The voices of Urban Institute's researchers and staff
October 10, 2011

Low-Wage Work: Is This Any Way To Raise a Family?

October 10, 2011

A generation ago, a man who finished eleventh grade could get an assembly line job in a Detroit auto plant and earn enough to provide his family with a decent living. When retiring, he could count on a comfortable pension and health benefits.  Today, that same young man, if he’s very lucky, can get a similar job in an auto plant, but will make only half the wage of the long-time employees working right beside him.

You could ask if this is fair.  But a more important question is whether this is any way to raise a family?  At about $14/hour, our worker –let’s call him Joe-- could support himself and an unpaid spouse at about twice the poverty level,  with an income of $29,120. But if he and his wife (Mary) have two children, what Joe brought home would just get them over the poverty line for a family of four.  Both Joe and Mary would have to work at that plant to break through the low- income threshold of $44,226.  If one of them lucked out and got the top entry- level wage announced in the Ford Motor Company union settlement this month, either would get $19.28 an hour--over  $40,000 annually. Better? Absolutely, but probably not enough to allow the other spouse to stay home with the kids.

How Much Do Wage Earners Have to Make to Stay Above the Poverty Line?

Poverty_level and full time jobs

While times could get better and the plant could raise wages and give out bonuses, as Ford is doing this year, there’s no guarantee that they will in the future.  So what happens when Joe retires?  Instead of a surefire pension, Joe and Mary will have to figure out how to make about $2,000 a year in employer contributions and whatever else they can scrape together into a retirement nest egg.  In a bonus year, their choice might be to spring for a car as good as the one they make—or add to their retirement account. That would be a hard call, especially since current public policy offers saving incentives for the well-to-do rather than the not so well off.

There are policies that could make the tradeoffs a little easier for low- income families, and there are ways to pay for them.  Examples from  “Asset Building for Today’s Stability and Tomorrow’s Security” by Signe-Mary McKernan and Caroline Ratcliffe include providing refundable tax credits for home mortgage payments for moderate income families and allowing Individual development accounts (IDAs) to be used for vehicle purchase and upkeep.

It might be good for the economy to bail out companies, but if the workers get thrown overboard, what’s the real point?  Just ask Joe.

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