job, seniority and health benefits during a maximum 12 weeks leave from work, it does not replace wages. A recent study by the U.S. Commission on Family and Medical Leave found that 64% of respondents who needed leave but did not take it said they could not afford it. Working poor families are particularly disadvantaged by the lack of paid family leave.

Rather than requiring employers to provide paid leave, attention is increasingly being given to the idea of using a pooled risk or pooled cost mechanism (such as the Unemployment Insurance system) to provide wage replacement. In the small number of states with mandatory temporary disability insurance programs, including New York, New Jersey and California, legislation has been introduced to provide paid family leave through this program. In New York, the disability benefits program has provided paid leave to employees since 1950 for their own non-work related disabilities, including — since 1977 — pregnancy and recovery after childbirth.

Recommendations

New York’s temporary disability insurance program should be expanded to cover leaves taken under the federal Family and Medical Leave act. This would extend workers’ access to paid leave for the care of a new child (newborn, adopted or foster) or an ill child, spouse or parent. Workers would be required to meet the provisions of both the federal FMLA and the state’s temporary disability insurance law to receive benefits under this proposal.(11)

Supplementing the Incomes of Low Wage Workers

A third group of policy strategies focus on government policies and programs which attempt to mitigate the economic impact of low wages and the lack of employment-related benefits. An economy which produced a sufficient number of jobs which paid a living wage with decent benefits would not require these government “band-aids.” Unfortunately, the US economy as a whole, and the New York State economy in particular appears to require continued governmental intervention for some time to come.

1. Expand the Earned Income Tax Credit (EITC) and the Federal Child Credit.

One of the most effective public programs for the working poor is the federal Earned Income Tax Credit. The federal EITC is a tax credit which goes to working people with low or moderate earnings. It was designed to offset the regressive nature of Social Security payroll taxes and supplement the earnings of low and moderate income families. First implemented in the Ford Administration, the EITC has been hailed by people from all political persuasions as pro-work and pro-family. After its creation in 1974, it was greatly expanded in 1986, 1990 and 1993. More recently, the EITC has been touted by the President’s Council of Economic Advisers as having significantly contributed to declines in welfare caseloads nationwide.

The amount of the credit a family receives varies with its earnings. For families with very low earnings, the credit increases as earnings increase. In 1998, a family with more than one child receives 40 cents of credit for each additional dollar earned until earnings reach $9,390. At that point the family receives the maximum benefit of $3,756. The benefit begins to phase out once the family’s annual income exceeds $12,260. For a
family with two or more children, it phases out completely at $30,095 per year. For a family with one child, the credit and maximum allowable earnings are less. There is also a very small credit for low and moderate income families without children.

One of the key features of the federal EITC is its refundability. This means that if the credit is larger than an eligible family’s total tax bill, the family receives a refund check. For families with little or no tax liability, the EITC serves as an important wage supplement. In New York, more than 1 million families claimed the Federal EITC benefit in 1996 receiving an average annual benefit of $1,251.

Despite the success of the federal EITC in reducing poverty among working people, a state supplement to the federal EITC is important because many working families remain poor even when the federal EITC is taken into account. In addition, a state EITC can offset the regressive nature of certain state and local taxes. New York adopted a refundable state EITC in 1994. A family can receive 20% of the federal credit through the New York EITC. The New York EITC is particularly important as the state has moved toward a greater reliance on regressive property and sales taxes and away from reliance on the more progressive income tax. As of tax year 1996, over one million filers received more than $290 million in state EITC benefits.

Recommendations

Even when the federal EITC is combined with the New York State EITC, some families with a member working full-time, year-round at the minimum wage do not take home enough cash income to bring their incomes above the poverty line. The heads of married couple families working full-time, year-round at the minimum wage take home income amounts below the federal poverty thresholds regardless of family size. The income of full-time, year-round, minimum wage-earning single parents with more than two children also falls short of the poverty thresholds. For example, a married couple with three children working full-time,
year-round at the federal minimum wage will bring home only $14,400 — only 74% of the federal poverty threshold, even after the federal and state EITCs. Correcting these inequities will require a combination of federal and state reforms.

  1. New York should take some immediate steps to expand the EITC for working families whose incomes are left below the poverty level despite the assistance provided by the current federal and state EITCs. In particular, New York should expand the state EITC for married couple families with children from 20% of the federal EITC to 30% of the EITC. This would bring the incomes of married couple families with less than three children very close to the federal poverty thresholds in 1999.
  2. Even with an expanded state EITC, families with three or more children with a full-time, year-round worker will still have below-poverty incomes. The federal EITC could be modified to include higher credits for larger families. (The current system provides an equal credit for all families with two or more children no matter how many children are in the family.) Alternatively, the new federal child credit should be made fully refundable for families with three or more children. Starting this year, middle income families are able to claim $400 per child as a tax credit and when fully implemented, this credit will provide $500 per child. Unfortunately, the child credit provides no benefit for the family whose income is too low to incur a federal tax liability, even if its income is well below the poverty level. The child credit is refundable for only a limited group of families — those with more than two children — and even for those families the portion of the credit that is refundable is limited to the amount by which their federal income tax and FICA payments combined exceed their federal EITC. Making the child credit fully refundable for all families with three or more children would bring the income of a single parent three-child family very close to the federal poverty threshold and would bring a married couple three-child family’s income to 84% of the poverty threshold. This reform would add a degree of evenhandedness to the way the tax system treats families with three or more children.
  3. New York should undo the 1995 change that reduced New Yorkers’ state EITC by the amount of the household credit that they use. Before the passage of the 1995 budget legislation, the value of the EITC to eligible residents was not reduced by the value of other credits received. But the $4+ billion per year personal income tax cut enacted in 1995 included a provision that required EITC applicants to subtract from their EITC credit the amount of the household credit they used.
  4. New York should also allow for “reverse withholding” of the New York State EITC so that families could opt to receive their New York State EITC benefit in each paycheck. This is currently an option for the federal credit and should not be difficult to implement.
  5. New York City should seek state legislation authorizing it to enact a NYC EITC to assist families who receive the federal and state EITCs but are still subject to New York City income taxes. A recent study by the Independent Budget Office found that 99,500 low-income households in New York City pay New York City personal income taxes even though they have no federal or state income tax liability.(12)

2. Increase Access to Quality Health Care

In 1989, the federal government required that all states provide health insurance through Medicaid to all poor children under age 8 by 1990 and to all poor children under age 19 by the year 2002. Since the loss of Medicaid coverage sometimes serves as a deterrent to work, the legislation makes it possible for poor parents to know that they aren’t risking their child’s health by working at a job without health insurance. The number of children receiving Medicaid has grown rapidly since the federal expansions, from 10.0 million in 1988 to 23.2 million in 1996. In 1997 Medicaid covered more than one in five children overall and almost 60% of all poor children.(13)

New York State already provides health insurance coverage to all children living in families with gross incomes up to 250% of the federal poverty line.(14) Through a combination of Medicaid expan sions and the Child Health Plus program, all the children of working poor families are at least eligible for health insurance through the state. While the expansions in children’s health insurance are important, 46% of working poor parents lacked health insurance in the mid 1990s.

Recommendations

A provision of the 1996 welfare reform law provides an opportunity to extend Medicaid coverage to many low-income parents. Under §1931 (b) of the Social Security Act, states now have the option to devise more liberal income and resource tests under Medicaid. Currently, adults in New York with incomes $91 above the public assistance standard of need are not eligible for medical assistance. In New York City this means that an adult in a family of three with earnings above $8,004 per year would not be eligible for Medicaid. The income cut-off varies by county ranging from a mere $6,888 in Rensselaer County to $9,396 in Rockland County. The income limits are even lower for adults in single person households, ranging from $4,561 to $6,349 per year. Currently New York limits Medicaid eligibility to families with less than $1,000 in resources. This means that a family with a functioning automobile is probably not eligible for medical assistance.

Other states have expanded coverage of uninsured adults through a variety of mechanisms. Delaware, Hawaii, Maine, Massachusetts, Minnesota, Oregon, Rhode Island and Vermont have extended eligibility to all families with incomes below the federal poverty line and Missouri and Wisconsin have adopted expansions that they plan to implement later in 1999. In Minnesota families with incomes below 275% of the federal poverty line are eligible for medical assistance.

  1. New York should establish a program for adults that is comparable to the Child Health Plus program for children. Such a “Family Health Plus” program would provide subsidized eligibility to families with incomes up to 250% of the federal poverty guidelines, eliminate resource tests and simplify enrollment. The state would automatically receive 50% federal financing for the newly covered adults in households with children and because New York now receives federal matching funds for single adults and childless couples under the state’s Partnership Plan, these populations would also be federally-financed.
  2. While the children of working poor families who are not insured through their parents’ employer are eligible for insurance through the state, many are unaware of the programs available to them. For example, some parents assume that the whole family loses Medicaid coverage as soon as they move off public assistance, even though their children are often still eligible. Many parents are also unaware of the Child Health Plus program. The state needs to continue to fund outreach efforts to ensure that eligible children receive care through the appropriate state health programs.
  3. There is some concern that children who are eligible for Child Health Plus may not be receiving care because the premiums are too high. The state should investigate whether premium costs are a significant barrier to low-income families obtaining health care through the Child Health Plus program.

3. Improve the Availability of Affordable Child Care

In 1996 the U.S. Congress created a new child care block grant, called the Child Care and Development Block Grant, by consolidating four existing programs (the Child Care and Development Block Grant, the AFDC child care program, the Transitional Child Care program, and the At-Risk Child Care program) which served low and moderate income families. Fiscal year 1997 funding for the Child Care Block Grant was $2.97 billion. This provided states with the ability to increase the child care subsidies of families already receiving grants or expand access to families not eligible for assistance.

Among families who pay for child care, working poor families spend one-third of their income on child care. This compares to 13% of family incomes spent on child care among families with incomes between the poverty level and $25,000, and 6% among families with annual incomes above $25,000.(15)

Without subsidies, many low-income families are not able to work. The General Accounting Office found that the availability of child care subsidies would increase the proportion of poor women who work from 29% to 44%.(16)

Since 1995 the number of state subsidized child care slots has grown by 50,000 to 126,000. The state is currently spending about $450 million dollars on subsidized child care. The 1999-2000 Executive Budget proposes to increase annual spending to $580 million which would support approximately 138,000 slots. Families with incomes up to 200% of the state standard of need are currently eligible for subsidized child care.

