Number A-42 in Series, "New Federalism: Issues and Options for States"
The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.
About the Series
This series is a product of Assessing the New Federalism, a multiyear project to monitor and assess the devolution of social programs from the federal to the state and local levels. Alan Weil is the project director. The project analyzes changes in income support, social services, and health programs. In collaboration with Child Trends, the project studies child and family well-being.
The project has received funding from The Annie E. Casey Foundation, the W.K. Kellogg Foundation, The Robert Wood Johnson Foundation, The Henry J. Kaiser Family Foundation, The Ford Foundation, The John D. and Catherine T. MacArthur Foundation, the Charles Stewart Mott Foundation, The David and Lucile Packard Foundation, The McKnight Foundation, The Commonwealth Fund, the Stuart Foundation, the Weingart Foundation, The Fund for New Jersey, The Lynde and Harry Bradley Foundation, the Joyce Foundation, and The Rockefeller Foundation.
This series is dedicated to the memory of Steven D. Gold, who was codirector of Assessing the New Federalism until his death in August 1996.
As welfare reform, helped by a prolonged economic expansion, moves millions of people off the welfare rolls into low-paying jobs, the policy world is considering the challenges facing low-income working families. These are the people who work hard and play by the rules, but still must struggle to make ends meet. Although many of them are not literally poor as measured by the official poverty line, they are near enough to the economic edge that an illness, a job layoff, or even a major car repair can have severe consequences for their well-being.
This brief uses data from the 1997 National Survey of America's Families1 (NSAF) to count the number of people who live in low-income working families and to describe their personal characteristics and the jobs they hold. We find that one in six nonelderly Americans lives in families in which the adults work, on average, at least half-time but whose incomes fall below twice, or 200 percent of, the federal poverty level (FPL)—our threshold for a low-income family.2 Two-thirds of these Americans are part of families with children and with two or more adults present. The primary earner in these families typically works full-time, year-round. While the work effort of the primary earner in these families matches that of higher-income families, other adults in these families work less. However, even if all able-bodied, prime-age adults in these families worked full-time, simulation results suggest that only about 20 percent would work their family's way off the bottom rung of the economic ladder.3 The relatively low wages of this group make it difficult for them to rise above 200 percent of the FPL.
What Is a Low-Income Working Family?
A working family on the bottom rung of the economic ladder is a family in which the adults work outside the home on a substantial and regular basis, but whose income is so low that it is difficult for them to sustain what Americans generally consider a minimally adequate standard of living. How can this essentially qualitative description be defined precisely enough to capture the number of persons in low-income working families, their characteristics, and the types and quality of jobs they hold? This brief is based on research that tackles the problem of definition along two dimensions, embodying two specific notions:
- Low-income workers have a substantial commitment to the labor force. (Working families are defined as those in which the adults work at least 1,000 hours a year, on average—roughly half-time work.)4
- Low-income families struggle to meet all their expenses. (This study puts the family income cutoff at 200 percent of the FPL.) (Wigton and D'Orio 1999.)
For a single parent with one child, the 1999 official poverty threshold is $11,483. The low-income income cutoff for such a family, therefore, is $22,966. Out of this income, the family must pay for basic necessities (i.e., food, shelter, clothing) plus the costs of working outside the home (e.g., transportation and child care). Nationally, persons in families with incomes below 200 percent of the FPL are three times more likely to report problems paying their mortgage, rent, or utility bills than higher-income families.5 The share of children living in families that worried about or experienced difficulty affording food is more than three times higher among those living in low-income families than among those in families with incomes above 200 percent of the FPL (McKenzie and Bell 1999). In addition, recent estimates of the income a single mother with one child living in Washington, D.C., needs to meet her expenses (about $34,000 a year) far exceeds 200 percent of the FPL.6
The average income of working low-income families for the United States as a whole is 139 percent of the FPL ($15,600 for a single parent with one child). These families are best off in Minnesota, at 149 percent of the poverty level, and worst off in California, at 124 percent of the poverty level. Working families with incomes below the official poverty level have average incomes of only 76 percent of the poverty level, with little variation by state.
