Highlights findings on the 2009 increase in the number of low-income working families and their children, proportion of low-income working families by parents' race/ethnicity, and the growth of income inequality. Discusses policy implications

Brandon Roberts

Deborah Povich

Mark Mather

English

IssueLab

InTrodUcTIonduring the great recession, unemployment rates reached theirhighest levels in more than 25 years, drawing attention to themillions of americans who lost their jobs during the economicdownturn. But there is another—mostly untold—story in thefederal employment statistics:  more families who havemanaged to continue working are hard-pressed to stay afloat inthe weak economy. new data from the U.S. census Bureau show that in 2009, therewere more than 10 million low-income working families in theUnited States.2 Between 2007 and 2009, the share of workingfamilies who are low-income—earning less than 200 percent ofthe official poverty threshold—increased from 28 percent to 30percent. This now means that nearly 1 in 3 working families inthe United States, despite their hard work, are struggling tomeet basic needs. The plight of these families now challenges afundamental assumption that in america, work pays.  although low-income working families remain mostly invisibleto policymakers, these families are comprised of workers whoform the backbone of our economy: working the cash registers,keeping our homes and businesses clean, preparing our food,and helping care for our children and elderly relatives. duringthese grave economic times, policymakers must choose to investin these low-income workers and their families. Suchinvestments are vital for the United States to maintain a strong,growing economy, and to “reduce the personal, social andeconomic costs imposed by low wages and poverty” in america.3Supported by the annie e. casey, Ford, joyce and mott founda-tions, The Working Poor Families Project is a national initiativegreaT receSSIon hIT hard aT amerIca’S WorKIngPoor: nearly 1 In 3 WorKIng FamIlIeS In UnITedSTaTeS are loW-IncomeBrandon roberts, deborah Povich and mark mather1Working Poor Families Project | www.workingpoorfamilies.org | wpfp@starpower.net | (301) 657-1480The WorKIng Poor FamIlIeS ProjecTPolIcy BrIeF  WInTer 2010-2011Key Findings from 2009 There were more than 10million low-income workingfamilies in the United States,an increase of nearly a quartermillion from the previous year.  Forty-five million people,including 22 million children,lived in low-income workingfamilies, an increase of 1.7million people from 2008. Forty-three percent of workingfamilies with at least oneminority parent were low-income, nearly twice theproportion of white workingfamilies (22 percent). Income inequality continued togrow with the richest 20percent of working familiestaking home 47 percent of allincome and earning 10 timesthat of low-income workingfamilies. 2Working Poor Families Project | www.workingpoorfamilies.org that seeks to strengthen state policies that canassist families striving to work their way into themiddle class and achieve economic security. For thepast eight years, WPFP has analyzed theconditions of working families, noting the magni-tude of the problem as well as the inadequacy ofpublic policies to serve working families. This newanalysis, with the latest U.S. census dataavailable, shows that the economic turmoil of thegreat recession has raised the problem to a criticallevel, creating even greater challenges for workingfamilies in their drive for economic success andsecurity. ImPacT oF The receSSIonThe great recession was not only the most severeeconomic downturn since the 1930s, but—withduration of 18 months—it was also one of thelongest. While the recession is officially over,millions of families are still looking for work andstruggling to pay bills. more than half of the U.S. labor force (55 percent)has “suffered a spell of unemployment, a cut in pay,a reduction in hours or have become involuntarypart-time workers” since the recession began indecember 2007.4 measuring the direct impact ofthe recession on working families is difficultbecause there are broader social, economic anddemographic factors at work, many of whichpredate the recent economic decline. But it’s clear from the data that conditions forworking families deteriorated after 2007 (seeFigure 1). The proportion of working families below200 percent of the poverty threshold increasedsharply in 2008 and again in 2009, as manymiddle-class families fell into the low-income trap.just between 2008 and 2009, the number of low-income working families increased by nearly aquarter of a million (246,000), adding another 1.7million to the number of people living in low-income working families.When the recession hit, many working familiesjoined the ranks of the unemployed or dropped outof the workforce altogether. others continued towork but saw their incomes drop as businessestightened their belts. The recession has been espe-cially hard on men, who were more highlyconcentrated in the depleted manufacturing,construction and financial sectors. Between 2007and 2009, the proportion of working women with anunemployed husband more than doubled, from 2.4percent to 5.4 percent.5 This means there is a grow-ing proportion of working families in whichwomen—who earn less money, on average, thanmen—are the primary breadwinners.3Working Poor Families Project | www.workingpoorfamilies.org Increasingly, workers need a college degree, creden-tial or other specialized training in order to find ajob with decent wages, good benefits and opportuni-ties for advancement. during the recession, theunemployment rate for those without a high schooldiploma peaked at more than 15 percent, comparedwith 4 percent unemployment among those withbachelor’s degrees and higher (see Figure 2). andrecent declines