No Relief for the Working Poor

New York City’s economy has rebounded from the recent recession and the effects of 9/11, but large numbers of New Yorkers have been left behind.  With the city’s poverty rate stagnant over the last year, it is evident that the economic good times have not trickled down to the working poor.  In fact, increasing wealth at the top and declining wages for working families have served to further widen the gap between rich and poor. 

According to the latest figures from the U.S. Census, New York is the only state in the nation where both the median household income and the poverty rate are higher than the national average.  Of course, whenever I comment on the growing inequality between rich and poor, my critics always cry “class warfare.”  But if we ignore the widening gap in income and wealth in New York and across the nation, it’s the working poor who will continue to get pummeled - not the country club set.

1.7 Million in Poverty

One-in-five New York City residents lives in poverty; in whole numbers, roughly 1.7 million people.  If they resided in their own municipality they would constitute the fifth largest city in the United States - only Houston, Chicago, Los Angeles, and the rest of New York would have a larger population.

While 21.6 percent of New York City residents are poor, the figure nationwide is 12.6 percent.  The city’s large share of people living in poverty is disproportionately made up of people of color: 30.2 percent of blacks and 29.1 percent of Hispanics in New York City live under the federal poverty line, compared to 11.5 percent of whites.  Nearly one-in-three (31.9 percent) children lives in poverty.

These are findings from the most recent Community Service Society report on the state of the city’s poor, Poverty in New York City, 2005.  The report analyzes the newly-released figures on poverty from the U.S. Census.

The latest figures emphasize the extent to which poverty affects working people.  A growing share of the city’s families with children is working.  The proportion of families with the equivalent of a full-time, year-round worker has risen from 73.0 percent in 2000/1999 to 80.0 percent in 2005/2004.

Annual earnings for these working families plunged during the economic downturn.  From 2000/1999 to 2003/2002, median family earnings fell by 14.9 percent.  While earnings have recovered somewhat for families at the middle rung of the pay scale (increasing by 5.0 percent from 2003/2002 to 2005/2004), there have been no pay gains for families at the lowest quartile of the earnings distribution during the recent recovery.  We’ve gone from a jobless recovery to a recovery where wage increases cannot match the rate of inflation.

Widened gap
between
rich and poor

The decline in earnings has direct implications for poverty trends.  The term “working poor” ought to be an oxymoron, but the working poor comprise a substantial portion of the city’s population.  In our 2005 survey, more than 60 percent of households with incomes below the poverty line reported having a full-time worker. 

Many of the working poor are subsisting on minimum wage jobs.  The minimum wage in New York State is $6.75 an hour.  A full-time worker working without a day’s vacation – 40 hours a week, 52 weeks a year – at the minimum wage earns $14,040 before taxes.  The federal poverty line for a family of one adult and two children is $15,735.  These are people who are working hard but going nowhere.

Making Work Pay

With more poor families working, their ability to earn their way up the economic ladder – and out of poverty – depends not only on steady work, but also on the help of both national and local public policies intended to make work pay.  No group exemplifies this need better than single mothers. 

Single mother families constitute two-thirds of New York City’s poor families with children.  Many of these women entered the labor market in response to welfare reform legislation passed by Congress in 1996.  After single mothers experienced a dramatic rise in employment and fall in poverty since the mid-1990’s, recent trends reversed much of that progress.  Employment by single mothers is down and the poverty rate for single mother families has climbed by 9.9 percentage points since 2002/2001.

There are a number of policies that would help single working mothers and other low-wage workers to break the cycle of poverty.  These include: indexing the minimum wage to the rate of inflation; expanding the federal tax child credit to cover all low-income families; and expanding outreach and access to the Earned Income Tax Credit.  Also, a policy of providing on-the-job training and education to low-income workers would allow them to move up to employment that pays family-sustaining wages.

From the New York Amsterdam News
September 21 - 27, 2006