Table 1 shows that nationally about a third (32.2 percent) of all nonelderly persons live in low-income families. Of these, slightly more than half live in working families, amounting to 16.7 percent of the U.S. population. The share of the population living in working low-income families varies widely across states, from a low of 9.1 percent in Massachusetts to a high of nearly 23 percent in Mississippi. The share of the population living in low-income families varies almost as much, from a low of 21.7 percent in New Jersey to a high of 45.8 percent in Mississippi.
TABLE 1 Persons Living in Working Low-Income Families
in Relation to Total Population and Low-Income Population, by State, 1996
| |
Working Low-Income Populationa
(% of all nonelderly persons) |
Low-Income Populationb
(% of all nonelderly persons) |
Working Low-Income Population
as a Percentage of Low- Income Population |
| U.S. Total |
16.7 |
32.2 |
52.0 |
| Alabama |
19.3 |
38.8 |
49.7 |
| California |
18.0 |
38.6 |
46.6 |
| Colorado |
15.9 |
27.4 |
57.8 |
| Florida |
20.1 |
36.8 |
54.6 |
| Massachusetts |
9.1 |
22.0 |
41.5 |
| Michigan |
13.3 |
25.5 |
52.2 |
| Minnesota |
13.5 |
22.6 |
59.6 |
| Mississippi |
22.7 |
45.8 |
49.5 |
| New Jersey |
10.0 |
21.7 |
46.1 |
| New York |
13.3 |
32.8 |
40.7 |
| Texas |
21.5 |
39.6 |
54.4 |
| Washington |
14.7 |
28.4 |
51.9 |
| Wisconsin |
14.3 |
21.9 |
65.3 |
Source: Urban Institute tabulations from the 1997 National Survey of America's Families.
a. Families with incomes below 200 percent of the official poverty level in which the average annual hours worked per adult is at least 1,000.
b. All families with incomes below 200 percent of the official poverty level. |
The relative size of the low-income population in a state bears little relation to the proportion that is working low-income. For example, while a far greater share of persons live in low-income families in California than in New Jersey (38.6 versus 21.7 percent), California and New Jersey have similar proportions of their low-income populations living in working low-income families (46.6 and 46.1 percent, respectively).
Who Are the Members of Working Low-Income Families?
The characteristics of persons in working low-income families tend to fall between those in other (nonworking) low-income families and those in higher-income working families. Along several dimensions, this means that working low-income families have substantial job-market disadvantages compared with their higher-income counterparts. These dimensions include age of family head, educational attainment of family head, number of children, the presence of a work-limiting health condition for the family head, and race.
The characteristics of the heads of working low-income families are compared with those of other families in table 2. Married men who are younger than heads of other family types are typically the heads of working low-income families. Two-thirds of the heads of working low-income families are men, for example, compared with fewer than half the heads of other low-income families and almost three-quarters of the heads of higher-income families. They are two years younger on average than the heads of other low-income families (35.5 years versus 37.7 years) and five years younger than the heads of higher-income families. More than two-thirds of persons in working low-income families live in married-couple families, compared with fewer than half of other low-income families and over three-quarters for persons in higher-income families.
