How Could DC Make Work Pay Better? Another Answer

April 19, 2012

As the title suggests, I’m taking off here from the DC Fiscal Policy Institute’s recent income inequality report.

As I earlier wrote, it proposes a handful of policy changes that would produce higher wages for workers and potential workers at the low end of the income scale.

One group would help low-income residents qualify for some of the living wage jobs in our local market.

The other consists of two related initiatives that would make work pay better. Both of these focus exclusively on the District’s living wage law.

Properly enforced — and as DCFPI suggests — expanded, the law would ensure that some workers get paid more than the regular minimum wage.

These are only workers employed by for-profit companies and large nonprofits that reap significant financial benefits from contracts with our local government and/or various types of assistance, i.e., grants, loans, tax increment financing.

I’ve been thinking about what else might be done to make work pay better for some of those in the bottom fifth. What about those in low-paying, high-demand service occupations, for example — food servers, janitors, cashiers, so-called sales associates, etc.?

An answer: The District could boost their incomes by reforming its minimum wage law.

At this point, the law links the local minimum wage to the federal minimum. It’s always $1 higher, no matter how long Congress defers a further increase.

Year after year, the minimum wage loses value due to inflation — at the District level, as well as the federal. By July 2011, two years after the latest federal minimum wage increase fully kicked in, its real value had already lost 5%.

Just in case you didn’t notice, inflation didn’t stop dead then.

A nifty calculator on the Bureau of Labor Statistics’ website shows that the District’s minimum wage has now lost an additional 1% of its purchasing power.

If it had just kept pace with inflation, it would be 50 cents higher now than when it was last increased. Full-time minimum wage workers would be earning over $1,000 a year more.

Eight states have already addressed this problem. And Connecticut may soon become the ninth, if New York or New Jersey doesn’t get there first.

The eight raised their minimum wages to partially make up for lost value over time and provided for further automatic increases based on some version of the Consumer Price Index — a commonly-used measure of inflation.

The District could do the same — just “fix it and forget it,” as the Economic Policy Institute says Congress should do.

This would, of course, make work pay better for minimum wage employees.

It would also benefit workers paid somewhat more since employers would increase their wages to retain a differential between them and the lowest paid.

This “spillover” effect, as EPI calls, it boosted the number of workers affected by the eight states’ last increases by about 27%.

Yes, I know the DC Chamber of Commerce and the Metro area Restaurant Association would scream bloody murder.

But raising and indexing the minimum wage is nonetheless a policy change that would make work pay better for some of those people in the bottom fifth who are living in poverty.

And small businesses would survive. Washington state indexed its minimum wage back in 1998. And there are still plenty of small businesses there — restaurants included.


How to Narrow the DC Income Gap: Some First Steps

March 29, 2012

As I recently wrote, the DC Fiscal Policy Institute has issued an eye-opening report on income inequality in the District of Columbia.

It’s got some recommendations for narrowing the income gap between the richest and the poorest. No revolutionary attack on “the system” that’s enriching the top 1% at the expense of the rest of us.

Instead some modest, politically-feasible our steps our local government could take right now to lift the incomes of some portion of the bottom 20% — now, on average, well below the poverty line.

With two limited exceptions, the recommendations address policies and programs already in place. As so often in the District, it’s the funding that’s wanting — and for the most part, will be wanting if the DC Council approves what Mayor Gray has proposed.

Bigger budgets for the initiatives would help achieve three objectives.

Help Residents Prepare for Living Wage Jobs

One initiative DCFPI cites is the recently-established workforce intermediary pilot. When/if implemented, the intermediary would get training programs better tailored to local workforce needs and then refer qualified candidates to employers.

Mayor Gray’s Fiscal Year 2013 proposes $1.6 million to “fully fund the creation of the pilot.” Unclear, at least to me, whether this means we’d have an ongoing, fully functional intermediary.

The second initiative is the unfolding redesign of the Temporary Assistance for Needy Families program. Participants are to get in-depth assessments of their strengths and needs, then be linked to appropriate services and a broader range of work-preparation opportunities than was previously available.

The problem here, as I (and others) have mentioned before, is that the current law calls for a phase-out of cash benefits for long-term participants who’ve had no opportunity to benefit from the improvements. It also fails to carve out needed exemptions, as federal rules allow.

