•Press Release
May 20, 2008
New Approach Improves on Problems with Poverty Line
For Immediate Release: May 20, 2008
Contact: Alan Barber, 202-293-5380 x115
WASHINGTON, DC—The federal poverty line does a poor job of measuring economic insecurity in the United States according to a new report from the Center for Economic and Policy Research (CEPR). In the typical state, 22 percent of people in working families suffer from economic hardship because their earnings and income from other sources, including public work supports and other public benefits, fall below the basic needs budget standard for where they live. By comparison, only 12.6 percent of Americans live below the federal poverty line.
The report, “Working Families and Economic Insecurity in the States: The Role of Job Quality and Work Supports,” synthesizes previous CEPR research using a new approach for measuring economic insecurity that addresses the major limitations of the poverty line and analyzes the state of economically insecure families across 45 states and the District of Columbia.
To determine how much income a working family needs to “make ends meet”, the authors of the report use basic family budgets that take into account the actual costs of goods and services needed to have a decent standard of living, as well as the variations in these costs, depending on where one lives.
The researchers also examined the role of public work supports- programs such as child care assistance, the Earned Income Tax Credit, food stamps, health insurance provided through Medicaid and the State Children’s Health Insurance Program, housing assistance, and income supplements provided through Temporary Assistance- in helping families achieve economic security.
“When measuring poverty, the government and most researchers do not take into account most public work supports,” said report co-author Rebecca Ray. “By contrast, when we determine whether a family is able to make ends meet, we take into account the value of all of these benefits.”
The report also shows that most economically insecure workers have jobs that pay low wages and provide few or no benefits or “bad Jobs”. Only a minority of jobs nation-wide are “good jobs”, in other words, ones that pay at least $17 an hour and provide health and retirement benefits.
“Public work supports play an important and largely unheralded role in promoting economic security and opportunity for working families,” said Shawn Fremstad, co-author of the report and Director of Bridging the Gaps, a CEPR initiative. “In the typical state, work supports close more than half of the hardship gap—the gap between a working family’s income and the basic family budget for where they live”.
The authors of the study point out, however, that substantial numbers of workers in low-paid jobs receive only modest or no help from work support programs.
According to the report, which uses data from the 2001-2003 Survey of Income and Program Participation (SIPP) and the basic family budgets developed by the Economic Policy Institute, the monthly income of the typical economically insecure family varies from $12,775 a year in Arkansas to $25,047 a year in New Hampshire. The findings of the report also point to a correlation between the number of good or bad jobs and economic security on a state-by-state basis. The full report can be found here (PDF).
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The Center for Economic and Policy Research is an independent, nonpartisan think tank that was established to promote democratic debate on the most important economic and social issues that affect people’s lives. CEPR’s Advisory Board of Economists includes Nobel Laureate economists Robert Solow and Joseph Stiglitz; Richard Freeman, Professor of Economics at Harvard University; and Eileen Appelbaum, Professor and Director of the Center for Women and Work at Rutgers University.