TABLE 2 Comparison of Personal Characteristics of Family Head in
Working Low-Income, Other Low-Income, and Higher-Income Families, 1996
| |
Low-Income Familiesa |
|
| |
Workingb |
Other |
Higher-Income Familiesc |
| Age (years) |
35.5 |
37.7 |
40.6 |
| Marital status (percent) |
| Married |
68.9 |
45.2 |
83.0 |
| Widowed/divorced/separated |
17.3 |
25.6 |
8.9 |
| Never married |
13.9 |
29.2 |
8.1 |
| Male (percent) |
63.0 |
43.0 |
73.4 |
| Education (percent) |
| Less than high school |
22.4 |
35.2 |
4.3 |
| HS grad or GED |
45.7 |
39.3 |
35.0 |
| Some college |
21.5 |
17.9 |
24.7 |
| College graduate |
10.4 |
7.6 |
36.0 |
| Has work-limiting condition (percent) |
11.6 |
27.6 |
7.1 |
| Race (percent) |
| Black, non-Hispanic |
18.0 |
26.5 |
9.4 |
| Hispanic |
11.6 |
10.7 |
3.9 |
| White, non-Hispanic |
66.0 |
56.2 |
82.5 |
| Other |
4.5 |
6.6 |
4.2 |
Source: Urban Institute tabulations from the 1997 National Survey of America's Families.
Note: Family head is the highest-earning adult, except in families with no earner for which the head is the adult with the most education.
a. All families with incomes below 200 percent of the official poverty level.
b. All families with incomes below 200 percent of the official poverty level in which the average annual hours worked per adult is at least 1,000.
c. All families with income at 200 percent of the official poverty level or above. |
In terms of education, the heads of working families are in a slightly better position than their counterparts in other low-income families but much worse off than the heads of higher-income families. More than 22 percent of the heads of working low-income families have less than a high school education, for example, compared with fewer than 5 percent of higher-income family heads. Only about 10 percent of working low-income family heads are college graduates, compared with 36 percent of higher-income family heads.
With respect to work-limiting health conditions, the heads of working low-income families are less likely to be affected than other low-income family heads (11.6 versus 27.6 percent) but more likely to be so than the heads of higher-income families (at 7.1 percent). On the race/ethnicity dimension, fewer heads of working low-income families than of other low-income families are black (18 versus 26.5 percent), but very similar percentages are Hispanic (11.6 versus 10.7 percent). Heads of working low-income families are somewhat more likely to be white than the heads of other low-income families, but considerably less likely to be white than their higher-income counterparts (66.0 versus 82.5 percent).
Persons in working low-income families are more likely to live in families with children, and more likely to have more children, than either persons in other low-income families or persons in higher-income families (table 3). For example, more than four-fifths of them (82.1 percent) live in families with children, compared with about two-thirds for the other two groups. About 80 percent of those living in families with children have more than one child, compared with about 75 percent for persons in other low-income families and about 65 percent for those in higher-income families.
TABLE 3 Family Composition of Persons in Working Low-Income,
Other Low-Income, and Higher-Income Families, 1996
| |
Low-Income Familiesa |
|
| |
Workingb |
Other |
Higher-Income Familiesc |
| Any children (percent) |
82.1 |
64.9 |
61.7 |
| Number (percent) |
| 1 |
20.2 |
25.2 |
35.5 |
| 2 |
36.5 |
31.6 |
41.6 |
| 3+ |
43.3 |
43.2 |
22.9 |
| Number of children per workerd |
1.6 |
1.5 |
0.7 |
| Three or more adults (percent) |
9.6 |
26.7 |
19.0 |
Source: Urban Institute tabulations from the 1997 National Survey of America's Families.
a. All families with income at 200 percent of the official poverty level or above.
b. All families with incomes below 200 percent of the official poverty level in which the average annual hours worked per adult is at least 1,000.
c. All families with income at 200 percent of the official poverty level or above.
d. Any families with children. |
How Much Do Low-Income Workers Work and at What Jobs?
The primary earners in working low-income families work full-time, full-year on average, but for much lower hourly wages than their higher-income counterparts. The jobs they hold also tend to be less stable and to provide fewer benefits.
The job characteristics of primary earners in working low-income families are compared with those of primary earners in higher-income working families in table 4. The first two columns show the comparison for all family types; the third and fourth columns for one-adult families with children.