in the U.S. manufacturing andconstruction sectors have made it even more diffi-cult for less-educated workers to find jobs that paya living wage. In 2008, median earnings for collegegraduates were $55,700, compared with $33,800 forthose with only a high school diploma.6a recent national study forecast that 63 percent ofall job openings occurring by 2018 will requireworkers with some level of postsecondaryeducation. Public systems, however, are not produc-ing enough college-educated individuals to meet thedemands of a knowledge economy.7 In 2009, nearlya third of low-income working families (31 percent)had at least one parent without a high schooldiploma. In more than half (52 percent) of low-income working families, no parent had anyeducation beyond high school, putting these fami-lies at a severe disadvantage in terms of jobsecurity and potential earnings. racIal/eThnIc mInorITIeSeconomic security is often out of reach for workingfamilies headed by minority parents, who are lesslikely to have the education and technical skillsthat are needed to earn higher incomes. In 2009, 43percent of working families with at least one minor-ity parent were low-income, nearly twice theproportion of white working families (22 percent).For both white and minority working families, theproportion below 200 percent of the poverty thresh-old increased from 2007 to 2009, by 2 percentagepoints each.The changing racial/ethnic composition of the U.S.labor force is a contributing factor in the rise inlow-income working families. Immigration trendsand higher fertility among minorities have put theUnited States on a path to become “majority-minor-ity,” when less than 50 percent of the populationwill be non-hispanic white. as the minority shareof the labor force increases, the proportion of work-ing families who are low-income is also expected togrow. There are low-income families from every racialand ethnic group, but non-hispanic whites stillmake up more than two-fifths (42 percent) of low-4Working Poor Families Project | www.workingpoorfamilies.org income working parents. Policymakers need toconsider this diversity in formulating policies andprograms to improve families’ lives. There is also astrong geographic component to these racial/ethnicdifferences, with low-income black families concen-trated in the South, hispanics in california and theSouthwest, whites in appalachia, and native amer-icans in the midwest.8chIldren In loW-Income WorKIngFamIlIeSIn 2009, there were about 45 million people livingin low-income working families, including morethan 22 million children. In just one year, from2008 to 2009, the number of children in low-incomeworking families increased by more than 700,000. children living in poverty tend to have worsehealth and educational outcomes than childrengrowing up in more affluent families.9 For manychildren, poverty persists into adolescence andadulthood, and is associated with higher risks ofdropping out of school, teens having children andlower earnings for young adults.10nationwide, more than 1 in 3 children in workingfamilies (35 percent) are low-income. Whatmessage is conveyed to these youth—our futureworkforce—whose parents work hard but stillstruggle to make ends meet? many children willfollow the same educational and work trajectoriesas their parents, and poverty will carry over fromone generation to the next. For policymakers, thechallenge is to increase economic security for low-income parents so they can provide the necessaryresources for their children to succeed in school andeventually the workforce.Income IneqUalITyThere is more bad news in these numbers: Therichest 20 percent of working families now takehome nearly half (47 percent) of all income, andincome inequality is increasing each year. In 2009those at the top of the economic ladder earned 10times the income of those at the bottom (see Figure3).11 This represents a 5 percent increase in incomeinequality since 2007 and an 11 percent increasesince 2004 in terms of the share of income receivedby working families at opposite ends of the U.S.income distribution. The divide between higher- and lower-income fami-lies goes beyond economics. Increasingly, familiesfrom different economic strata are also sorted intodifferent neighborhoods, schools and socialnetworks. These families and their children are atrisk of becoming isolated from educational andeconomic opportunities that could provide a pathout of poverty.125Working Poor Families Project | www.workingpoorfamilies.org ImPlIcaTIonS For PolIcymaKerSThis new analysis of U.S. census Bureau datashows that the great recession has exacerbated analready serious american challenge: Too manyhard-working families earn incomes too low toachieve economic security. It also shows that theeconomic divide between working families at thetop of the economic ladder and those at the bottomis growing. Federal and state policymakers have not addressedthis challenge sufficiently in the past.  now theproblem is even more severe and the conditions fortaking policy actions more constrained. yet policy-makers cannot afford to ignore the decliningconditions of working families; prior warnings thatinaction will threaten “economic growth, interna-tional competiveness, and, potentially even ourcohesiveness as a nation” seem alarmingly accuratetoday.13The United States requires a sustainedcommitment from federal and state governments toensure that hard-working families have a viableopportunity to achieve economic advancement andsecurity. Such a commitment must be followed withspecific policy actions at both levels of government.  