Recommendations

A recent study by the New York State Comptroller found that there is a need for 108,000 more child care slots in New York State over the next four years.(17) Advocates, such as the Child Care Coor dinating Council estimate that twice that many slots are needed over the next six years.(18) New York should increase its financial commitment to child care to ensure that families with young children can remain employed. At least a significant portion of the welfare windfall must be applied to child care so that funds from the Child Care and Development Block Grant can be freed up for low-income working families.

The “Child Care that Works” Campaign is promoting a legislative proposal that would provide child care to 42,000 additional children in the first year and 250,000 additional children in six years. The Campaign’s proposal would expand eligibility for subsidized child care to include all families with incomes below 85% of the State Median income, or $43,095 for a family of four with family co-payments on a sliding scale fee basis limited to no more than 10% of a family’s gross income. The proposal would also increase currently inadequate subsidy rates to a level which reflects the actual cost of child care/ early learning programs and increase salaries as a way to recruit and retain high quality professionals. The proposal also includes a series of quality initiatives and funds for facility renovation and construction to expand supply. The SFY 1999-2000 cost of the CCtW proposal is estimated at $277 million.

Conclusion

This report has highlighted the problem of poverty despite work in New York, including a discussion of the economic forces which have kept so many families in poverty. Since the late 1970s the poverty rate of working poor families with children has almost doubled, increasing from 6.4% to 11.7%. A majority of poor families in New York include at least one worker. Contrary to common stereotypes, working poor families in New York are as likely to include two parents as to be headed by a single adult. Most working parents have at least a high school education.

Much of the policy debate nationally and in New York has focused on the issues affecting the nonworking poor, specifically the need to move families from welfare to work. The reality that work does not guarantee a decent standard of living can no longer be ignored. Fortunately there are a number of positive alternatives available which can raise the incomes and improve the quality of life for working poor families, while fostering the overall growth and development of the economy at the same time. The United States Congress and the New York State Legislature can seize this opportunity by acting to raise the wage floor, to strengthen the economic security safety net and to supplement the income of low-income workers by ensuring access to affordable and reliable health and child care and expanding the Earned Income Tax Credit and the new federal child credit.


Data Appendix

Summary Data

 

Summary Data 

United States New York State
Number of residents 265,896,000 18,239,000
Number of poor residents 36,162,000 3,028,000
Poor residents as a percent of all residents 13.6% 16.6%
Number of children 70,762,000 4,739,000
Number of poor children 14,415,000 1,202,000
Poor children as a percent of all children 20.4% 25.4%

 

Poor Families with Children

United States New York State
Number of poor families with children 6,258,000 541,000
Number of poor families with children in which parents were not ill, disabled, or
retired
5,620,000 482,000
Poor families with children in which parents were not ill, disabled or retired as a
percent of all poor families with children
89.8% 89.2%
Number of poor families with children with a worker 3,944,000 252,000
Poor families with children with a worker as a percent of poor families with children
in which parents were not ill, disabled or retired
70.2% 52.3%
Number of people in working poor families 14,812,000 946,000
Poor people in working poor families as a percent of individuals in poor families 41.0% 31.2%
Number of children in poor working families 8,659,000 531,000
Poor children in working families as a percent of all poor children 60.1% 44.2%
Number of poor families with children with parents working more than 13 weeks 3,378,000 207,000
Poor families with children with parents working more than 13 weeks as a percent of
poor families with an employable adult
60.1% 42.9%
Average number of weeks worked by working poor families with children 41 weeks 39 weeks
Number of poor families with children with a full-time, year-round worker 1,449,000 93,000
Poor families with children with a full-time, year-round worker as a percent of all
poor families with children with an employable adult
25.8% 19.3%
Number of working poor parents who worked part-time for economic reasons(19) 1,046,000 57,000
Working poor parents who worked part-time for economic reasons* as a percent of
working poor parents
23.7% 21.1%
Number of working poor parents who worked part-year for economic reasons 1,294,000 84,000
Working poor parents who worked part-year for economic reasons as a percent of working
poor parents
29.3% 30.8%
Number of working poor parents who worked either part-time or part-year for economic
reasons
1,889,000 115,000
Working poor parents who worked either part-time or part-year for economic reasons as
a percent of working poor parents
42.7% 42.2%
Parents in working poor families lacking health insurance as a percent of working poor
parents
46.1% 39.4%
Number of children in working poor families lacking health insurance 233,200 128,000
Children in working poor families lacking health insurance as a percent of all
children in working poor families
26.9% 24.1%
Poor families with children with earnings as majority of income as a percent of all
poor families with an employable parent
57.0% 42.1%
Families with children that received public assistance and also worked as a percent of
families that received public assistance
62.6% 43.3%

 

 

Non-elderly Poor Families and Individuals without Children

United States New York State
Non-elderly poor families and individuals without children 7,790,000 593,000
Number of non-elderly poor families and individuals without children in which adults
were not ill, disabled, or retired
5,864,000 408,000
Non-elderly poor families and individuals without children in which adults were not
ill, disabled, or retired as a percent of all non-elderly childless poor families and
individuals
75.3% 68.8%
Number of non-elderly poor families and individuals without children with a worker 3,535,000 194,000
Non-elderly poor families and individuals without children with a worker as a percent
of all non-elderly childless poor families and individuals with an employable adult
60.3% 47.5%
Number of people in working poor families and individuals without children 4,174,000 243,000
Number of non-elderly poor families and individuals without children working
full-time, year-round
641,000 37,000
Poor non-elderly families and individuals without children working full-time,
year-round as a percent of all poor non-elderly childless families and individuals with an
employable adult
10.9% 9.1%
Number of non-elderly poor families and individuals without children working more than
13 weeks
2,766,000 155,000
Non-elderly poor families and individuals without children working more than 13 weeks
as a percent of all poor non-elderly, childless families and individuals with an
employable adult
47.2% 38.0%
Average number of weeks worked by non-elderly working poor families and individuals
without children
33 34

 

 

Working Families with Income between 100% and 150% of the Poverty Line

United States New York State
Number of families with children and income between 100% and 150% of the poverty line 3,599,000 223,000
Number of families with children and income between 100% and 150% of the poverty line
with a worker
3,421,000 197,000
Families with children and income between 100% and 150% of the poverty line with a
worker as a percent of all families with children and income between 100% and 150% of the
poverty line
95.1% 88.4%
Number of families with children and income between 100% and 150% of the poverty line
with a full-time, year-round worker
2,316,000 130,000
Families with children and income between 100% and 150% of the poverty line with a
full-time, year-round worker as a percent of all families with children and income between
100% and 150% of the poverty line
64.3% 58.1%
Number of non-elderly families and individuals without children with income between
100% and 150% of the poverty line
33,000,000 169,000
Number of non-elderly families and individuals without children with income between
100% and 150% of the poverty line with a worker
3,104,000 155,000
Non-elderly families and individuals without children with income between 100% and
150% of the poverty line with a worker as a percent of all non-elderly childless families
and individuals with income between 100% and 150% of the poverty line
94.0% 91.9%
Number of non-elderly families and individuals without children with income between
100% and 150% of the poverty line with a full-time year-round worker
1,404,000 69,000
Non-elderly families and individuals without children with income between 100% and
150% of the poverty line with a full-time year-round worker as a percent of all
non-elderly childless families and individuals with income between 100% and 150% of the
poverty line
42.6% 41.0%

 

 

Characteristics of Working Poor Families with Children

United States New York State
Family Type
Married Couples 44.2% 46.5%
Female-headed 48.6% 46.4%
Male-headed 7.2% 7.1%
Race and Ethnicity of Family Head
White 45.4% 38.2%
Black 23.1% 25.6%
Hispanic 27.1% 29.5%
Other 4.4% 6.7%
Education of Family Head
Less than high school 37.5% 34.8%
High school or GED 37.4% 33.5%
Some college 20.3% 22.3%
College or more 4.8% 9.4%
Age of Family Head
Under 25 14.8% 13.2%
25-34 39.6% 34.7%
35-44 32.8% 34.0%
45 or older 12.7% 18.0%
Metro/non-metro Residence
Metro 75.3% 95.3%
Non-metro 24.7% 4.7%

 

 

Characteristics of Non-elderly Childless Working Poor Families and Individuals

United States New York State
Family Type
Married Couples 11.2% 13.3%
Single individuals 88.2% 86.7%
Race And Ethnicity of Family Head
White 67.8% 62.5%
Black 13.6% 11.7%
Hispanic 14.6% 19.1%
Other 4.1% 6.6%
Education of Family Head
Less than high school 26.6% 32.9%
High school or GED 34.2% 33.1%
Some college 27.6% 20.8%
College or more 11.6% 13.2%
Age of Family Head
Under 25 37.7% 21.0%
25-34 21.6% 24.4%
35-44 15.7% 20.6%
45 or older 25.0% 34.0%
Metro/non-metro Residence
Metro 77.0% 84.9%
Non-metro 23.0% 15.1

 

 

Working Parents with Low Hourly Earnings(20)

United States New York State
Number of working parents with low hourly earnings 12,158,000 637,000
Working parents with low hourly earnings as a percent of all working parents 22.9% 20.0%
Number of full-time, year-round working parents with low earnings 4,750,000 236,000
Full-time, year-round working parents with low earnings as a percent of all working
parents
12.8% 10.7%
Percent of parents with low hourly earnings employed in: United States New York
Services 41.2% 43.5%
Retail trade 25.3% 26.5%
Manufacturing 12.0% 10.8%
Construction 4.6% 3.9%
Government 2.2% 2.2%
Agriculture 4.6% 2.6%
Other 10.1% 10.6%

 

 

Average Weekly Earnings and Job Growth by Industry

Number of Jobs, 1982 (thousands) Number of Jobs. 1998 (thousands) Percent Change1982-1998 Average Weekly Pay, 1997
Total Nonfarm 7,254.6 8,155.0 12.4%
Mining 6.5 4.4 -32.3% n/a
Construction 219.6 276.9 26.1% $731
Manufacturing 1352.5 916.8 -32.2% $844
Transportation(21) 422.0 410.9 -2.6% $818
Wholesale Trade 454.0 434.5 -4.3% $894
Retail Trade 1,014.3 1,229.5 21.2% $339
Finance(22) 670.6 729.3 8.8% $1,571
Services 1,821.3 2,783.6 52.8% $649
Government 1,293.7 1,369.5 5.9% $749

 

 

Changes in the Status of the Working Poor

United States New York State
Number of working poor families
1977-79 2,285,000 137,000
1987-89 3,178,000 158,000
1995-97 3,942,000 252,000
Poverty rate of working poor families with children
1977-79 7.9% 6.4%
1987-89 10.2% 7.7%
1995-97 11.5% 11.7%
Change in the poverty rate of working poor families with children
1977-79 to 1987-89 29% 20%
1987-89 to 1995-97 13% 52%
1977-79 to 1995-97 45% 83%
Proportion of working family heads with low hourly earnings
1977-79 13.4% 9.9%
1987-89 17.1% 12.6%
1995-97 21.1% 19.4%
Change in the percent of working family heads with low hourly earnings
1977-79 to 1987-89 27% 26%
1987-89 to 1995-97 23% 54%
1977-79 to 1995-97 57% 95%

 

 

Earned Income Tax Credit

United States New York State
Families and individuals claiming the federal EITC 19,338,920 1,270,649
Average EITC benefit $1,523 $1,452

 

 

Unemployment Benefits

United States New York State
Average monthly number of unemployed 6,739,000 564,000
Average monthly number of unemployment insurance recipients 2,364,000 191,000
Percent of unemployed receiving benefits 35% 34%
Average monthly number of job losers(23) 3,037,000 266,000
Percent of job losers receiving benefits 78% 72%

Endnotes

1. This analysis includes only families where parents are not ill,
disabled or retired.

2. This report relies on the Census Bureau’s definition of full-time
work as at least 35 hours per week for at least 50 weeks per year.