Unfair and very unwise, given all we know about the lifelong disadvantages children suffer when they grow up in poverty.

Address Housing Concerns

The “concerns” here are budget cuts to the District’s main affordable housing programs.

One — the Housing Production Trust Fund — was all but gutted last year, stalling numerous projects to develop and preserve housing that low and moderate-income residents could afford.

The other — the Local Rent Supplement Program — provides housing vouchers residents can use to rent apartments on the open market.

It would need regular budget increases just to keep pace with rising rents. It hasn’t gotten them and now reportedly has a shortfall that could leave more than 500 households with no more rental assistance.

The Mayor’s proposed budget addresses the shortfall — by once again raiding the Trust Fund. Says he’ll put the money back if revenues come in substantially higher than projected. Well, he agreed to something similar last year. And the Trust Fund got zip.

Make Work Pay Better

DCFPI focuses on the District’s living wage law, which establishes a higher minimum wage requirement for employers that benefit from District government contracts and/or various types of financial assistance worth $100,000 or more.

The law, DCFPI says, needs to be more strictly enforced, suggesting that the District has finally gotten around to enforcing it at all. DCFPI also recommends expanding the law. No details here.

Other Work-Related Needs

The DCFPI recommendations are, as I said, very modest. And with the exception of affordable housing funding, they’d help only those in the bottom fifth who work or potentially could work if properly trained.

Even for this group, the District could — and should — do more. But the Mayor doesn’t see it that way.

For example, as the Fair Budget Coalition notes, child care programs have been cut by more than $20 million in the last five years. The Mayor’s proposed budget cuts an additional $5.7 million from child care subsidies.

Without funding to increase provider reimbursement rates, low-income parents with little kids may have no choice but to stay home.

Funding for basic adult education has also been cut. Two years ago, programs funded in part by local taxpayer dollars served only 8% of need — this when more than one in three  D.C. adults is functionally illiterate.

How many aren’t working because they can’t read even well enough to fill out a job application? How many are stuck in part-time, minimum wage jobs because they can’t pass the GED exams?

How many more will be stuck if the Council approves the Mayor’s proposed $950,000 cut for adults and family education?

New Report Shows Huge Income Gap Between Richest and Poorest in DC

March 19, 2012

Everyone who lives in the District of Columbia knows that there’s a yawning gulf between the haves and the have-nots. But the new income inequality report from the DC Fiscal Policy Institute could still be a shocker. I know it was for me.

Turns out that the income gap between the richest and poorest 20% of households is the third largest among U.S. cities — this based on data from the 2010 American Community Survey.

The average income for the richest fifth was 29 times greater than for the poorest fifth. Look only at the top 5% and the mutiple rises to 52.2% — $473,343, as compared to $9,062.

I know that conservatives generally don’t view income inequality as a problem. What matters, they say, is income mobility, i.e., the opportunity to move up the income scale.

But, to my mind, such enormous gaps should concern us — and for various reasons.

Some research indicates that severe income inequality is, in and of itself, bad for society.

Researchers at the University of York, for example, have found that people in countries with high income inequality — the U.S. among them — fare worse on a host of indicators, e.g., physical and mental health, violence and drug abuse, mutual trust and community cohesion.

The findings are controversial. Other explanations have been offered for what are, after all, only statistical correlations. Yet we surely see something like them at the local level.

The two cities Mayor Gray is rightly concerned about depress many measures of community well-being. And they’re fraught with cross-class hostilities — some more overt than others.

We also know — or surely should — that wealthy people have disproportionate political clout and, of course, use it to protect their own interests. The bigger the income gap, the more these interests are likely to diverge from those of people at the bottom of the income scale.

We need only look at the fate of some very reasonable tax reform proposals to see how this plays out — and to the detriment of residents who depend on our safety net programs.

But the biggest deal here is the very low average income for the bottom fifth of D.C. households — under 50% of the federal poverty line for a family of three. About $4,800 less than the yearly rent on a modest efficiency unit.

The rising tide that’s supposed to lift all boats hasn’t done much for these households. Since 1979, their inflation-adjusted wages have grown just 14%, while those for the high earners have grown 44%.

