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Working Families and Economic Insecurity
A new report on economic security and working families in the United States appeared this week from the Center for Economic and Policy Research (CEPR). The full title is Working Families and Economic Insecurity in the States: The Role of Job Quality and Work Supports, and it is well worth everyone’s attention.
First, some basic framing is necessary: the researchers are using a measure of economic security defined by whether families have sufficient resources to meet basic needs. This is different from how the government comes up with its official poverty data. The Institute has discussed the inadequacy of the Census measure—we dedicate an entire chapter to this in our own report Working Harder for Working Families.
A basic needs budget “takes 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.” Basic needs include housing, utilities, food, health care costs, transportation, and child care. We’re not talking entertainment and new furniture.
Naturally, cost of living varies depending on where you live and how large a family you have. For a family of three, basic needs can be met in Arkansas with an annual income of $12,775, whereas in New Hampshire it takes $25,047. According to the Census Bureau, it makes no difference which state you live in because costs of living are irrelevant. You see the problem.
The numbers in this report tell a compelling story. CEPR finds 22 percent of working families suffer from economic hardship. That’s almost double the official poverty rate.
To meet basic needs, people need good jobs—and a good job is more than just one that pays a decent wage.
To define a “good” job, we use a simple definition based on three characteristics: pay, health insurance and retirement benefits. According to this definition, a good job is one that meets all of the following three criteria: it pays at least $17 per hour (about $34,000 on an annual basis), it offers employer-sponsored health insurance (where the employer pays at least part of the monthly premium), it offers an employer-sponsored retirement plan (either a “defined contribution plan” like a 401(k) or a “defined benefit” like a traditional pension).
These criteria are consistent with what we said families need in Working Harder for Working Families. Generally, what CEPR is talking about are:
- Wages that at least meet the national median.
- Basic benefits (can’t get more basic than health insurance).
- And a way of building assets (401(k) plans).
A job that has none of these criteria qualifies as a “bad” one. A job with one or two but not all three is neither good nor bad. Across the United States, CEPR finds bad jobs are more common than good jobs: In the typical state, 30 percent of jobs are bad jobs, while 25 percent of jobs are good jobs.
What can we do for those families stuck in bad jobs? This brings us to the part of the report that deals with work supports, another issue we too take up in Working Harder for Working Families. CEPR defines work supports as the Earned Income Tax Credit, Medicaid/SCHIP, Food Stamps, Child Care, Housing Assistance, and Temporary Aid to Needy Families (TANF). Included is an interesting chart (I said a nice thing about this report is the numbers tell the story) that shows the problem for those economically insecure families who don’t earn enough to meet basic needs in their communities and are income-ineligible for various work supports.
This chart covers ten states: Illinois, Iowa, Massachusetts, Minnesota, New York, North Carolina, Ohio, Texas, Washington, and Washington, DC. It would be nice to have a chart for all the states, but it looks to me like these ten are a reasonable cross section of what we could expect to see with the others included.
Maybe it wasn't the main thing CEPR was hoping to leave people with, but one thing I discern from this report is that we could help a lot more families struggling to get by if we updated that old clunker of a poverty measure they use at the Census Bureau. You got to hope someone in government too is reading reports like this one.
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