3. For the purpose of this analysis and the analyses presented in
The State of Working America (see endnote 5, below) the average wage paid to low-wage
workers is defined as the wage paid to a worker at the twentieth percentile of the wage
distribution. Jared Berstein and Lawrence Mishel, “Wages Gain Ground” EPI Issue
Brief, Number 129, February 2, 1999.

4. Bernstein and Mishel.

5. Lawrence Mishel, Jared Bernstein & John Schmitt, The State of
Working America: 1998-99 (Washington, DC: Economic Policy Institute, 1998) p. 6.

6. Mishel, Bernstein & Schmitt, pp. 189-95.

7. David Card and Alan B. Krueger, “Minimum Wages and
Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania,”
American Economic Review 84:4 (1994) pp. 772-793.

8. Economic Report of the President, (United States Government
Printing Office, 1999) p. 112.

9. Robert Pollin and Stephanie Luce, The Living Wage: Building a
Fair Economy (New Press, 1998).

10. The earned income disregards are eliminated when the welfare
recipient’s income reaches the federal poverty line or 185% of the New York State standard
of need, whichever is lower.

11. For a more comprehensive discussion of this issue, see Carolyn
Boldiston, “Providing Paid Family Leave Through the Temporary Disability Insurance
Program: An Attractive and Affordable Option,” Fiscal Policy Note$, December 1998.

12. New York City Independent Budget Office, “New York City’s
Tax on the Working Poor,” Fiscal Brief, March 1998.

13. Paul Fronstin, “Sources of Health Insurance and
Characteristics of the Uninsured: Analysis of the March 1998 Current Population
Survey,” EBRI Issue Brief, Number 204, December 1998.

14. Richard Kirsh, “Health Care: As Market Forces Grow, The
System Fails a Growing Number of New Yorkers,” An Agenda for a Better New York Policy
Paper (Fiscal Policy Institute, forthcoming).

15. Deborah Phillips and Anne Bridgman, eds., New Findings on
Children, Families and Economic Self-Sufficiency (Washington, DC: National Academy Press,
1995).

16. United States General Accounting Office, Child Care Subsidies
Increase the Likelihood that Low-Income Mothers Will Work (December 1994).

17. “Comptroller: Child care slots lacking to meet welfare
reform need,” Newsday, January 14, 1999.

18. “Improved Child Care/ Early Learning & Relief for
Families are Goals of New Multi-Year Legislative Proposal,” Press Release issued by
The Child Care that Works Campaign, December 8, 1998.

19. Economic reasons include workers who were laid off, unemployed
and looking for work, or not looking for work because none was available.

20. As defined by the Census Bureau, hourly earnings that on a
full-time basis would produce annual earnings below roughly the poverty line for a family
of four.

21. Transportation, Communications, Public Utilities

22. Finance, Insurance, Real Estate

23. As defined by the Bureau of Labor Statistics, these are workers who lost their jobs involuntarily and are looking for work as well as workers on temporary layoff.

 

About the Fiscal Policy Institute

The Fiscal Policy Institute (FPI) is a non-partisan research and education organization founded in 1991 to increase public and governmental understanding of issues related to the fairness of New York’s tax system and the stability and adequacy of state and local public services. Each year FPI issues an analysis of the state’s fiscal situation and tax system. In addition to these annual reports, FPI prepares special reports and articles on a variety of subjects related to New York’s finances.

In the summer of 1993, FPI was one of 29 state-level organizations throughout the nation that were invited by the Ford, Charles Stewart Mott, and Annie E. Casey foundations to compete for funding under a new State Fiscal Analysis Initiative designed to enhance the timeliness, credibility, accessibility and usefulness of the analysis that is available on the broad range of state tax and budget issues that affect low income and other vulnerable populations. FPI was one of the 12 state-level organizations that were initially selected to participate in this initiative. The initiative has since been expanded to cover a total of 22 states and to include support from the Open Society Institute.

Over the past year, the Fiscal Policy Institute, with the support of the New York State AFL-CIO and many of its member unions, has expanded its work to cover a broader range of the economic and social issues that affect low and middle income New Yorkers. As part of this effort, FPI is in the process of opening a New York City office and has completed major studies of the state’s unemployment insurance system and of the issues surrounding the provision of paid family leave through New York’s temporary disability insurance program.

Published On: March 8th, 1999Categories: Blog

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Working but Poor in New York

March 8, 1999. This report from the Fiscal Policy Institute (revised in July 1999) outlines why and how to improve the economic situation of a hard-working but ignored population. Report below; also see press release.

Working but Poor in New York

Table of Contents

  1. Dedication
  2. Acknowledgements
  3. Executive Summary
  4. Working but Poor in New York
    1. Many New Yorkers Work but Remain Poor
    2. New York’s Poverty Rate Has Remained High While the National Rate Has Dropped Steadily
    3. Most Poor Families Include a Worker
    4. Many Working Families Have Incomes Just Above the Poverty Line
    5. New York’s Working Poor Defy Demographic Stereotypes
    6. The Situation Has Worsened Significantly in the Past 20 Years
    7. A Variety of Factors Explain the Persistence of Poverty Despite Work
  5. Positive Strategies to Make Work Pay
    1. Raising the Wage Floor
      1. Raise the Minimum Wage and Index It
      2. Enact Living Wage Laws
    2. Strengthening Economic
      Security Safety Net Programs 

      1. Make Welfare Reform Work
      2. Reform the Unemployment Insurance System
      3. Provide Paid Family Leave
    3. Supplementing the Incomes of Low Wage Workers
      1. Expand the Earned Income Tax Credit (EITC) and the Federal Child Credit
      2. Increase Access to Quality Health Care
      3. Improve the Availability of Affordable Child Care
  6. Conclusions
  7. Endnotes

Dedication

The publication of this edition of Working but Poor in New York is dedicated to the members and staff of the New York State Labor-Religion Coalition, and the local labor-religion coalitions with which it works, for their dedication to improving the incomes and the quality of life of the low-wage workers without whose labor our state’s economy could not function. This report is being issued in conjunction with the Labor-Religion Coalition’s 40-hour fast in support of the working poor of New York, from 8 p.m. Monday, March 8 through noon on Wednesday, March 10.

Acknowledgments

This report was prepared by Trudi Renwick who is an economist with the Fiscal Policy Institute. She has written several articles and a book on poverty measurement with a particular focus on poverty among single parent families. Earlier versions of this report were prepared by Deborah Ellwood when she served as a senior policy analyst with the
Fiscal Policy Institute. She is currently a senior researcher with the Nelson A. Rockefeller Institute of Government’s Center for the Study of the States.

Special thanks are owed to the staff of the Center on Budget and Policy Priorities, particularly Christina Smith FitzPatrick and Ed Lazere, whose compilation and analysis of Current Population Survey data made this report possible. We also wish to thank the Ford and Charles Stewart Mott Foundations and the many labor, religious, human services, community and other organizations that support, disseminate and promote the Fiscal Policy Institute’s analytical work.

The section of this report that deals with the unemployment insurance system is derived from a broader report on this subject that has been prepared by the Fiscal Policy Institute staff and which is currently undergoing final review. Individuals with questions about aspects of unemployment insurance reform that are not covered by this report on the
working poor, such as the indexing of the maximum weekly unemployment insurance benefit to the state’s average weekly wage, are encouraged to contact Trudi Renwick.

Executive Summary

Broad economic indicators tell us that the American economy is stronger than it has been in decades. However, a closer look at the economic conditions shows that the benefits of the growing economy are not being shared by all. Large numbers of New Yorkers are poor. Despite the fact that New York had the 4th highest per capita income of any state in the
nation in 1997, more than three million New Yorkers lived in poverty. This represents 16.6% of the population or one in six New Yorkers. The numbers are worse for children — one in four children or 25.4% of all children in New York were poor. This is more than 1.2 million children.

The poverty rate of the poorest families is not high because of reduced work effort. In more than half of all poor families with children in New York State (52%), at least one person worked. In the mid-1990s, this repr esented more than one-quarter of a million (252,000) families who were working but poor. More than a third of New York’s working poor families had at least one worker who worked full-time year-round but these families still had incomes below the official poverty thresholds.

The demographics of New York’s working poor defy common stereotypes. The working poor are not all young, poorly educated, single parents who do not have the skills to make a decent living. In fact, only a minority of working poor families fit that description. On the contrary, the growing problem of the working poor is in large part the result of broad economic forces that are beyond their control.

While nationwide the poverty rate of poor working families with children grew by 13% between the late-1980s and the mid-1990s, in New York the poverty rate for such families increased at four times that rate or 52%. In the mid-1990s, one quarter of a million New York families were poor despite work, 115,000 more working poor families than in the late-1970s.