This reflects a nationwide trend. The Economic Policy Institute reports that the inflation-adjusted income for the top fifth of families grew 49% during about the same period as DCFPI carved out. For the bottom fifth, income actually shrank by 7.9%.

The problem, many analysts say, is that the top fifth — and even more the notorious top 1% — have been gaining ground at the expense of everyone else.

Explanations abound. Solutions also. President Obama is again campaigning on some. We’ll soon see a related, bigger bundle in Senator Tom Harkin’s Rebuild America Act.

DCFPI instead focuses on a handful of local policies and programs that could lift the incomes of our bottom fifth. With two limited exceptions, they’re already on the books. What’s not is sufficient funding.

Given the resources, the initiatives would:

  • Help residents prepare for living-wage jobs.
  • Address housing concerns, i.e., remedy the budget cuts to the District’s main affordable housing programs.
  • Make work pay better for a subset of current and future D.C. workers.

I’ll return to these in a separate post. Will say here only that DCFPI’s recommendations are — I assume deliberately — very modest.

But they could make a big difference for many of those very poor residents in the bottom fifth. A big difference for our divided community too.

Recession Widens Education-Linked Race Gaps In DC

October 14, 2010

A new report by the DC Fiscal Policy Institute confirms with a vengeance trends it has previously reported. The District has wide race-linked economic disparities, and they’re getting wider.

Using the latest Census survey results, DCFPI delves into the impacts of the recession.

As I earlier noted, the recession has hit the District’s racial and ethnic minorities especially hard. Also (not unrelated) residents with no more than a high school education. White residents and those with at least a bachelor’s degree (also not unrelated) have weathered the downturn quite well, thank you.

As a result, the gaps between the haves and the have-nots are wider than ever. For example, in 2009:

  • Only 49.5% of black D.C. residents over 16 had any job at all — down from a pretty dismal  56% in 2000.
  • The employment rate among white D.C. adults was 28.5% higher — widening the black/white gap to the largest in 30 years.
  • The employment rate for Latino D.C. adults dropped to 68%, though it had previously remained fairly close to the rate for white D.C. adults.
  • The employment rate among D.C. adults with no more than a high school diploma fell to 48% — down by 10% from 2000.
  • The employment rate for college-educated D.C. adults remained nearly constant at 80%.
  • They earned, on average, $16 per hour more than those with only a high school education and $20 per hour more than those with less.
  • The wage gap between blacks and whites reached an all-time high. White residents earned, on average, 77% more than black residents, as compared to 60% in 2000.
  • Looked at another way, the average inflation-adjusted wage for black residents has increased by just 1% in the last nine years, while white residents have gained, on average, 19%.

DCFPI puts its finger on the link between these gaps. While 80% of white D.C. residents over 25 have a college degree, only 21% of their black counterparts do.

Thus, it concludes, our local labor market is likely to remain “challenging” for them — and for other D.C. residents without a college degree.

The much-touted reforms in our public education system may help the next generation, as may soon-to-be-mayor Vincent Gray’s focuses on early childhood education and workforce development-oriented expansion of DC Community College.

But, as Marina Streznewski, Coordinator of the DC Jobs Council, asks, “What are you going to do about the generation left behind?” What, for example, about the more than 36% of D.C. adults who don’t have the functional literacy skills to even read a job application?

No simple answer here. But this much I think is certain. We won’t have a healthy economy — let alone “one city” — if the mayor and the DC Council cut the District’s small investments in education and training for both adults and young high school dropouts when they once again re-balance our budget.

Housing Still Unaffordable For Low-Wage Workers, But An Even Broader Problem In Washington, DC

April 12, 2010

The housing bubble is history. Mortgage rates have plummeted. One would think that housing should be more affordable for full-time workers.  A new report by the Center on Housing Policies says this is generally true for workers with the income and the credit to purchase a home.

But for many workers, rental housing is no more affordable than it was two years ago–and in some places less. In the 210 metro areas CHP reviewed, fair market rents for a two-bedroom apartment increased by a median average of 2.8% last year.

Using salary data for occupations in each geographic area, CHP calculated affordability, using the U.S. Department of Housing and Urban Development’s 30% of income standard.

