DOCUMENT RESUME RC 023 156 ED 456 966 Boushey, Heather; Brocht, Chauna; Gundersen, Bethney; AUTHOR Bernstein, Jared Hardships in America: The Real Story of Working Families. TITLE Economic Policy Inst., Washington, DC. INSTITUTION Foundation for Child Development, New York, NY. SPONS AGENCY ISBN-0-944826-95-4 ISBN 2001-00-00 PUB DATE NOTE 125p. Economic Policy Institute, 1660 L Street NW, Suite 1200, AVAILABLE FROM Tel: 202-775-8810. For full Washington, DC 20036 ($12.95) . text: http://www.epinet.org/books/hardships.pdf. Reports Numerical/Quantitative Data (110) Books (010) PUB TYPE Research (143) MF01/PC05 Plus Postage. EDRS PRICE *Budgets; Child Welfare; Costs; Day Care; Economic Research; DESCRIPTORS *Family Needs; Family Problems; Fringe Benefits; Health Insurance; Housing; Hunger; Metropolitan Areas; Policy Analysis; *Poverty; *Public Policy; *Quality of Life; Rural Areas; Tables (Data); Underemployment; *Working Poor Access to Health Care; Family Support; Food Security IDENTIFIERS ABSTRACT Although U.S. policymakers have adopted the view that work is the solution to poverty, work may not ensure a decent standard of living for many families. This report estimates the number of families who are not making ends meet. It examines the cost of living in various communities in every state and determines "basic family budgets" for six family types in all metropolitan areas and in a combined rural area for each state. These budgets cover housing, child care, health care, food, transportation, and taxes and, in contrast to the federal poverty line, offer a more realistic measure of the income needed for a decent standard of living. The families studied comprised one or two adults and one to three children under age 12. Among these kinds of families, nationally, 29 percent fell below basic family budget levels for their communities in the late 1990s, and over 2.5 times as many families fell below family budget levels as fell below the poverty line. Families headed by single parents, young workers, minority workers, or workers who were high school dropouts were more likely to be struggling. The report also examines "critical" and "serious" hardships faced by families. Among the findings: families at all income levels had problems meeting health care and child care needs, and lack of health insurance was a strong predictor of family hardship. Extensive policy recommendations are offered concerning worker pay and benefits and a safety net of social services. Appendices present methodology, hardship data, and family budgets for 400 rural and urban areas. (Contains 45 references and many statistical data tables.) (SV) Reproductions supplied by EDRS are the best that can be made from the original document. 1/40 1/4C) U S DEPARTMENT OF EDUCATION kr) Office of Educational Research and Improvement EDlJCATlONAL RESOURCES INFORMATION CENTER (ERIC) This document has been reproduced as received from the person or organization originating it. 0 Minor changes have been made to improve reproduction quality Points of view or opinions stated in this docu- ment do not necessarily represent official OERI position or policy "PERMISSION TO REPRODUCE THIS MATERIAL HAS BEEN GRANTED BY TO THE EDUCATIONAL RESOURCES INFORMATION CENTER (ERIC)" The Real Story of Working Families Heather Boushey Chauna Brocht Bethney Gundersen Jared Bernstein ECONOMIC POLICY INSTITUTE 2 BEST COPY AVAIL LE Hardships in America 3 Other books and studies from the ECONOMIC POLICY INSTITUTE The State of Working America 2000-01 How Much Is Enough? Basic Family Budgets for Working Families Crime and Work What We Can Learn From the Low-Wage Labor Market Net Working Work Patterns and Workforce Policies for the New Media Industry Pulling Apart A State-by-State Analysis of Income Trends Balancing Acts Easing the Burdens and Improving the Options for Working Families 4 Hardships in America The Real Story of Working Families Heather Boushey Chauna Brocht Bethney Gundersen Jared Bernstein ECONOMIC POLICY INSTITUTE 5 About the authors Heather Boushey is an economist at the Economic Policy Institute. She has previ- ously conducted research on wages and employment, gender and racial wage inequali- ties, and social policy. Her current research is on welfare reform. She received her Ph.D. in economics from the New School for Social Research in New York City. Chauna Brocht is a policy analyst at the Economic Policy Institute. Her research focuses on poverty measurement, low-wage labor markets, and living wage and mini- mum wage analysis. She coordinates EPI's outreach program and provides technical assistance to state and local advocates on living standards issues. She has an M.A. in public policy from the Humphrey Institute at the University of Minnesota. Bethney Gundersen is a research fellow at the Economic Policy Institute. Her current research interests include the effect of labor unions and union organizing on the work- ing poor. She has also conducted research on the impact of welfare reform on rural areas and American Indian communities. She received her masters in economics from Washington University in St. Louis and is a doctoral candidate in social work there. Jared Bernstein is a labor economist at the Economic Policy Institute. His areas of research include income and wage inequality, technology's impact on wages and em- ployment, low-wage labor markets and poverty, minimum wage analysis, and interna- tional comparisons. He has published extensively in popular and academic journals, and is the co-author of four editions of the book The State of Working America. Copyright 2001 ECONOMIC POLICY INSTITUTE 1660 L Street NW, Suite 1200 Washington, DC 20036 http://epinet.org ISBN: 0-944826-95-4 6 Table of contents Acknowledgments vi Executive summary 1 Introduction 3 Chapter I: Families that fall below basic family budget levels 5 The problem with the current poverty thresholds 5 Basic family budgets 7 Family budget methodology 8 How do these budgets compare with other measures? 9 Number and shares of families falling below family budget levels ... 