In addition to painting a picture of working poor families in New York and describing how the situation has changed over time, this report also outlines the factors that contribute to the problem of poverty despite work and discusses specific positive strategies designed to make work pay. The report’s recommendations include:

  • raising the minimum wage and indexing it to inflation;
  • requiring firms that receive public contracts or public subsidies to pay their employees a living wage;
  • making welfare reform work better by increasing the portion of earnings that a family can keep as it moves from welfare to work, establishing transitional employment programs, and making affordable transportation alternatives more readily available;
  • making the unemployment insurance system a more effective safety net for low wage workers;
  • expanding New York’s temporary disability insurance program to cover leaves taken under the federal Family and Medical Leave Act;
  • expanding the federal and state Earned Income Tax Credits and the new federal child credit to ensure that working families do not live in poverty;
  • increasing access to quality health care, particularly for low-income adults, and
  • improving the availability of affordable and reliable child care.

Working but Poor in New York

Broad economic indicators tell us that the American economy is stronger than it has been in decades. The unemployment rate is the lowest it has been in 29 years, inflation is lower than it has been in 33 years, and the current economic expansion is the longest peacetime expansion in our nation’s history. However, a closer look at the economic conditions shows that the benefits of the growing economy are not being shared by all.

Over the past 20 years, the richest Americans have seen their incomes skyrocket but the poorest have seen their incomes plummet while wage increases of the middle class have been eaten away by inflation. Income inequality has worsened dramatically. This is unusual for the United States, where economic prosperity has traditionally been more broadly shared.

The situation is particularly stark in New York State. Its income inequality is the worst of all 50 states and has been growing more quickly than all but one state. The inequality is not worsening simply because the rich are getting richer, however. Both the poor and the middle class have seen their real incomes decline. From the late 1970s to the mid-1990s, the richest fifth of New York families with children saw their incomes increase 46% while the poorest fifth of New York families saw their incomes decline by 36% and the middle fifth of families saw their incomes drop by 4%.

Contrary to the philosophy underlying welfare reform, the incomes of the poorest families are not falling because of any reduced work effort. They are falling because the jobs that our economy offers these workers are not paying wages that keep pace with even modest increases in consumer prices. In fact, many New Yorkers work and still remain poor. This defies the commonly held value — affirmed by numerous opinion polls — that if you work hard, you should be able to provide a reasonable standard of living for your family.

The number of New Yorkers who are working but poor is large and growing. The demographics of this group defy stereotypes. The working poor are not poor because they are all young, uneducated, single parents who do not have the skills to make a decent living. In fact, only a minority of working poor families fits that description. On the contrary, the growing problem of the working poor is in large part the result of broad economic forces that are beyond their control.

The situation is now dire enough that it demands immediate attention from public and private leaders. The data is compelling and opinion surveys show that a majority of the public thinks that this is an issue society should be addressing. Fortunately, there are steps public and private institutions can take to address the situation.

This report paints a picture of working poor families in New York and describes how the situation has changed over time. It outlines the factors that contribute to the problem of poverty despite work and provides policy options for addressing the situation.

Many New Yorkers Work but Remain Poor


Large numbers of New Yorkers are poor. Despite the fact that New York had the 4th highest per capita income of any state in the nation in 1997, more than three million New Yorkers lived in poverty. This represents 16.6% of the population or one in six New Yorkers. The numbers are worse for children — one in four children or 25.4% of all children in New York were poor. This is more than 1.2 million children.

 

 

 

New York’s Poverty Rate Has Remained High While the National Rate Has Dropped Steadily


The poverty rate in New York has remained high while the national poverty rate has dropped steadily. Between 1993 and 1997 the national poverty rate fell from 15% to just more than 13% while the New York State poverty rate hovered between 16.5% and 17%. While historically New York’s poverty rate was lower than the national rate, since 1989 the state’s poverty rate has exceeded the national poverty rate. In 1997 the New York State poverty rate was nearly one fourth higher than the national rate.

 

 

 

Most Poor Families Include a Worker


It is commonly believed that people are poor because they do not work. But large numbers of New York families remain poor despite the fact that someone in the family works for wages.(1)

Work does not guarantee a decent standard of living in New York. In more than half of all poor families with children in New York State (52%), at least one person worked outside the home. In the mid-1990s, this represented more than one-quarter of a million (252,000) families who were working but poor.

In addition, there were 194,000 additional non-elderly families and individuals without children who were poor despite work. In terms of individual people, a total of 1,189,000 New Yorkers in the mid-1990s lived in poor families where at least one person worked. More than half a million New York children (531,000) lived in poor families where someone worked — 39% of poor children in New York.


The workers in these poor families were not merely tangentially attached to the labor force. Many of these poor families had a family member who worked full time throughout the year.(2) In fact, 130,000 poor New York families had at least one full-time, full-year worker, including 93,000 families with children. Many of the parents that did not work full time or full year wanted to be employed full-time. Over two fifths (42.2%) of all working parents in poor families worked part-time or part-year involuntarily. In fact, growing numbers of workers were involuntarily employed in the “contingent” (temporary or part-time) labor market.

Working poor families also worked most weeks of the year: the average number of weeks worked by poor families with children in the mid-1990s was 39, or roughly nine months of the year. Non-elderly poor families and individuals without children worked an average of 34 weeks. Forty-three percent of working families with children worked more than 13 weeks. While most poor families received some public cash assistance, 42.1% of New York State’s poor families of children relied on earnings for the majority of their annual income. Even among families who receive public assistance, 43% of these families also worked in 1997.

Many Working Families Have Incomes Just Above the Poverty Line

In addition to those families living below the official poverty line, another quarter of a million families – 223,000 – live just above the poverty line, with incomes between 100% and 150% of the poverty line. Most – 89% – of these near-poor families have a worker in the family and 58% of these families have a full-time, year-round worker. Another 155,000 non-elderly families and individuals without children are also classified as near-poor and 92% of these families include a worker. Near-poor families may still lack sufficient resources to provide for their basic needs. In recognition of the need of families classified as “near-poor” many programs, especially for health and nutrition, use increments above the poverty level to establish eligibility.

New York’s Working Poor Defy Demographic Stereotypes

Another common misconception is that families that have low earnings are headed by young, nonwhite, uneducated, single parents. In fact, neither age nor race nor education nor marriage guarantee against poverty.

Only 13% of the family heads of working poor families were less than 25 years old. Two-thirds of the household heads of working poor families with children were in their prime working years, 25-44. Even among childless families and individuals, only 20% of the individuals were under 25.

More working poor families with children in New York are headed by non-Hispanic whites than any other racial category. Only one fourth of working poor families with children are headed by an African American, while almost 30% of family heads are classified as Hispanic. Among childless working poor families and individuals, almost two-thirds (62.5%) are non-Hispanic whites while only 12% are African American and 19% are Hispanic.

A vast majority — over two-thirds — of the family heads of working poor families with children had at least a high school diploma or GED. More than a quarter of these family heads had some college education or a college degree.

In New York, a working poor family was less likely to be headed by a single woman — less than half (46.4%) of the working poor families in New York were headed by single women. More than half the working poor families were headed by nonmarried men or married couples.

Characteristics of Poor Working Families



The Situation Has Worsened Significantly in the Past 20 Years

Rapidly changing economic conditions throughout the country continue to put downward pressure on wages for most workers. But workers at the bottom end of the pay scale are hit hardest. The number and proportion of poor families with a worker in the labor force has grown dramatically in the last 17 years.


When comparing two similar points in the business cycle — the late-1970s and the mid-1990s — we find that there were 115,000 more working poor families in New York in the mid-1990s than in the late-1970s. This 84% increase is substantially larger than the 2% increase in the total New York population over that time period and substantially larger than the increase in working poor families nationally.

 

 

 


The poverty rate of working families with children who are poor grew substantially from 6.4% in the late-1970s to 7.7% in the mid-1980s to 11.7% in the mid-1990s. The percent change in the poverty rate for New York’s working poor families was much greater than the percent change in the poverty rate of these families nationwide. While nationwide the poverty rate of poor working families with children grew by 13% between the mid-1980s and the mid-1990s, in New York the poverty rate increased at four times that rate or 52%.

The educational attainment of working poor families has changed too. In the late-1970s, more than half (52%) of the heads of all working poor families with children had a high school diploma or GED. By the mid-1990s, 68% of the heads of working poor families had a high school diploma or GED. At the other end of the spectrum, 15% of all heads of working poor families had at least some college education in the late-1970s while by the mid-1990s, 31% of the heads of working poor families had attended college.

A Variety of Factors Explain the Persistence of Poverty Despite Work

Numerous studies have documented the decline in real wages among the lowest income American workers. Between 1989 and 1996, hourly wages for low-wage workers in New York State fell 8.3%, after adjusting for inflation. Over this same period, the inflation-adjusted wages of low wage workers nationally declined by 2.3%. (3)


Although nationally the wages of low-wage workers grew strongly in 1998, the rate of growth in the wages for such workers in New York was well below the national average. Nationally the wages of such workers grew by 6% between 1996 and 1998 while the wages of New York’s low-wage workers grew by only 2.2%. Overall, for the period 1989 to 1998 wages of these lower income workers in New York fell by 6.3% while nationally wages for this group of workers increased by 3.5%.(4)

For some time many families were able to make up for the declining wages by sending a second worker into the labor force or by working more hours outside the home. But now they can no longer keep up.

While economists continue to grapple with explanations for falling wages and widening wage inequality, a number of factors appear to account for most of the shifts in the wage structure. These include:

  • severe drops during the 1980s and 1990s in the number (and bargaining power) or unionized workers;
  • an erosion through the 1980s in the inflation-adjusted value of the minimum wage, which has only been partially corrected in the 1990s;
  • the decline in higher-wage manufacturing jobs and the corresponding expansion of low-wage, service sector employment;
  • the increasing globalization of the economy through immigration and trade; and
  • the growth in contingent (temporary and part-time) and other nontraditional work arrangements.(5)


While wages in the service sector vary widely — from, for example, high paying investment banking jobs to low-wage restaurant jobs — the average hourly wage in the service sector is 30% lower than the average wage in the goods-producing sector. Since most of the employment growth in the 1980s was in the service sector, economists argue that this is an important contributor to the stagnation of wages among the lowest wage workers.(6)

This is particularly true for New York State. Between 1982 and 1998, New York State lost 435,700 manufacturing jobs, a decrease of 32.2%, while service sector employment was up 52.8%. During the current recovery, from November 1992 to December 1998, the number of nonfarm jobs in New York increased by more than 500,000 but almost 90% of this growth was in the service sector. The manufacturing sector continued to deteriorate, shedding almost 100,000 jobs while another 100,000 middle income jobs in banking, public and private hospitals and government also disappeared.