What it found nationwide is that only some of those touted “green jobs” paid enough to make the two-bedroom apartment affordable. It was unaffordable for insulation workers in a nearly a third of the metro areas and for maintenance and repair workers in almost as many.

The situation was worse for workers in some more common fairly low-paying jobs. Retail salespersons earned, on average, only about 58% of what would make the apartment affordable. In fact, in 84% of the metro areas, they didn’t earn enough to afford even a one-bedroom apartment at the fair market rate.

Janitors earned, on average, only 64% of what would make the two-bedroom apartment affordable and enough for the one-bedroom apartment in only 58 metro areas. While licensed practical nurses generally earned enough to make the two-bedroom apartment affordable, their wages fell short in 55 metro areas–more than a quarter of the total.

CFP has a nifty online tool that let’s you look at sets of preselected jobs by metro area or choose as many as 10 jobs from a lengthy list. So I, of course, drilled down to Washington, D.C. Key findings here:

  • The two-bedroom apartment was unaffordable for workers earning the average in all five of the preselected “green jobs,” including environmental and electrical engineering technicians.
  • It was also unaffordable for workers in all five other the other preselected jobs, including elementary school teachers and police officers.
  • Even a one-bedroom apartment at the fair market rate was unaffordable for LPNs, janitors and retail salespersons. The latter two, in fact, earned, on average, less than half of what would make that apartment affordable.
  • General office workers don’t fare much better. Administrative assistants, secretaries, clerks and receptionists all earned, on average, less than what would make the one-bedroom apartment affordable here.
  • And, of course, things get even worse for workers in low-skill jobs. Dishwashers and wait staff, for example, earned, on average, less than a third of what would make the one-bedroom apartment affordable. Housekeepers earned well less than than half.

Advocates often focus on affordability issues for very low-income households, i.e., those with incomes at or below 30% of the area median average. These, of course, include households with no wage earner and those with earners who work only part-time or intermittently.

What I find striking is that housing here in the District and in many other metro areas is unaffordable for workers in a fairly wide range of jobs, including those that require postsecondary education and/or specialized training.

Imagine the housing burdens on jobless and low-wage residents when even teachers can’t afford a modest two-bedroom apartment. Consider how housing costs diminish the vitality and diversity of our community.

We clearly need to shore up the District’s affordable housing programs, budget constraints notwithstanding. As the DC Fiscal Policy Institute recently reported, funding for core local programs is just over half what it was two years ago.

But I think we also need to take another look at the policies and practices that have resulted in the loss of more than a third of the District’s low-cost rental housing units since 2000. Clearly, condo conversions, gentrification and the like are outstripping affordable housing production.

They’re squeezing–or squeezing out–low-income residents. They’re also, I would guess, deterring middle-income workers, including our public servants, from sinking their roots in our community.

A Little Home Rule Could Go a Long Way

April 1, 2010

District of Columbia officials have good reason to be wary of Congress. Over the years, it has violated the spirit, if not the letter, of our putative home rule. We’ve been forced to do things we didn’t choose to do and barred from doing things we chose to do with our own local revenues.

For example, we had to have a referendum on the death penalty because a senior Republican Senator decided we should reinstate it. For 10 years, we were barred from formally recognizing domestic partnerships and from providing health insurance for the partners of D.C. employees.

Only this year did we gain, at least for the time being, the ability to implement laws passed in 2002 that fund elective abortions for low-income women and needle exchange programs to help control our egregiously high rate of HIV/AIDS. Our just-gained freedom to permit medical uses of marijuana gives life to a referendum passed in 1998.

But none of these intrusions seems to have scarred the memories of our elected and appointed officials so much as the 1995 imposition of a control board to manage the District’s financial affairs.

Last year, during budget deliberations, several Councilmembers repeatedly raised the specter of another control board–this in defense of balancing the budget mainly by tightening our belts and without tapping the cash reserves in the rainy day fund.

Use of those reserves, said Council Chairman Vincent Gray, would not be “prudent …, especially given the stringent pay back requirements.”

The reference here is to an amendment to the Home Rule Act that was attached to our budget 10 years ago. This amendment requires a rainy day fund of a specific size, mandates repayment of any funds withdrawn within two years and prohibits their use for “shortfalls in projected reductions in proposed District budgets.” Yet another instance of Congressional over-oversight.