at this critical time, policymakers must give prior-ity to investing public resources and enactingpublic policies that are directed at: expanding the number of low-skilled adultswho enroll in education and skillsdevelopment programs and successfullyobtain postsecondary credentials valued inthe labor market. Improving wages, benefits and supports forlow-income working families andstimulating the creation of significantlymore good jobs. regularly assessing the challenges faced byamerica’s working families and theadequacy and success of government policiesthat facilitate their drive for economicadvancement and security.The entire nation has an important stake in ensur-ing that all working families succeed and thatpublic investments are used effectively to increasethe success of low-income working families. more-over, the demands of the global economy make itimperative that policymakers at all levels ofgovernment commit to addressing this challenge.low-income working families want nothing morethan other americans: the opportunity to achieveeconomic security and to contribute to the country’soverall prosperity and well-being. We must act nowto renew america’s promise that work pays.For questions about this policy brief or theWorking Poor Families Project contact:Brandon robertsrobert3@starpower.net(301) 657-1480The WorKIng PoorFamIlIeS ProjecTStrengthening State Policies for america’s Working Poormillions of american breadwinners workhard to support their families. But, despitetheir determination and effort, many aremired in low-wage jobs that provideinadequate benefits and offer fewopportunities for advancement. In fact,nearly 1 in 3 american working familiesnow earn wages so low that they havedifficulty surviving financially.launched in 2002 and currently supportedby the annie e. casey, Ford, joyce andmott foundations, The Working PoorFamilies Project is a national initiativethat works to improve these economicconditions. The project partners with statenonprofit organizations and supports theirpolicy efforts to better prepare america’sworking families for a more secureeconomic future. For more information:www.workingpoorfamilies.org6Working Poor Families Project | www.workingpoorfamilies.org endnoTeS1 Brandon roberts and deborah Povich manage TheWorking Poor Families Project.  mark mather is ademographer at the Population reference Bureau, wherehe specializes in issues related to U.S. social anddemographic trends, child and family well-being, anddata from the U.S. census Bureau.  2 In this brief, a family is a primary married-couple orsingle-parent family with at least one co-resident childyounger than 18 years old. a family is defined as working ifall family members 15 and older either have a combinedwork effort of 39 weeks or more in the prior 12 months, orall family members 15 and older have a combined workeffort of 26 to 39 weeks in the prior 12 and one currentlyunemployed parent looked for work in the prior four weeks.In 2009, the low-income threshold for a family of four withtwo children was $43,512. Unless otherwise noted, data arefrom the Population reference Bureau’s analysis of the U.S.census Bureau’s american community Survey. estimatesfrom the acS are subject to both sampling andnonsampling error.3 Tom Waldron, Brandon roberts and andrew reamer,Working hard, Falling Short: america’s Working Familiesand the Pursuit of economic Security, Working PoorFamilies Project, october 2004, 1(http://www.workingpoorfamilies.org/pdfs/Working_hard.pdf). 4 The great recession at 30 months, Pew research center,Washington, dc, june 2010(http://pewresearch.org/pubs/1643/recession-reactions-at-30-months-extensive-job-loss-new-frugality-lower-expectations).5 heather Boushey, Women Breadwinners, menUnemployed, center for american Progress, Washington,dc, july 2009(http://www.americanprogress.org/issues/2009/07/breadwin_women.html).6 education Pays 2010, college Board advocacy and Policycenter, 4(http://trends.collegeboard.org/downloads/education_Pays_2010.pdf). 7 anthony carnevale, nicole Smith and jeff Strohl, helpWanted: Projections of jobs and education requirementsThrough 2018, georgetown University center on educationand the Workforce, Washington, dc, 2010, 13, 16(http://www9.georgetown.edu/grad/gppi/hpi/cew/pdfs/Fullreport.pdf).8 Unequal opportunities for Family and communityeconomic Success. The annie e. casey Foundation(http://www.aecf.org/upload/publicationfiles/fact_sheet7.pdf)9 jeanne Brooks-gunn, greg j. duncan and nancymaritato, “Poor Families, Poor outcomes: The Well-Being ofchildren and youth,” in consequences of growing Up Poor,ed. greg j. duncan and jeanne Brooks-gunn (new york:russell Sage Foundation, 1997), 1-17; and eugene m.lewit, donna l. Terman and richard e. Behrman,“children and Poverty: analysis and recommendations,”The Future of children, Summer/Fall 1997, 8-9(http://futureofchildren.org/futureofchildren/publications/docs/07_02_analysis.pdf).10 Susan e. mayer, “Trends in the economic Well-Being andlife chances of america’s children,” in consequences ofgrowing Up Poor, 46-69; and greg j. duncan, Kathleen m.Ziol-guest and ariel Kalil, “early-childhood Poverty andadult attainment, Behavior, and health,” childhooddevelopment 81 (2010).11 The bottom quintile represents families with income upto $31,000 annually while the top quintile includes familieswith income greater than $116,400.12 mark mather and nadwa mossaad, children inPersistently Poor neighborhoods, paper presented at thePopulation association of america annual meeting indetroit, mich., march 2009(http://paa2009.princeton.edu/download.aspx?submissionId=90826).13 david ellwood, grow Fast Together, or grow Slowlyapart:  how Will america Work in the 21st century, aspenInstitute, 2002.

Great Recession Hit Hard at America's Working Poor: Nearly 1 in 3 Working Families in United States Are Low-Income

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Great Recession Hit Hard at America's Working Poor: Nearly 1 in 3 Working Families in United States Are Low-Income

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