Between 1992 and 1998 the two fastest growing industries in New York State were services and retail trade — the two sectors with the lowest average weekly wages.

Working poor families are disproportionately employed in these lower paying sectors of the economy. One in five working poor families had hourly earnings in 1997 that on a full-time basis would produce annual earnings below the poverty line for a family of four. Two-thirds of these working parents were employed in either the service sector or retail trade. Perhaps most disturbing is the fact that the percent of working poor family heads with low hourly earnings has almost doubled since the late-1970s – growing from 9.9% to 19.4%.

Positive Strategies to Make Work Pay

The decline in wages and incomes for people at the low-end of the pay scale is due to fundamental changes in the economy. Reversing the trend will require the development and implementation of creative, comprehensive strategies at both the federal and state level. But there are some steps that can be taken to ameliorate the situation. This section highlights some of the policies that federal, state, and local governments have already implemented and discusses what they can do to build on what has been achieved.

Raising the Wage Floor

The most important direct cause of our growing income inequality and the increasing poverty rates of working families is the deterioration of the wages of the lowest income workers. The real wages of New York workers in the lowest decile of the wage distribution fell by 15% between 1979 and 1997. Nothing has contributed to this decline more than the erosion of the minimum wage as a floor beneath the low wage job market.

1. Raise the Minimum Wage and Index It: The Value of the Federal Minimum Wage has Fallen Significantly.

In 1996, the U.S. Congress raised the minimum wage from $4.25 to $5.15 per hour. The increase was phased in over two years with 1998 the first full year of the $5.15 per hour rate. This was the first increase in the federal minimum wage in five years.

Despite the recent increase in the federal minimum wage, a person earning $5.15 per hour will earn only 72% of the federal poverty line for a family of three. In the 1960s and 70s, the earnings of a full-time, year round worker receiving the minimum were enough to lift a family of three above the poverty line. The real value of the federal minimum wage is lower in 1998 than it was during the entire 1961 through 1984 period. Even with the latest increase, the purchasing power of the minimum wage in 1998 was only 69% of the purchasing power of the minimum wage in 1968.

Contrary to popular belief, a majority of minimum wage workers are adults, not teenagers, and increasing the minimum wage does not adversely affect employment. Less than 30% of all minimum wage workers are teenagers while nearly half are age 25 or older. Indeed, it is clear that the decline in the value of the minimum wage has severely hurt many families. Since minimum wage workers account for 54% of their household earnings on average, the inflation-adjusted drop in the minimum wage has contributed to an increase in the number of working poor families and to the widening wage inequality. Economists David Card and Alan Krueger of Princeton University recently analyzed the employment impacts of an increase in the minimum wage in California and New Jersey. They found no evidence that employment declined in either state in response to the increases.(7)

The 1999 Economic Report of the President noted that while many studies have examined this issue, the “weight of the evidence suggests that modest increases in the minimum wage have had very little or no effect on employment.”(8)

New York’s State Minimum Wage is Now 17% Below the Federal Minimum.

New York has recognized the importance of the minimum wage by establishing its own
minimum wage law and applying it to more types of workers than are covered by the federal
law. For example, workers employed by small businesses not engaged in interstate commerce
are covered by the New York State law but not the federal law.

Historically, New York has almost always increased the New York State minimum wage in
tandem with increases in the federal minimum wage. During two periods (1967 and 1970-1974)
New York’s minimum wage actually exceeded the federal rate. Unfortunately, New York did
not increase the state minimum wage when the federal minimum wage was increased in 1996
and still has not done so. The result is that workers covered by the New York State
minimum wage but not the federal minimum wage are only guaranteed $4.25 per hour instead
of the $5.15 guaranteed to most workers.

While it would be most appropriate for the federal government to enact such
legislation, New York’s high cost of living relative to the rest of the nation makes it
logical for New York to take this step now. Recognizing the need to raise the minimum wage
to maintain minimal living standards, seven other states and the District of Columbia
already have enacted minimum wages above the federal minimum wage — Alaska, California,
Connecticut, Hawaii, Massachusetts, Oregon and Vermont. A successful 1998 ballot measure
in Washington State will index their minimum wage to the Consumer Price Index beginning in
2001.

Recommendations

  1. The U.S. Congress should support Senator Edward Kennedy’s proposal to increase the
    minimum wage in three steps and then index it to inflation. Increasing the minimum wage is
    one important way that policymakers can ensure that wages of the lowest income Americans
    do not continue to deteriorate. Increasing the minimum wage has broad support among the
    general public. President Clinton recently called for a two-step $1 increase in the
    minimum wage.
  2. New York State should immediately increase the state minimum wage to at least equal the
    current federal minimum wage and should consider further increasing the state minimum wage
    and indexing it to inflation. It is important to index the minimum wage to inflation
    because without regular revisions, the value of the minimum wage quickly erodes with
    increasing costs pushing more families back into poverty. Indexing the minimum wage to
    inflation can ensure that minimum wage earners do not lose ground every year the minimum
    wage is not legislatively increased.

2. Enact Living Wage Laws

The decline in wages for low-income workers and the failure of the federal government to take stronger steps to address the problem have led to efforts to raise wages through legislation at the state and local level. These efforts, commonly referred to as “living wage campaigns,” have been launched by grass-roots coalitions of community organizations, religious groups and labor unions – led in many cases by the AFL-CIO’s state labor federations and local central labor councils and the Association of Community Organizations for Reform Now (ACORN). Living wage ordinances have been passed in seventeen cities and organizing campaigns are underway in two dozen states and municipalities.(9)

In contrast to minimum wage legislation, many living wage campaigns are intended to raise wages to the level necessary to keep the family of a full-time worker above the poverty line. Some of the proposals would raise the minimum wage in a state or municipality to its peak historical value under federal law ($7.74 per hour in 1998 dollars, achieved in 1968) and thereafter index it to inflation. Other proposals mandate health insurance benefits to low-wage workers while some proposals set wages according to local cost of living levels. The California Liveable Wage Coalition, for example, took the high cost of living in that state into account when setting its minimum wage goal above the federal level.

Most living wage campaigns do not seek to increase the minimum wage across the board in a particular location. Instead they focus on employers who receive public subsidies or public contracts. State and local programs that provide subsidies, tax abatements and other benefits to private employers for the purpose of job creation and retention rarely distinguish between high and low-wage employment. Nor do most cities and states that contract with private corporations for the provision of public services impose any pay and benefits standards on contract recipients. As a result, many companies receiving public subsidies and/or public contracts pay wages well below the poverty level. The argument behind living wage laws is that governments should not be using tax dollars to create or subsidize poverty-wage jobs, but rather should set a positive example by requiring employers who receive public funds to pay a living wage.

In July 1996, New York City enacted a law which is similar in some regards to a living wage law. The City Council ordinance requires that employees of city contractors for security, temporary cleaning and food services be paid the applicable prevailing wage for the industry to be determined by the City Comptroller. The amendment to the City Code was passed on July 11, 1996, and vetoed by Mayor Giuliani on August 7, 1996 but the Council overrode the veto on September 11, 1996. Unfortunately this ordinance has not been fully implemented.

Recommendations

  1. New York State should adopt a living wage statute that requires firms that receive contracts or subsidies from the state government or any of its public benefit authorities (e.g. MTA, Port Authority, etc.) to pay employees a living wage and provide health insurance coverage. Any employer receiving any form of economic development incentive should be subject to the living wage statute, including companies enjoying the benefits of lower cost power from the New York Power Authority.
  2. Local governments should enact ordinances requiring the firms with which they contract to pay a living wage. Such ordinances should also include firms that receive economic development incentives.

Strengthening Economic Security Safety Net Programs

A second category of reforms which would help the working poor are those that would strengthen economic security safety net programs. While these programs are designed to provide economic security to all New Yorkers, working poor families and individuals are more likely to turn to these safety net programs to make ends meet.

1. Make Welfare Reform Work

In developing state policies to assist the working poor, particular attention should be given to people who are making the transition from welfare to work. Recent federal welfare legislation and state and local legislative and administrative changes have pushed large numbers of welfare recipients into the job market. The following three policy proposals represent some initial steps to address the needs of this important group of low-income families. The availability of affordable and reliable child care, as discussed later in this report, is also essential to facilitate the transition from welfare to work.

Recommendations

  1. Liberalize the earned income disregard. One way states can help welfare recipients to move successfully from welfare to work is by allowing them to keep more of their welfare benefits when they do work. Under standard federal welfare rules prior to the 1996 welfare reform, many families found that when their work expenses were taken into account, their disposable income declined after taking a job. Welfare recipients’ public assistance grants were reduced by 66 cents for every dollar earned during the first 12 months of work and dollar for dollar (except for the first $90) after one year of work. In 1997, New York took steps to ease this problem. It adopted an earned income disregard of 42% which was increased in 1998 to 45%. This means that a welfare recipient’s benefits are reduced 55 cents with every dollar.(10)While the recent increase in the state’s earned income disregard is an improvement over the past, it still means that welfare recipients face a marginal tax rate of 55% — a much higher rate than any other citizen. New York already has a more realistic earned income disregard for participants of the Child Assistance Program, its alternative welfare program. CAP participants face a 90% earned income disregard, the equivalent of a 10% marginal tax rate. New York should adopt the 90% earned income disregard for all public
    assistance recipients.
  2. Make affordable transportation alternatives readily available. Another significant barrier to moving from welfare to employment for many New York families, particularly those outside of New York City, is the lack of affordable transportation. In many upstate counties there is no public transportation available and many poor families cannot afford to own and maintain a reliable car. Even where transportation is available, the cost may demand too great a portion of income to really offer a viable choice. The State should fund transportation initiatives to support welfare-to-employment, including Reverse Commute programs, van services, JOBLINKs, car-buying clubs and community garage programs.
  3. Establish transitional employment programs. Many welfare recipients will have great difficulty finding employment in the regular private labor market because of a lack of opportunities, lack of skills and/or lack of adequate work experience. Research shows that closely-supervised community service jobs increase the earnings potential of welfare recipients and their chances of finding work. New York State should invest in a jobs program designed to create jobs for the individuals who need extra assistance in entering the labor market.A coalition of labor, community and hunger advocates have developed the Empire State Jobs Program. This five-year demonstration project would provide employment experience of 18 to 24 months for individuals who have been unable to find unsubsidized employment. These jobs, despite being transitional positions, would provide participants with real exposure to the world of work. Program participants would have the status of “employees” not work experience participants and therefore they will learn the responsibilities and
    duties of work. All positions would have clearly defined work responsibilities and reporting responsibilities with adequate orientation, training and supervision. Participants in the proposed Empire State Jobs Program would earn approximately $7.50 per hour in New York City and $7.20 upstate, or the prevailing wage for employees doing the same work in the same location. Employees will get the same vacation and sick leave as other employees in that agency. Workers will have the same rights as non-transitional workers, including overtime and the right to join a union. Eligible individuals will continue to receive transitional benefits such as Medicaid and child care assistance throughout the duration of their participation in the program.A jobs program like the Empire State Jobs program can provide valuable services to communities throughout the state. Public and nonprofit organizations hiring these transitional workers will be able to expand their ability to provide services in a wide array of areas such as housing, child care, public health and environmental protection. In order to leverage resources for such a program, incentives should be built in to give preference to employers who access other programs for support services and training.
  4. Increase welfare grant levels. Welfare grant levels are important to working poor families for several reasons. First, many working poor families rely on public assistance to support their families when they are unable to work or their earnings are not sufficient to support their families. Two-thirds of the 252,000 poor New York families with children with a worker in the mid-1990s also received some public assistance. Second, an increasing portion of the adults receiving public assistance are working — whether for wages or in workfare programs in which their incomes are set at the level of the welfare grant. Finally, by allowing the real value of the welfare grant to decline by more than 50% over the last 24 years, New York state has placed significant downward pressure on the wages of New Yorkers in the lowest paid jobs. The public assistance grant in New York State has not been increased since 1990. For a typical family of three, the grant has fallen from 110% of the federal poverty level in 1975 to 50% of the poverty level in 1999. Even when combined with food stamps, such a family’s income has declined from 125% to 74% of the federal poverty level over this period. New York should immediately increase the welfare grant by the amount necessary to bring its purchasing power to the 1990 level. The state should also establish a system of regular, periodic increases in grant levels to reflect increases in the cost of living. In addition, an examination should be commissioned by the legislature, as soon as possible, to determine if further increases are necessary to provide families with sufficient income to meet basic needs.