We also heard worries last year about negative reactions from the bond rating agencies. They reportedly wanted to see spending cuts in core areas like education and human services. And the Council took heed, with cuts in these areas totaling more than $90 million.

But that was then. And this is now. We’ve got a $500 million budget gap to close. And no one, I think, could credibly assert that it reflects financial mismanagement. What member of Congress could flog us when so many states are grappling with enormous budget gaps?

So I think the DC Fiscal Policy Institute is right to recommend that our leaders seek relief from the unique restrictions on the use of our rainy day fund. As it says, no state has to replenish its fund so quickly. Indeed, most can wait until economic conditions improve enough to give them the needed revenues.

All but one of the states that have used their rainy day funds have the same bond ratings as before. The exception here is Illinois, which, as you may recall, had some big-time corruption issues at the top. Yet Councilmember Jack Evans, Chairman of the Finance Committee, still warns of risks to the District’s ratings.

Last year, Mayor Fenty and Council Chairman Gray testified in support of two related federal bills (H.R. 960 and H.R. 1045) that would give the District autonomy over its local budget and other legislation. These bills aren’t going anywhere fast.

So how’s about going back to Congress with a modest proposal to let us use our rainy day fund when it’s raining and replenish it when the sun shines again. That in itself wouldn’t close our budget gap. But it could make a big difference.

New Report Details DC’s Affordable Housing Crisis

February 10, 2010

When we moved to Capitol Hill, our house was near the frontier of gentrification. Over the years, we’ve watched property values soar and small apartment buildings give way to condos.

The townhouse next door to us–described by a former owner as a nice place for one person or two people who get along very well–recently sold for more than half a million dollars. A sign on a nearby condo advertises units beginning at $400,000. Rental units are scarce, and most list at over $1,500 a month.

A new report by the DC Fiscal Policy Institute puts our experience in perspective. Using Census Bureau data from 2000-2007, it documents the growing affordable housing crisis throughout the District.

  • A loss of more than a third of the District’s low-cost rental units (units with rent and utility costs of $750 or less).
  • A 55% increase in the number of units costing more than $1,500.
  • A loss of 43,000 homes valued at $250,000 or less–from more than half of all owner-occupied homes to just one-sixth.

Of course, this change in the real estate market reflects changes in our local economy–increases in professional, business and health care services, IT and real estate development itself. These have produced a large increase in higher-income households.

But the shrinkage of affordable housing is putting stress on a growing number of people. More than 40% of all D.C. households have housing costs above the U.S. Department of Housing and Urban Development’s affordability standard, i.e., 30% of income. That’s 20,000 more households than in 2000.

Needless to say, households at the bottom of the income scale are faring worst.

  • More than 60% of those with incomes below 30% of the area median income* are paying more for housing than the HUD affordability standard.
  • Two-thirds of the households that pay more than they can afford have incomes below half the AMI.
  • Nearly 50,000 households pay more than half their income for housing. Of these, 85% have incomes below half the AMI.

The D.C. government provided substantial funding for affordable housing during the period covered by DCFPI’s report. Funding for three key programs–the Housing Production Trust Fund, the Local Rent Supplement Program and the DC Department of Housing and Community Development–increased, in current dollars, from $7 million in 2000 to $92 million in 2007.

Funding rose again in 2008–to $123 million. Then the impacts of the recession set in–a drastic drop in HPTF funds, which come from fees paid to record deeds and transfers, and cuts made to balance the District’s budget. DCFPI says that the current budget for core housing programs is just over half what it was in Fiscal Year 2008. This was before the Mayor’s recent spending cut order.

If we had an affordable housing crisis in the years covered by the report, imagine what it is now. Rents are still very high. And many more people are unemployed or struggling to make do with part-time jobs.

DCFPI suggests that the District try to maintain funding for some stalled affordable housing projects and for existing rent subsidies. This is a modest, politically savvy recommendation. I have a hard time believing the District couldn’t do better.

* The measure DCFPI uses here is the same measure HUD uses for housing vouchers and certain grant programs. HUD’s affordability standard depends on household size. In 2007, the AMI for a DC-area three-person household was $85,100.