Look first at the job characteristics of the primary earners. The median hourly wage for those in working low-income families ($7.55) is about half that for higher-income working families ($16.67). A similar pattern, at slightly lower levels, holds for single-adult families with children. This difference does not hold for work effort, however. Primary workers in working families across the board typically work full-time and year-round - that is, a bit more than 2,000 hours and 52 weeks a year.
TABLE 4 Comparison of Job Characteristics of Adults in Working Families, 1996
| |
All Working Familiesa |
One-Adult Working
Families with Childrena |
| |
Low-Incomeb |
Higher-Incomec |
Low-Incomeb |
Higher-Incomec |
| Primary earner |
| Wage rate ($ per hour)d |
$7.55 |
$16.67 |
$6.73 |
$14.42 |
| Hours worked per yeard |
2,080 |
2,184 |
2,058 |
2,080 |
| Weeks worked per yeard |
52 |
52 |
52 |
52 |
| Has more than one job (percent) |
8.0 |
11.5 |
8.3 |
13.7 |
| Works mainly between 6 am and 6 pm (percent) |
74.7 |
83.0 |
75.6 |
86.3 |
| Time at current employer (percent) |
|
|
|
|
| < One year |
30.8 |
13.7 |
34.5 |
14.7 |
| One year or more |
69.2 |
86.3 |
65.5 |
85.3 |
| Other earners in familye |
| Among all other adults (percent) |
61.4 |
85.7 |
— |
— |
| Hours worked per yeard |
1,300 |
1,924 |
— |
— |
| Weeks worked per yeard |
43 |
52 |
— |
— |
| Total family |
| Hours worked per yeard |
2,600 |
3,873 |
2,080 |
2,080 |
| Weeks worked per yeard |
52 |
98 |
52 |
52 |
| Hours worked per adultd |
1,508 |
1,820 |
2,080 |
2,080 |
| Has health insurance through employer (percent) |
54.3 |
88.6 |
54.3 |
85.6 |
Source: Urban Institute tabulations from the 1997 National Survey of America's Families.
a. Families in which the average annual hours worked per adult is at least 1,000.
b. Families with income below 200 percent of the official poverty level.
c. Families with income at or above 200 percent of the official poverty level or above.
d. Median.
e. Calculated only for families with two or more adults. |
While the work effort of primary earners does not differ by family income, working low-income families are less likely to have additional earners (table 4). Just more than 61 percent of all adults who are not primary earners in working low-income families work at all. In contrast, 85.7 percent of other adults in working higher-income families provide additional earnings for their families. Secondary workers in working low-income families work fewer hours than additional earners in working higher-income families (1,300 hours versus 1,924 hours). Not surprisingly, the median number of hours worked by all adults in working low-income families is 2,600 a year, compared with 3,873 for higher-income working families.
Job quality differences are also clear (table 4). Lower proportions of primary earners in working low-income families than in higher-income families work mostly during regular business hours (about 75 percent versus about 85 percent). Proportionately fewer have been with the same employer for a year or more (69 percent versus 86 percent), and proportionately fewer have health insurance through an employer (54 percent versus 85 to 89 percent).
Summary and Implications
One in six nonelderly Americans lives in a working low-income family—a family with income below twice the FPL in which all adults work, on average, at least half-time. Almost two-thirds of persons in low-income families live in a household with children and at least two adults. The primary earners in these families typically work full-time, full-year.
The major differences between the incomes of working low-income families and those of higher-income families are substantially lower hourly earnings ($7.55 on average, compared with $16.67) plus fewer secondary workers and lower work effort among secondary workers.
If all prime-age adults worked full-time, full-year, according to rough simulations, about one-fifth of persons currently in working low-income families would work their way up to becoming higher-income families, and more than one-third of persons living in other low-income families would now live in working low-income families.7 Thus, even if policies aimed at promoting work - such as child care and transportation assistance - are spectacularly successful in increasing work effort, many people will still live in working low-income families.