2. Reform the Unemployment Insurance System


A large number of workers fall into poverty when they experience a spell of unemployment. The unemployment insurance system was created to prevent this by replacing a portion of an unemployed family’s earnings while the unemployed person is looking for a new job. Unfortunately, many workers do not receive unemployment benefits when they lose their jobs. In New York State, only one third of the unemployed received benefits in 1997. If the recipiency rate in 1996 remained as it was in 1970, roughly 125,000 more people would have received unemployment insurance. Even in the group of “job losers” (defined as workers who lost a job involuntarily or were on temporary layoff) only 72% received benefits.

In 1998 New York State approved an unemployment insurance reform package. The maximum weekly benefit was increased from $300 to $365 and will increase again in September 2000 to one-half the average weekly wage. This was an important step ensuring some New York workers sufficient benefits to keep a family’s income above the poverty line. The 1998 reforms also established what is known as a “moveable base period” which defines the base period so that the most recent earnings are included in the eligibility determination.

New York’s unemployment insurance law is better than the law of most other states in that it permits benefits for those who find themselves without work for reasons not directly related to their employer. In New York workers who lose their jobs due to domestic violence, the need to care for family members or an inability to find decent affordable child care can sometimes secure unemployment benefits.

Recommendations

  1. Eligibility rules for unemployment insurance should be revised to increase the percentage of the unemployed who actually receive benefits. Many low wage workers do not qualify for benefits because they have not earned $1600 in a single quarter. In order to ensure equitable treatment of low wage workers, eligibility rules should be revised to require a minimum number of hours per quarter rather than an earnings threshold.
  2. Although New York’s unemployment insurance law is better than the law of most other states in that it permits benefits for those who find themselves without work due to personal circumstances, the statute does not explicitly discuss these “compelling individual circumstances” and many low wage workers, particularly women, may be denied benefits due to unduly narrow and inconsistent interpretations of the law by program administrators. New York should explicitly recognize that compelling domestic circumstances, health-related reasons, marital obligations and domestic violence constitute “good cause” justifying a voluntary separation from work.
  3. For those workers who do receive benefits, the weekly benefit is often not sufficient to keep their families’ incomes above the poverty line. For workers earning the minimum wage, the weekly unemployment insurance benefit set at one half of the average weekly wage falls far below the poverty threshold. Consideration should be given to setting the benefit level at more than 50% of the average weekly wage for those who have worked full-time at the minimum wage for six months or more.

3. Provide Paid Family Leave

Over the last twenty-five years, the numbers of people that work and also care for children and parents have increased dramatically. To respond to this situation, Congress passed the Family and Medical Leave Act (FMLA) in 1993 which required employers to provide leave to care for one’s own serious health condition, including pregnancy, and to care for a new child or a seriously ill child, spouse or parent. While the FMLA protects an employee’s job, seniority and health benefits during a maximum 12 weeks leave from work, it does not replace wages. A recent study by the U.S. Commission on Family and Medical Leave found that 64% of respondents who needed leave but did not take it said they could not afford it. Working poor families are particularly disadvantaged by the lack of paid family leave.

Rather than requiring employers to provide paid leave, attention is increasingly being given to the idea of using a pooled risk or pooled cost mechanism (such as the Unemployment Insurance system) to provide wage replacement. In the small number of states with mandatory temporary disability insurance programs, including New York, New Jersey and California, legislation has been introduced to provide paid family leave through this program. In New York, the disability benefits program has provided paid leave to employees since 1950 for their own non-work related disabilities, including — since 1977 — pregnancy and recovery after childbirth.

Recommendations

New York’s temporary disability insurance program should be expanded to cover leaves taken under the federal Family and Medical Leave act. This would extend workers’ access to paid leave for the care of a new child (newborn, adopted or foster) or an ill child, spouse or parent. Workers would be required to meet the provisions of both the federal FMLA and the state’s temporary disability insurance law to receive benefits under this proposal.(11)

Supplementing the Incomes of Low Wage Workers

A third group of policy strategies focus on government policies and programs which attempt to mitigate the economic impact of low wages and the lack of employment-related benefits. An economy which produced a sufficient number of jobs which paid a living wage with decent benefits would not require these government “band-aids.” Unfortunately, the US economy as a whole, and the New York State economy in particular appears to require continued governmental intervention for some time to come.

1. Expand the Earned Income Tax Credit (EITC) and the Federal Child Credit.

One of the most effective public programs for the working poor is the federal Earned Income Tax Credit. The federal EITC is a tax credit which goes to working people with low or moderate earnings. It was designed to offset the regressive nature of Social Security payroll taxes and supplement the earnings of low and moderate income families. First implemented in the Ford Administration, the EITC has been hailed by people from all political persuasions as pro-work and pro-family. After its creation in 1974, it was greatly expanded in 1986, 1990 and 1993. More recently, the EITC has been touted by the President’s Council of Economic Advisers as having significantly contributed to declines in welfare caseloads nationwide.

The amount of the credit a family receives varies with its earnings. For families with very low earnings, the credit increases as earnings increase. In 1998, a family with more than one child receives 40 cents of credit for each additional dollar earned until earnings reach $9,390. At that point the family receives the maximum benefit of $3,756. The benefit begins to phase out once the family’s annual income exceeds $12,260. For a
family with two or more children, it phases out completely at $30,095 per year. For a family with one child, the credit and maximum allowable earnings are less. There is also a very small credit for low and moderate income families without children.

One of the key features of the federal EITC is its refundability. This means that if the credit is larger than an eligible family’s total tax bill, the family receives a refund check. For families with little or no tax liability, the EITC serves as an important wage supplement. In New York, more than 1 million families claimed the Federal EITC benefit in 1996 receiving an average annual benefit of $1,251.

Despite the success of the federal EITC in reducing poverty among working people, a state supplement to the federal EITC is important because many working families remain poor even when the federal EITC is taken into account. In addition, a state EITC can offset the regressive nature of certain state and local taxes. New York adopted a refundable state EITC in 1994. A family can receive 20% of the federal credit through the New York EITC. The New York EITC is particularly important as the state has moved toward a greater reliance on regressive property and sales taxes and away from reliance on the more progressive income tax. As of tax year 1996, over one million filers received more than $290 million in state EITC benefits.

Recommendations

Even when the federal EITC is combined with the New York State EITC, some families with a member working full-time, year-round at the minimum wage do not take home enough cash income to bring their incomes above the poverty line. The heads of married couple families working full-time, year-round at the minimum wage take home income amounts below the federal poverty thresholds regardless of family size. The income of full-time, year-round, minimum wage-earning single parents with more than two children also falls short of the poverty thresholds. For example, a married couple with three children working full-time,
year-round at the federal minimum wage will bring home only $14,400 — only 74% of the federal poverty threshold, even after the federal and state EITCs. Correcting these inequities will require a combination of federal and state reforms.

  1. New York should take some immediate steps to expand the EITC for working families whose incomes are left below the poverty level despite the assistance provided by the current federal and state EITCs. In particular, New York should expand the state EITC for married couple families with children from 20% of the federal EITC to 30% of the EITC. This would bring the incomes of married couple families with less than three children very close to the federal poverty thresholds in 1999.
  2. Even with an expanded state EITC, families with three or more children with a full-time, year-round worker will still have below-poverty incomes. The federal EITC could be modified to include higher credits for larger families. (The current system provides an equal credit for all families with two or more children no matter how many children are in the family.) Alternatively, the new federal child credit should be made fully refundable for families with three or more children. Starting this year, middle income families are able to claim $400 per child as a tax credit and when fully implemented, this credit will provide $500 per child. Unfortunately, the child credit provides no benefit for the family whose income is too low to incur a federal tax liability, even if its income is well below the poverty level. The child credit is refundable for only a limited group of families — those with more than two children — and even for those families the portion of the credit that is refundable is limited to the amount by which their federal income tax and FICA payments combined exceed their federal EITC. Making the child credit fully refundable for all families with three or more children would bring the income of a single parent three-child family very close to the federal poverty threshold and would bring a married couple three-child family’s income to 84% of the poverty threshold. This reform would add a degree of evenhandedness to the way the tax system treats families with three or more children.
  3. New York should undo the 1995 change that reduced New Yorkers’ state EITC by the amount of the household credit that they use. Before the passage of the 1995 budget legislation, the value of the EITC to eligible residents was not reduced by the value of other credits received. But the $4+ billion per year personal income tax cut enacted in 1995 included a provision that required EITC applicants to subtract from their EITC credit the amount of the household credit they used.
  4. New York should also allow for “reverse withholding” of the New York State EITC so that families could opt to receive their New York State EITC benefit in each paycheck. This is currently an option for the federal credit and should not be difficult to implement.
  5. New York City should seek state legislation authorizing it to enact a NYC EITC to assist families who receive the federal and state EITCs but are still subject to New York City income taxes. A recent study by the Independent Budget Office found that 99,500 low-income households in New York City pay New York City personal income taxes even though they have no federal or state income tax liability.(12)

2. Increase Access to Quality Health Care

In 1989, the federal government required that all states provide health insurance through Medicaid to all poor children under age 8 by 1990 and to all poor children under age 19 by the year 2002. Since the loss of Medicaid coverage sometimes serves as a deterrent to work, the legislation makes it possible for poor parents to know that they aren’t risking their child’s health by working at a job without health insurance. The number of children receiving Medicaid has grown rapidly since the federal expansions, from 10.0 million in 1988 to 23.2 million in 1996. In 1997 Medicaid covered more than one in five children overall and almost 60% of all poor children.(13)

New York State already provides health insurance coverage to all children living in families with gross incomes up to 250% of the federal poverty line.(14) Through a combination of Medicaid expan sions and the Child Health Plus program, all the children of working poor families are at least eligible for health insurance through the state. While the expansions in children’s health insurance are important, 46% of working poor parents lacked health insurance in the mid 1990s.

