Tough to Get By in High-Cost Communities Like DC, Updated Budget Calculator Shows

July 12, 2013

The Economic Policy Institute has issued an updated and expanded version of its family budget calculator — the first since 2008.

This should be welcome news to both advocates for the interests of low and moderate-income Americans and analysts working on issues like an alternative to our over-simple official poverty measure.

The calculator allows us to produce current budgets for six family types — one or two parents, with at least one and as many as three children — and for each, basic living costs in 615 communities.

Basic living costs include:

  • Housing (rent, plus basic utilities for a modestly-priced apartment big enough for the family).
  • Food, based on the U.S. Department of Agriculture’s second cheapest food plan.
  • Transportation (costs of owning and operating a car for essential travel).
  • Health care (premiums for employer-sponsored health insurance, plus out-of-pocket costs).
  • Other necessary expenses, e.g., clothing, personal care items, household supplies.
  • Taxes (income and payroll).

Some items are quite consistent across jurisdictions — food, for example, and transportation. Others, as you might imagine, vary widely.

But in every single jurisdiction and for every family type, the costs of what it takes “to get by” are well over the federal poverty line.

Also more than a full-time, year round minimum wage worker can earn — even in jurisdictions that have established minimum wages considerably higher than the federal.

So what can we learn about the District of Columbia? Well, it’s one of the costliest places in the country to live — and for families with one child the costliest of all.

Chalk this up to the highest market-rate child care cost of any jurisdiction — $1,318 a month for a preschooler. (EPI assumes that families with more children will be paying for only after-school care for the rest.)

Taking a closer look at your conventional two-parent, two-child family, we see that sustaining a modest standard of living in D.C. would require $88,615 a year. Only similar families in New York City and several nearby communities need more.

The District’s family budget, as EPI calculates it, is well over three and a half times the federal poverty line for a four-person household.

If both the parents worked full-time, year round at the local minimum wage, they would be shy about $53,000.

This assumes, as we really shouldn’t, that they’re entitled to some paid leave — or never, for any reason, have to take any time of from work.

Also that they and their kids have only minimal health care costs because they’re enrolled in Medicaid.

And — big assumption here — that the family has found a two-bedroom apartment at the U.S. Department of Housing and Urban Development’s fair market rent — $1,412 a month.

Not in my backyard, as they say. Nor necessarily a representative modest rent in the District as a whole, since the FMR that EPI was constrained to use represents a rate calculated for the greater Washington metro area.

What EPI says for communities nationwide is obviously true for the District. Many parents won’t earn enough to meet their families basic needs.

Work supports like the refundable Earned Income Tax Credit and Child Tax Credit, child care and transportation subsidies can help.

So can other public benefits like SNAP (the food stamp program), subsidized housing and Medicaid — or for some slightly better-off families, the soon-to-be-available subsidies for private health insurance plans.

But even with these, it’s got to be awfully tough for a whole lot of families “to get by” in high-cost communities like the District.

And virtually all the work supports and other benefits I’ve mentioned are under some form of threat on Capitol Hill.

I’d like to think that the EPI budget calculator, with its community-specific data, would give pause to policymakers who are busy about cutting programs their less well-off constituents need to live free from economic hardship.

If wishes were horses …


Why It’s (Past) Time to Raise the Federal Minimum Wage

September 27, 2012

It’s been three years and two months since the last phase of the latest federal minimum wage increase kicked in. By the time it did, the wage had already lost nearly 5% of the value it had when Congress increased it.

This always happens with federal minimum wage increases. And when Congress finally overcomes the barriers to passing another increase, it doesn’t fully make up for the value lost over time.

If the minimum wage were worth as much as it was in 1968, it would be $10.55 an hour instead of just $7.25 — less than what’s needed to lift a family of two with a full-time minimum wage worker above the poverty line.

A pair of bills pending in Congress — Senator Tom Harkin’s and Congressman George Miller’s Fair Minimum Wage Act — would keep the wage from losing value, though not fully make up for what it’s already lost.

The bills would increase the minimum wage, in steps, to $9.80 over a two-year period. They’d also index it to the CPI-U — a commonly-used Consumer Price Index — so that it would subsequently rise with the cost of living.

In other words, to borrow from the Economic Policy Institute, they’d fix it and forget it, as 10 states already have.

A bill introduced somewhat earlier by Congressman Jesse Jackson, Jr. would raise the minimum wage immediately to $10.00 an hour, thus almost living up to its title — the Catching Up to 1968 Act. It too would then index the wage.

None of these bills stands the chance of an iceberg in hell so long as the Republicans hold a majority in the House and at least enough seats in the Senate to block a substantive vote on whatever they choose.

But say, for the sake of argument, that Congress passed the more moderate Harkin-Miller bill some time early in the new year.

