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It's Not Like I'm Poor
How Working Families Make Ends Meet In A Post-Welfare World
By Sarah Halpern-Meekin, Kathryn Edin, Laura Tach, Jennifer Sykes
UNIVERSITY OF CALIFORNIA PRESSCopyright © 2015 Sarah Halpern-Meekin, Kathryn Edin, Laura Tach, and Jennifer Sykes
All rights reserved.
STAYING IN THE BLACK, SLIPPING INTO THE RED
What does it really mean to have a social safety net organized around the principle that, if you work you shouldn't be poor? The American poverty line is neither an absolute measure of what it takes to survive—an estimate of what a basic "market basket" of necessities costs—nor a relative measure, like poverty thresholds in Europe that identify households falling below some percentage of the median income; the figure in the European Union is 60 percent. Instead, it is based on 1950s surveys of the cost of a minimally nutritious diet on an "emergency" or short-term basis (which assumed that a family consumed powdered milk and no fresh vegetables), multiplied by three (at that time, the average family spent a third of its income on food). Since the poverty threshold was set in the 1960s based on these calculations, the dollar amount has simply been adjusted for inflation.
Because of the poverty line's odd origins, no one is quite sure what "poor" really means in America, and, perhaps for that reason, hardly anyone likes the official measure. Some on the political right, for example, charge that the threshold is way too high—Robert Rector of the Heritage Foundation argues that it overestimates poverty because few poor Americans truly go without food, most have air conditioners and cable, half have personal computers, and a third even have fancy TVs. "For most people, the word 'poverty' suggests near destitution: an inability to provide nutritious food, clothing, and reasonable shelter for one's family. However, only a small number of the 46.2 million persons classified as 'poor' by the Census Bureau fit that definition," he writes. This is not mere punditry: surveys show that the poor do report possessions that many Americans-especially those of a previous generation-would deem luxuries. Because of this, some economists have called for a new poverty measure based on consumption, not income, arguing that it does the best job of identifying the neediest Americans.
In contrast, those on the political left often complain that the poverty line is much too low-little more than a back-of-the envelope, midcentury calculation based on national patterns of consumption that no longer hold; Americans now spend only about a sixth of their income on food, for example, but more on child care and medical costs than they once did. At this writing, the poverty line for a family of four is just under $24,000 in income, or about $2,000 a month. Critics in this camp ask, is there any place in America where a family of four can actually make ends meet on that amount? Columbia University's National Center for Children in Poverty estimates that, on average, a family would need an income of about twice the poverty level to truly get by. Ordinary Americans seem to side with the Columbia University researchers. In 2007, Gallup pollsters asked Americans from across the country: "What is the smallest amount of yearly income a family of four would need to get along in your local community?" The median response was $45,000, with a mean above $50,000.
The EITC was designed to bring a minimum-wage worker and his or her family above the official poverty line. The controversy over the poverty line raises the question of whether this is a worthy goal. Some might argue that, if the working poor have Internet and cable TV, supplementing their incomes with a cash transfer from the government is not an appropriate policy objective. Others might contend that, if the working poor are willing to play by the rules—stay employed— it is unjust, even immoral, not to ensure that they have the wherewithal to provide their children with a minimally decent life, as Americans define it. Indeed, for those meeting this fundamental requirement of the American social contract, just getting by may not be enough; those in this camp might argue that society should ensure that they have the real possibility to reach for more.
Accordingly, this chapter is devoted to examining the finances of working-poor and near-poor households who claim the EITC. At present, one minimum-wage job will provide an income of $14,500 a year, provided the work is full time and full year. The EITC and other tax credits fill the gap between that figure and the poverty threshold. Here we ask which of the two views of the poverty line is correct. Are people below the threshold truly struggling, or are they blowing money on big-screen TVs and cable packages? We'll find that the answer isn't one or the other, but both.
Our logic in addressing this question at the start of the book is simple: if we want to understand the real impact of the EITC, and whether it is worth the cost to taxpayers, getting a detailed look at household budgets is a critical first step. But, as we've indicated, the ultimate question this chapter raises is much larger: What bundle of goods and services is "enough" for those on the front lines of this revolutionary new approach to alleviating poverty, parents who are working but poor? Is it merely about financial need, or should our standard for what is enough be based on American notions of what workers "deserve"? In short, given the fact that these household heads all play by the rules-working, many full time and full year-do they need the EITC, and are they worthy of it?