Recommendations

A provision of the 1996 welfare reform law provides an opportunity to extend Medicaid coverage to many low-income parents. Under §1931 (b) of the Social Security Act, states now have the option to devise more liberal income and resource tests under Medicaid. Currently, adults in New York with incomes $91 above the public assistance standard of need are not eligible for medical assistance. In New York City this means that an adult in a family of three with earnings above $8,004 per year would not be eligible for Medicaid. The income cut-off varies by county ranging from a mere $6,888 in Rensselaer County to $9,396 in Rockland County. The income limits are even lower for adults in single person households, ranging from $4,561 to $6,349 per year. Currently New York limits Medicaid eligibility to families with less than $1,000 in resources. This means that a family with a functioning automobile is probably not eligible for medical assistance.

Other states have expanded coverage of uninsured adults through a variety of mechanisms. Delaware, Hawaii, Maine, Massachusetts, Minnesota, Oregon, Rhode Island and Vermont have extended eligibility to all families with incomes below the federal poverty line and Missouri and Wisconsin have adopted expansions that they plan to implement later in 1999. In Minnesota families with incomes below 275% of the federal poverty line are eligible for medical assistance.

  1. New York should establish a program for adults that is comparable to the Child Health Plus program for children. Such a “Family Health Plus” program would provide subsidized eligibility to families with incomes up to 250% of the federal poverty guidelines, eliminate resource tests and simplify enrollment. The state would automatically receive 50% federal financing for the newly covered adults in households with children and because New York now receives federal matching funds for single adults and childless couples under the state’s Partnership Plan, these populations would also be federally-financed.
  2. While the children of working poor families who are not insured through their parents’ employer are eligible for insurance through the state, many are unaware of the programs available to them. For example, some parents assume that the whole family loses Medicaid coverage as soon as they move off public assistance, even though their children are often still eligible. Many parents are also unaware of the Child Health Plus program. The state needs to continue to fund outreach efforts to ensure that eligible children receive care through the appropriate state health programs.
  3. There is some concern that children who are eligible for Child Health Plus may not be receiving care because the premiums are too high. The state should investigate whether premium costs are a significant barrier to low-income families obtaining health care through the Child Health Plus program.

3. Improve the Availability of Affordable Child Care

In 1996 the U.S. Congress created a new child care block grant, called the Child Care and Development Block Grant, by consolidating four existing programs (the Child Care and Development Block Grant, the AFDC child care program, the Transitional Child Care program, and the At-Risk Child Care program) which served low and moderate income families. Fiscal year 1997 funding for the Child Care Block Grant was $2.97 billion. This provided states with the ability to increase the child care subsidies of families already receiving grants or expand access to families not eligible for assistance.

Among families who pay for child care, working poor families spend one-third of their income on child care. This compares to 13% of family incomes spent on child care among families with incomes between the poverty level and $25,000, and 6% among families with annual incomes above $25,000.(15)

Without subsidies, many low-income families are not able to work. The General Accounting Office found that the availability of child care subsidies would increase the proportion of poor women who work from 29% to 44%.(16)

Since 1995 the number of state subsidized child care slots has grown by 50,000 to 126,000. The state is currently spending about $450 million dollars on subsidized child care. The 1999-2000 Executive Budget proposes to increase annual spending to $580 million which would support approximately 138,000 slots. Families with incomes up to 200% of the state standard of need are currently eligible for subsidized child care.

Recommendations

A recent study by the New York State Comptroller found that there is a need for 108,000 more child care slots in New York State over the next four years.(17) Advocates, such as the Child Care Coor dinating Council estimate that twice that many slots are needed over the next six years.(18) New York should increase its financial commitment to child care to ensure that families with young children can remain employed. At least a significant portion of the welfare windfall must be applied to child care so that funds from the Child Care and Development Block Grant can be freed up for low-income working families.

The “Child Care that Works” Campaign is promoting a legislative proposal that would provide child care to 42,000 additional children in the first year and 250,000 additional children in six years. The Campaign’s proposal would expand eligibility for subsidized child care to include all families with incomes below 85% of the State Median income, or $43,095 for a family of four with family co-payments on a sliding scale fee basis limited to no more than 10% of a family’s gross income. The proposal would also increase currently inadequate subsidy rates to a level which reflects the actual cost of child care/ early learning programs and increase salaries as a way to recruit and retain high quality professionals. The proposal also includes a series of quality initiatives and funds for facility renovation and construction to expand supply. The SFY 1999-2000 cost of the CCtW proposal is estimated at $277 million.

Conclusion

This report has highlighted the problem of poverty despite work in New York, including a discussion of the economic forces which have kept so many families in poverty. Since the late 1970s the poverty rate of working poor families with children has almost doubled, increasing from 6.4% to 11.7%. A majority of poor families in New York include at least one worker. Contrary to common stereotypes, working poor families in New York are as likely to include two parents as to be headed by a single adult. Most working parents have at least a high school education.

Much of the policy debate nationally and in New York has focused on the issues affecting the nonworking poor, specifically the need to move families from welfare to work. The reality that work does not guarantee a decent standard of living can no longer be ignored. Fortunately there are a number of positive alternatives available which can raise the incomes and improve the quality of life for working poor families, while fostering the overall growth and development of the economy at the same time. The United States Congress and the New York State Legislature can seize this opportunity by acting to raise the wage floor, to strengthen the economic security safety net and to supplement the income of low-income workers by ensuring access to affordable and reliable health and child care and expanding the Earned Income Tax Credit and the new federal child credit.


Data Appendix

Summary Data

 

Summary Data 

United States New York State
Number of residents 265,896,000 18,239,000
Number of poor residents 36,162,000 3,028,000
Poor residents as a percent of all residents 13.6% 16.6%
Number of children 70,762,000 4,739,000
Number of poor children 14,415,000 1,202,000
Poor children as a percent of all children 20.4% 25.4%

 

Poor Families with Children

United States New York State
Number of poor families with children 6,258,000 541,000
Number of poor families with children in which parents were not ill, disabled, or
retired
5,620,000 482,000
Poor families with children in which parents were not ill, disabled or retired as a
percent of all poor families with children
89.8% 89.2%
Number of poor families with children with a worker 3,944,000 252,000
Poor families with children with a worker as a percent of poor families with children
in which parents were not ill, disabled or retired
70.2% 52.3%
Number of people in working poor families 14,812,000 946,000
Poor people in working poor families as a percent of individuals in poor families 41.0% 31.2%
Number of children in poor working families 8,659,000 531,000
Poor children in working families as a percent of all poor children 60.1% 44.2%
Number of poor families with children with parents working more than 13 weeks 3,378,000 207,000
Poor families with children with parents working more than 13 weeks as a percent of
poor families with an employable adult
60.1% 42.9%
Average number of weeks worked by working poor families with children 41 weeks 39 weeks
Number of poor families with children with a full-time, year-round worker 1,449,000 93,000
Poor families with children with a full-time, year-round worker as a percent of all
poor families with children with an employable adult
25.8% 19.3%
Number of working poor parents who worked part-time for economic reasons(19) 1,046,000 57,000
Working poor parents who worked part-time for economic reasons* as a percent of
working poor parents
23.7% 21.1%
Number of working poor parents who worked part-year for economic reasons 1,294,000 84,000
Working poor parents who worked part-year for economic reasons as a percent of working
poor parents
29.3% 30.8%
Number of working poor parents who worked either part-time or part-year for economic
reasons
1,889,000 115,000
Working poor parents who worked either part-time or part-year for economic reasons as
a percent of working poor parents
42.7% 42.2%
Parents in working poor families lacking health insurance as a percent of working poor
parents
46.1% 39.4%
Number of children in working poor families lacking health insurance 233,200 128,000
Children in working poor families lacking health insurance as a percent of all
children in working poor families
26.9% 24.1%
Poor families with children with earnings as majority of income as a percent of all
poor families with an employable parent
57.0% 42.1%
Families with children that received public assistance and also worked as a percent of
families that received public assistance
62.6% 43.3%

 

 

Non-elderly Poor Families and Individuals without Children

United States New York State
Non-elderly poor families and individuals without children 7,790,000 593,000
Number of non-elderly poor families and individuals without children in which adults
were not ill, disabled, or retired
5,864,000 408,000
Non-elderly poor families and individuals without children in which adults were not
ill, disabled, or retired as a percent of all non-elderly childless poor families and
individuals
75.3% 68.8%
Number of non-elderly poor families and individuals without children with a worker 3,535,000 194,000
Non-elderly poor families and individuals without children with a worker as a percent
of all non-elderly childless poor families and individuals with an employable adult
60.3% 47.5%
Number of people in working poor families and individuals without children 4,174,000 243,000
Number of non-elderly poor families and individuals without children working
full-time, year-round
641,000 37,000
Poor non-elderly families and individuals without children working full-time,
year-round as a percent of all poor non-elderly childless families and individuals with an
employable adult
10.9% 9.1%
Number of non-elderly poor families and individuals without children working more than
13 weeks
2,766,000 155,000
Non-elderly poor families and individuals without children working more than 13 weeks
as a percent of all poor non-elderly, childless families and individuals with an
employable adult
47.2% 38.0%
Average number of weeks worked by non-elderly working poor families and individuals
without children
33 34