In the end, lifting working families above 200 percent of the poverty level will require better wages and work supports. The Earned Income Tax Credit helps working low-income families, but phases out as families approach the upper boundary of the "low-income" category. On its own, a higher minimum wage would move few working families from low-income to higher-income status, because the median primary earner in a low-income working family already earns $7.55 an hour.8 Expanded credits, or higher wages through better education and skills, must be the path to greater economic security for America's low-income workers and their families.
Endnotes
The NSAF provides information on a nationally representative sample of the civilian, noninstitutionalized population under age 65 and their families; it also provides state-representative data for 13 states. For more information and the survey methods and data reliability, see Dean Brick et al. (1999).
We use the poverty thresholds for 1999.
Prime-age adults are between the ages of 25 and 54; able-bodied adults report no work-limiting physical, mental, or other health condition.
Requiring, for example, 1,000 hours a year for a one-adult family and 2,000 hours for a two-adult family enables a single work-effort measure to be appropriate for families with different numbers of potential workers.
Expressing family income in terms of the official poverty level adjusts for family size differences.
Pearce and Brooks (1999). More generally, there is considerable debate about the weaknesses of the federal poverty level as currently defined. See Ruggles (1990) and National Research Council (1995).
For details, see Acs, Ross Phillips, and McKenzie (2000).
Increasing the minimum wage to $6.15 an hour could raise the incomes of low-income workers; however, it is important to note that the average primary earner in a working low-income family already earns $7.55 an hour. When we simulate the impact of an increase in the minimum wage, we find that the share of persons living in working low-income families would decline from 16.7 to 16.2 percent (see Acs et al. [2000]).
References
Acs, Gregory, Katherin Ross Phillips, and Daniel McKenzie. 2000. "Playing by the Rules but Losing the Game: America's Working Poor." Paper presented at Jobs for the Future Conference on "Low-Wage Workers in the New Economy: Strategies for Opportunity and Advancement," Washington, D.C., May.
Dean Brick, Pat, Genevieve Kenney, Robin McCullough-Harlin, Shruti Rajan, Fritz Scheuren, and Kevin Wang. 1999. Survey Methods and Data Reliability. Washington, D.C.: The Urban Institute. Assessing the New Federalism Methodology Report No. 1.
McKenzie, Daniel, and Stephen Bell. 1999. "Income and Hardship: Food Concerns and Affordability." Washington, D.C.: The Urban Institute. Snapshots of America's Families No. A-5.
National Research Council. 1995. Measuring Poverty: A New Approach. Constance Citro and Robert Michael, editors. Washington, D.C.: National Academy Press.
Pearce, Diana, and Jennifer Brooks. 1999. "The Self-Sufficiency Standard for the Washington, DC Metropolitan Area." Washington, D.C.: Wider Opportunities for Women.
Ruggles, Patricia. 1990. Drawing the Line - Alternative Poverty Measures and Their Implications for Public Policy. Washington, D.C.: The Urban Institute Press.
Wigton, Alyssa, and David D'Orio. 1999. "Income and Hardship: Affordability of Housing." Washington, D.C.: The Urban Institute. Snapshots of America's Families No. A-4.
About the Authors
Gregory Acs is a senior research associate in the Urban Institute's Income and Benefits Policy Center. His research focuses on social insurance, social welfare, and worker compensation. Currently, he is studying the status of families that have left welfare.
Katherin Ross Phillips is a research associate in the Income and Benefits Policy Center of the Urban Institute. Her research focuses on low-income workers with children. Currently she is using the NSAF data to describe differences in knowledge about the Earned Income Tax Credit (EITC) among low-income parents and to examine the association between parental work and child well-being.
Daniel McKenzie was a research assistant in the Urban Institute's Income and Benefits Policy Center at the time of this study. While at the Urban Institute, he worked on studies related to welfare reform, income inequality, and health insurance coverage. He is currently attending law school at Northwestern University.