We devote a later chapter (chapter 3) to comparing the new work-based safety net to the old welfare entitlement system that existed prior to the 1996 reforms, and to the time-limited welfare system that remains. Thus we will not engage in a full discussion of those differences here. Note, however, that the old system, which entitled a family to a certain level of resources based on their need, never came close to pulling families above the poverty line. Today, not one state in our nation offers enough in TANF benefits to raise a family much above even half of the official poverty threshold; in fact, in the majority of states, TANF benefits are limited to less than a third of the poverty line, although TANF beneficiaries usually are also able to claim SNAP (formerly known as food stamps) and Medicaid. Nonetheless, the monthly TANF benefit for a family of three won't even pay the rent: it is less than the cost of a modest two-bedroom apartment in any state, and, in twenty-six states it is not even half of that cost. This shortfall is meaningful given the fact that nationally only a quarter of eligible families get any form of subsidized housing, and families with substantial assets are barred from the welfare rolls.
Clearly, what remains of the traditional need-based safety net is not—and never was—truly about helping families meet all of their needs. Yet few politicians worry in public, and perhaps few even worry in private, that TANF benefits are too low. What standard of living, then, did Bill Clinton envision ensuring when he proposed a massive expansion of the EITC so that working Americans—at least those with kids—would not be poor? Was it bare-bones survival or something more—some notion of a "decent" standard of living that exceeded subsistence? The narratives we present in this chapter raise the question of what kind of reward American workers ought to get from their labor.
We first turn to Ashlee Reed, whose household financial situation is quite typical of that of other households in our study. Ashlee grew up in the South Boston housing projects watching her mother struggle financially while raising three kids on her own. A high school dropout, Ashlee's mom had to take whatever work she could find. Certification as a home health aide translated into long hours taking care of the elderly for little more than minimum wage. Perhaps as a result, she frequently lectured Ashlee and her siblings about the importance of education in the hopes that her children might rise above bottom-of-the-barrel jobs like hers and escape "Southie," the troubled neighborhood in which they lived. Ashlee bought into this message wholeheartedly; she excelled in high school and took out loans so that she could go to college. Four years later, she left with her bachelor of arts degree in hand, becoming the only college graduate in her family.
But life has fallen short of the comfortable living promised by her mother's stay-in-school mantra. Now, seven years after graduation, this twenty-nine-year-old white mother lives with her boyfriend, Adrian—who used to work as a cook in her college cafeteria—and their three young children on a run-down block that's just a stone's throw from the one that she was raised on. She is still saddled with $25,000 in educational debt, which she chips away at bit by bit. Because of the slack job market for teachers, she considered herself lucky when she landed a job at Head Start, earning $532 in gross wages per week, or $357 in take-home pay, during the forty-four-week school year. But the job hasn't left her much better off than her mother.
We first meet this family of five in their small, two-bedroom apartment directly across from a convenience store on a busy street in Dorchester. This mostly black neighborhood borders South Boston, the largely white enclave to the east where Ashlee was raised. Inside the apartment, it is dark; the living room is crowded with outdated but carefully preserved furniture, and a washing machine sits prominently in the kitchen, taking up too much space. Though it's cramped here, order reigns; the only clutter visible is an overflowing pile of bills on the desk in the living room.
Ashlee has a housing choice voucher—a program known colloquially as Section 8, which limits her rent to roughly 30 percent of her income. Without it, she would need to devote nearly all of her take-home pay to rent this modest apartment. During the months that she is employed—all but eight weeks during the summer—her share of the rent is $575 (the government pays the rest). And, in this unit, the rent includes utilities, a lucky break. Years ago, Ashlee applied for a modification to her housing voucher, which would have entitled her to a three-bedroom apartment so that the three kids wouldn't have to all share a room, but she has heard nothing from the Boston Housing Authority about that request. She needs to be close to work—she purchased a car only recently—so Ashlee has ended up in Dorchester, a step down, not up, from Southie. She worries about raising her children here: the block is home to a bar that is open all day, and Ashlee says the street is full of "yelling and broken bottles."
Head Start teachers don't command high wages, but the job does offer some critical perks for this working mother of three. While she must leave her toddler with her boyfriend's mother while she works, she can bring her two older children with her. Though the two kids are not technically eligible for the program (she makes too much money to qualify), Head Start charges her only $300 per month for both children. Elsewhere, she might easily pay three or four times that amount. Another perk is the schedule, which allows her to be home with the kids after school. She firmly believes that "no matter what, my kids have to come first." Despite the nice fit between her family responsibilities and her work schedule, running after a dozen or so preschoolers all day can be tiring, and, for the hard work involved in managing her classroom, she finds the compensation wanting. In an average month, her paychecks show gross earnings of $2,288, although she notes that payroll taxes, deductions for her share of her health care premium, and intentional overwithholding—a decision to "save" made when both she and Adrian were working—bring that amount down considerably.