 

 

Working Families with Income between 100% and 150% of the Poverty Line

United States New York State
Number of families with children and income between 100% and 150% of the poverty line 3,599,000 223,000
Number of families with children and income between 100% and 150% of the poverty line
with a worker
3,421,000 197,000
Families with children and income between 100% and 150% of the poverty line with a
worker as a percent of all families with children and income between 100% and 150% of the
poverty line
95.1% 88.4%
Number of families with children and income between 100% and 150% of the poverty line
with a full-time, year-round worker
2,316,000 130,000
Families with children and income between 100% and 150% of the poverty line with a
full-time, year-round worker as a percent of all families with children and income between
100% and 150% of the poverty line
64.3% 58.1%
Number of non-elderly families and individuals without children with income between
100% and 150% of the poverty line
33,000,000 169,000
Number of non-elderly families and individuals without children with income between
100% and 150% of the poverty line with a worker
3,104,000 155,000
Non-elderly families and individuals without children with income between 100% and
150% of the poverty line with a worker as a percent of all non-elderly childless families
and individuals with income between 100% and 150% of the poverty line
94.0% 91.9%
Number of non-elderly families and individuals without children with income between
100% and 150% of the poverty line with a full-time year-round worker
1,404,000 69,000
Non-elderly families and individuals without children with income between 100% and
150% of the poverty line with a full-time year-round worker as a percent of all
non-elderly childless families and individuals with income between 100% and 150% of the
poverty line
42.6% 41.0%

 

 

Characteristics of Working Poor Families with Children

United States New York State
Family Type
Married Couples 44.2% 46.5%
Female-headed 48.6% 46.4%
Male-headed 7.2% 7.1%
Race and Ethnicity of Family Head
White 45.4% 38.2%
Black 23.1% 25.6%
Hispanic 27.1% 29.5%
Other 4.4% 6.7%
Education of Family Head
Less than high school 37.5% 34.8%
High school or GED 37.4% 33.5%
Some college 20.3% 22.3%
College or more 4.8% 9.4%
Age of Family Head
Under 25 14.8% 13.2%
25-34 39.6% 34.7%
35-44 32.8% 34.0%
45 or older 12.7% 18.0%
Metro/non-metro Residence
Metro 75.3% 95.3%
Non-metro 24.7% 4.7%

 

 

Characteristics of Non-elderly Childless Working Poor Families and Individuals

United States New York State
Family Type
Married Couples 11.2% 13.3%
Single individuals 88.2% 86.7%
Race And Ethnicity of Family Head
White 67.8% 62.5%
Black 13.6% 11.7%
Hispanic 14.6% 19.1%
Other 4.1% 6.6%
Education of Family Head
Less than high school 26.6% 32.9%
High school or GED 34.2% 33.1%
Some college 27.6% 20.8%
College or more 11.6% 13.2%
Age of Family Head
Under 25 37.7% 21.0%
25-34 21.6% 24.4%
35-44 15.7% 20.6%
45 or older 25.0% 34.0%
Metro/non-metro Residence
Metro 77.0% 84.9%
Non-metro 23.0% 15.1

 

 

Working Parents with Low Hourly Earnings(20)

United States New York State
Number of working parents with low hourly earnings 12,158,000 637,000
Working parents with low hourly earnings as a percent of all working parents 22.9% 20.0%
Number of full-time, year-round working parents with low earnings 4,750,000 236,000
Full-time, year-round working parents with low earnings as a percent of all working
parents
12.8% 10.7%
Percent of parents with low hourly earnings employed in: United States New York
Services 41.2% 43.5%
Retail trade 25.3% 26.5%
Manufacturing 12.0% 10.8%
Construction 4.6% 3.9%
Government 2.2% 2.2%
Agriculture 4.6% 2.6%
Other 10.1% 10.6%

 

 

Average Weekly Earnings and Job Growth by Industry

Number of Jobs, 1982 (thousands) Number of Jobs. 1998 (thousands) Percent Change1982-1998 Average Weekly Pay, 1997
Total Nonfarm 7,254.6 8,155.0 12.4%
Mining 6.5 4.4 -32.3% n/a
Construction 219.6 276.9 26.1% $731
Manufacturing 1352.5 916.8 -32.2% $844
Transportation(21) 422.0 410.9 -2.6% $818
Wholesale Trade 454.0 434.5 -4.3% $894
Retail Trade 1,014.3 1,229.5 21.2% $339
Finance(22) 670.6 729.3 8.8% $1,571
Services 1,821.3 2,783.6 52.8% $649
Government 1,293.7 1,369.5 5.9% $749

 

 

Changes in the Status of the Working Poor

United States New York State
Number of working poor families
1977-79 2,285,000 137,000
1987-89 3,178,000 158,000
1995-97 3,942,000 252,000
Poverty rate of working poor families with children
1977-79 7.9% 6.4%
1987-89 10.2% 7.7%
1995-97 11.5% 11.7%
Change in the poverty rate of working poor families with children
1977-79 to 1987-89 29% 20%
1987-89 to 1995-97 13% 52%
1977-79 to 1995-97 45% 83%
Proportion of working family heads with low hourly earnings
1977-79 13.4% 9.9%
1987-89 17.1% 12.6%
1995-97 21.1% 19.4%
Change in the percent of working family heads with low hourly earnings
1977-79 to 1987-89 27% 26%
1987-89 to 1995-97 23% 54%
1977-79 to 1995-97 57% 95%

 

 

Earned Income Tax Credit

United States New York State
Families and individuals claiming the federal EITC 19,338,920 1,270,649
Average EITC benefit $1,523 $1,452

 

 

Unemployment Benefits

United States New York State
Average monthly number of unemployed 6,739,000 564,000
Average monthly number of unemployment insurance recipients 2,364,000 191,000
Percent of unemployed receiving benefits 35% 34%
Average monthly number of job losers(23) 3,037,000 266,000
Percent of job losers receiving benefits 78% 72%

Endnotes

1. This analysis includes only families where parents are not ill,
disabled or retired.

2. This report relies on the Census Bureau’s definition of full-time
work as at least 35 hours per week for at least 50 weeks per year.

3. For the purpose of this analysis and the analyses presented in
The State of Working America (see endnote 5, below) the average wage paid to low-wage
workers is defined as the wage paid to a worker at the twentieth percentile of the wage
distribution. Jared Berstein and Lawrence Mishel, “Wages Gain Ground” EPI Issue
Brief, Number 129, February 2, 1999.

4. Bernstein and Mishel.

5. Lawrence Mishel, Jared Bernstein & John Schmitt, The State of
Working America: 1998-99 (Washington, DC: Economic Policy Institute, 1998) p. 6.

6. Mishel, Bernstein & Schmitt, pp. 189-95.

7. David Card and Alan B. Krueger, “Minimum Wages and
Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania,”
American Economic Review 84:4 (1994) pp. 772-793.

8. Economic Report of the President, (United States Government
Printing Office, 1999) p. 112.

9. Robert Pollin and Stephanie Luce, The Living Wage: Building a
Fair Economy (New Press, 1998).

10. The earned income disregards are eliminated when the welfare
recipient’s income reaches the federal poverty line or 185% of the New York State standard
of need, whichever is lower.

11. For a more comprehensive discussion of this issue, see Carolyn
Boldiston, “Providing Paid Family Leave Through the Temporary Disability Insurance
Program: An Attractive and Affordable Option,” Fiscal Policy Note$, December 1998.

12. New York City Independent Budget Office, “New York City’s
Tax on the Working Poor,” Fiscal Brief, March 1998.

13. Paul Fronstin, “Sources of Health Insurance and
Characteristics of the Uninsured: Analysis of the March 1998 Current Population
Survey,” EBRI Issue Brief, Number 204, December 1998.

14. Richard Kirsh, “Health Care: As Market Forces Grow, The
System Fails a Growing Number of New Yorkers,” An Agenda for a Better New York Policy
Paper (Fiscal Policy Institute, forthcoming).

15. Deborah Phillips and Anne Bridgman, eds., New Findings on
Children, Families and Economic Self-Sufficiency (Washington, DC: National Academy Press,
1995).

16. United States General Accounting Office, Child Care Subsidies
Increase the Likelihood that Low-Income Mothers Will Work (December 1994).

17. “Comptroller: Child care slots lacking to meet welfare
reform need,” Newsday, January 14, 1999.

18. “Improved Child Care/ Early Learning & Relief for
Families are Goals of New Multi-Year Legislative Proposal,” Press Release issued by
The Child Care that Works Campaign, December 8, 1998.

19. Economic reasons include workers who were laid off, unemployed
and looking for work, or not looking for work because none was available.

20. As defined by the Census Bureau, hourly earnings that on a
full-time basis would produce annual earnings below roughly the poverty line for a family
of four.

21. Transportation, Communications, Public Utilities

22. Finance, Insurance, Real Estate

23. As defined by the Bureau of Labor Statistics, these are workers who lost their jobs involuntarily and are looking for work as well as workers on temporary layoff.

 

About the Fiscal Policy Institute

The Fiscal Policy Institute (FPI) is a non-partisan research and education organization founded in 1991 to increase public and governmental understanding of issues related to the fairness of New York’s tax system and the stability and adequacy of state and local public services. Each year FPI issues an analysis of the state’s fiscal situation and tax system. In addition to these annual reports, FPI prepares special reports and articles on a variety of subjects related to New York’s finances.

In the summer of 1993, FPI was one of 29 state-level organizations throughout the nation that were invited by the Ford, Charles Stewart Mott, and Annie E. Casey foundations to compete for funding under a new State Fiscal Analysis Initiative designed to enhance the timeliness, credibility, accessibility and usefulness of the analysis that is available on the broad range of state tax and budget issues that affect low income and other vulnerable populations. FPI was one of the 12 state-level organizations that were initially selected to participate in this initiative. The initiative has since been expanded to cover a total of 22 states and to include support from the Open Society Institute.

Over the past year, the Fiscal Policy Institute, with the support of the New York State AFL-CIO and many of its member unions, has expanded its work to cover a broader range of the economic and social issues that affect low and middle income New Yorkers. As part of this effort, FPI is in the process of opening a New York City office and has completed major studies of the state’s unemployment insurance system and of the issues surrounding the provision of paid family leave through New York’s temporary disability insurance program.

Published On: March 8th, 1999Categories: Blog