11 Chapter 2: The hardships low-income families face 19 Methods of measuring hardships 19 Hardship indicators 20 Critical hardships and serious hardships 23 Analysis: Critical and serious hardships 29 Summary 42 Chapter 3: Policies to help families meet basic needs 44 The need for an expanded social safety net 46 Policies that can help meet a family's needs 48 Conclusion 51 Appendix A: Family budgets methodology 52 Appendix B: CPS methodology 56 Appendix C: Hardships data 58 Appendix D: Comparison of 200% of poverty and family budgets 61 Appendix E: Analytic method 62 Appendix F: Family budgets for 400 U.S. communities 67 Endnotes 68 References 70 7 Acknowledgments We would like to thank the many people who provided insightful comments on this report, including Gregory Acs, Kurt Bauman, Sondra Beverly, Marcia Meyers, Bill Spriggs, Fasaha Traylor, and Eileen Appelbaum. We would also like to thank Matthew Walters, Jennifer Lake, and Danielle Gao for their assistance on the project and this report, Patrick Watson for overseeing its editing and publication, and Tom Kiley for helping to ensure a wide audience for its findings. This project was funded by the Foundation for Child Development. 8 Executive summary Policy makers in the United States have adopted the view that work is the solution to poverty, and the government's role is to promote employment rather than provide income support for poor families. For many families, however, work may not be enough to ensure a decent standard of living. This report estimates the number of families who are not making ends meet. We examine the cost of living in every U.S. community and determine basic family budgets for various family types in each one. In all, over 400 separate basic family budgets for six family types are generated. We then count the number of working families in each state whose incomes fall below these basic budgets. Next we examine the hardships these families experience. Finally, we explore how the U.S. can create a social safety net that recognizes that work is not always enough to help families meet their basic needs. The federal poverty line is traditionally used to measure whether families have incomes too low to enable them to meet basic needs. Yet most researchers now agree that a "poverty line" income is not sufficient to support most working families. "Basic family budgets," individualized for communities nationwide and for type of family, offer a realistic measure of how much income it takes for a safe and decent standard of living. In this report we focus on a subset of families: those with one or two adults and one to three children under 12. Among these kinds of families, we fmd: basic family budgets for a two-parent, two-child family range from $27,005 a year to $52,114, depending on the community. The national median is $33,511, roughly twice the poverty line of $17,463 for a family that size; nationally, 29% of families with one to three children under 12 fell below basic family budget levels for their communities in the late 1990s; over two-and-a-half-times as many families fall below family budget levels as fall below the official poverty line. Families headed by single parents, young workers, minority workers, or workers with less than a high school degree are more likely to struggle to make ends meet. However, families not typically thought of as needy are also 9 Hardships in America 2 struggling. Of families with incomes below basic budget levels, half include a parent who works full time; nearly 60% are two-parent families. More than three-quarters are headed by a worker with a high school degree or more, and nearly half are headed by a worker over age 30. About one-third live in the suburbs, one-third in cities, and one-third in rural areas. In examining the difficulties families face, we distinguish between two types of hardships. Critical hardships arise from the inability to meet basic needs such as food, housing, or medical care. Serious hardships arise when families can't afford preventive medical care, quality child care, or safe and affordable housing. Families that fall below basic family budget levels often lack the income needed to support a safe and decent living standard. Using twice the national poverty line as a national proxy for the basic family budget, we found that in 1996: nearly 30% of families with incomes below twice the poverty line faced at least one critical hardship such as missing meals, being evicted from their housing, having their utilities disconnected, doubling up on housing, or not having access to needed medical care; over 72% of such families had at least one serious hardship, such as worries about food, missed rent or mortgage payments, reliance on the emergency room as the main source of medical care, or inadequate child care arrangements; families with incomes below the basic family budget level faced nearly the same incidence of critical and serious hardships as those with incomes below the poverty line. We found that families at all income levels are struggling to meet their health care and child care needs. Families lacking private health insurance experience a variety of hardships. For example, families without health insurance are over twice as likely to miss meals and not pay their rent, mortgage, or utility bills as are other families with the same income, regardless of the amount of income they have. Helping working families meet their basic needs requires a two-pronged approach. First, raising the minimum wage, removing barriers to unionizing, expanding the Earned Income Tax Credit, adopting pay equity policies, and increasing workforce development will increase family incomes. Second, investing in a social safety net of universal programs will help families meet basic needs. The research reported here documents that families with incomes above the poverty line but below basic family budget levels experience as many hardships as poor families. Thus, policy solutions must be directed toward these families as well. Moreover, the market has priced basic items such as health care, child care, and housing above what many families can afford. It will take a social safety net to truly help families make ends meet. 1 0