Employment entails a host of expenses—especially child care and transportation. A busy highway separates Ashlee from her job. Now that she has a car, she drives to work, piloting a dark blue Dodge Caravan older than her children's ages combined—five-year-old Warren, four-year-old Mallory, and three-year-old Johnny. She's proud that this "clunker" is paid off , but it isn't cheap to insure or maintain: in a typical month, she estimates that she pays $401 for transportation, between car insurance, gas, registration, and routine maintenance or the occasional parking ticket. That's nearly a third of her take-home pay.
Ashlee's financial struggles are particularly acute at the moment. Her boyfriend, thirty-three-year-old Adrian, can't pay anything toward the household expenses. After six years of steady work as a cook at her alma mater, he was laid off just before Christmas, along with all of his coworkers, when the college chose a rival food-service provider. By the time of our first in-depth conversation, Adrian's unemployment benefits have run out. And Ashlee is facing another financial hit: it's late June, and she has just been laid off from her job, as she is every summer. She, along with thousands of Head Start teachers across the country, applies for unemployment during the summer months, but unemployment insurance covers only a portion of her lost wages; in any case, the first check takes about four weeks to arrive. While waiting for that check, Ashlee copes by using the only safety net that she has available—credit cards—to pay the bills.
For Ashlee and so many others working lower-wage jobs, there really is no average month. Instead, their financial lives are boom and bust. During the "bust," debt accrual is common. Most aspire to save, but the barriers to saving are high; unexpected financial upheavals quickly eat away at one's savings. During the forty-four weeks that Head Start is in session, Ashlee, Adrian, and the kids can count on at least one steady paycheck. But each summer Ashlee's income takes a nosedive. And she has no cheap source of child care available to make a summer job worth her while. Most years, Ashlee manages to limp along until February, tax refund time. In February, when her tax refund arrives, she can catch up on bills that may have been overdue for months, pay off some of her longer-term debt, and, in good years, save for the summer financial crunch.
We begin by considering Ashlee's financial situation in an "average" month, as if her income and expenses stayed steady throughout the year. In the typical month, Ashlee's expenses exceed her wages from her job. With monthly expenses totaling $2,856—this includes only minimum payments on the credit cards and on her student loans—and average take-home pay of under $1,600, the family is sliding into debt even during the months that she claims her full salary, as long as Adrian is unable to contribute. The weighty load of Ashlee's credit card debt is testimony that she's relied on credit as a safety net in the past.
Ashlee lives as many lower-wage workers do, under a cloud of debt that grows rather than shrinks over time: currently, she owes five credit card companies a total of $4,080. Each month, she tries to make at least the minimum payment on these cards plus a few dollars more, but, with interest rates of more than 20 percent (and one as high as 30 percent), her progress on paying down the balances is slow. Lately, she feels a sense of accomplishment in those months when she manages not to increase the amount she owes. On top of the credit cards, her student loan payment is $360 a month. She tries not to think about how long it will take to pay off the $25,000 that remains. Since Adrian has been unemployed, Ashlee has skipped these payments in order to provide for the family's basic needs.
Last February, Ashlee got a refund check from H&R Block totaling $4,704—more than three times the amount that she brings home in an average month. Ashlee keenly remembers the excitement she felt when she collected that check, walking it straight to the bank. By the time that the refund was in hand, she had spent months planning how she would spend it. She had fallen behind on her student loan during the prior summer and had decided to put that particular debt at the top of the list. Ashlee typically prioritizes her student loan above her credit cards because, "once you go so long without paying, they can default you." Defaulting on a federal student loan triggers garnishment of one's tax refund, a risk she doesn't feel prepared to take: "I didn't want to get there," she says.
After she had gotten up to date on that loan, the remaining $3,204 from the refund allowed Ashlee to pay down some of the principal on her credit cards, which she had also accrued the prior summer, and to catch up on the overdue cable and phone bills. Now, just as she faces another layoff , the savings from her tax refund have nearly run dry. Thus, this year, Ashlee made no progress toward her longer-term goal: "I try to save [a lot of my refund]. My goal usually, even though I don't ever make it, is to have enough money saved up for the summer for when I go onto unemployment, because ... it takes like four weeks [to get my first unemployment check]. That's four weeks without pay if I don't have anything saved up from when I was working. So I usually have that goal, which is to at least have enough to get me through that [month without any cash coming in]." For Ashlee, having that cushion in savings would decrease her reliance on credit cards and alleviate stress. Given the seasonal ups and downs in Ashlee's financial situation, especially since Adrian lost his job, it is difficult to formulate, much less stick to, a budget.
Excerpted from It's Not Like I'm Poor by Sarah Halpern-Meekin, Kathryn Edin, Laura Tach, Jennifer Sykes. Copyright © 2015 Sarah Halpern-Meekin, Kathryn Edin, Laura Tach, and Jennifer Sykes. Excerpted by permission of UNIVERSITY OF CALIFORNIA PRESS.
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