And say, for the sake of argument, that whoever is sitting in the White House signs it. An open question if that’s Mitt Romney. Not so if Obama, assuming, as we may, that the Democratic party platform reflects his views on the issue.

The law would boost take-home pay for nearly 19.5 million minimum wage workers in 45 states — and in the District of Columbia, which pegs its higher minimum wage to the federal.

Still, an hourly wage of $8.10 next year seems a paltry thing. Why do so many advocates invest so much in a minimum wage increase?

I’m not asking this rhetorically. It’s a question I’ve asked myself — and so tried to find answers for. Best I’ve come up with follow.

The relatively modest, phased-in increase reflects political realities. A significantly larger increase, however justified, could cause some potential supporters to balk.

Even the modest increase would be good for minimum wage workers, of course. But they’re not the only ones who’d benefit.

An estimated 8.7 million workers earning somewhat more than the new minimum wage would get raises because of the so-called “spillover effect.”

In other words, employers would adjust their pay scales upward to preserve a differential between their lowest-paid workers and those who, for various reasons, have been getting more.

Demos, in fact, argues that raising work standards, including the minimum wage, would “raise the floor for all working people.”

The notion here, I think, is that there’d be an spillover effect. If $9.80 became the rock-bottom minimum, many — though far from all — employers would peg their entry-level wage somewhat higher. Other wages would get a bump-up as a result.

The impact on struggling working families could be very large indeed because we’re seeing significant growth at the low end of the wage scale.

Our recovery has created 2.7 times more jobs in lower-wage occupations than in those at mid-level or higher, according to a recent analysis by the National Employment Law Project.

This may not be a temporary phenomenon. Many of the jobs where the greatest growth is projected over the longer term fall into the low-wage category, e.g., retail salespersons, home care aides, food preparation and food service workers.

There’s a sound economic argument for ensuring that these folks earn a living wage. Same as the argument for increasing the minimum wage now.

More take-home pay will put more money into the economy, as families spend at least some of the extra on goods and services. More demand will move businesses to hire more people — at least for positions they can’t automate or offshore.

There’s also a fairness argument. When employers take what Restaurant Opportunities Centers United calls “the low road,” we taxpayers in effect subsidize their excess profits because under-paid workers enroll in safety net programs to help meet their basic needs.

Some state-level studies have put hard numbers on this cost shift — very large numbers.

Finally, there’s what I guess we could call a justice argument — or perhaps a values argument.

Demos frames it nicely. “Americans believe that hard work should be rewarded — people who go to work every day should not then be forced to raise their families in poverty.”

A large majority of Americans do believe this — all demographic groups, except for Tea Partiers and Fox News junkies.

Suggests that if our federal policymakers were more attuned to their constituents than their deep-pocket donors, we could get that overdue minimum wage increase passed.

More Than Half A Million Jobs Lost If Federal Unemployment Benefits Expire

December 1, 2011

I’m not acutely distressed by the fact that Super Committee members couldn’t cut a deal.

The Democrats had moved so far to the right that whatever deal got enough Republicans on board would probably have been worse than the automatic spending cuts the no-deal will trigger — assuming Congress lets them happen.

In one respect, however, the stalemate disappoints me.

I’d hoped that Democrats could wedge an extension of federally-funded unemployment benefits into a deal that could pass — just as President Obama got them extended as part of last December’s deal on the expiring Bush tax cuts.

Hope is the operative word here because the UI benefits extension had reportedly gotten tangled up in party-line differences based on a more fundamental consensus, i.e., the cost of the extension must be fully offset by savings elsewhere in the budget.

This incidentally marks a change from past precedent — and from the Democrats’ position as recently as last December.

In any event, we need a Plan B fast because the programs are due to expire at the end of the year.

So millions of jobless workers may soon find themselves with no cash income — 5,500 in the District of Columbia alone. And that’s only losses through early February.

Republicans balked at extending the programs last year. The situation is worse now because Congress as a whole is so riveted on the deficit. And extending the programs is, of course, not free.

But also not nearly as costly as what the federal government will spend to fund the programs. Nor nearly so costly as letting them die.

Costs in human terms should go without saying. We read story after story about the plight of jobless workers who’ve exhausted their UI benefits.

But the debate, of course, revolves around economic costs. So a bit of perspective on these.

The Congressional Budget Office estimates the cost of extending the UI programs for year at somewhat over $44 billion.

The Economic Policy Institute, however, argues that we need to factor in the jobs that will be created or saved because workers and their families spend most, if not all their benefits on basic needs — food, rent, gas for the car, clothes for the kids, etc.

Their spending supports jobs throughout the economy — in retail businesses, the companies that supply them, the companies that supply the suppliers and so forth.

So every$1 paid out in UI benefits delivers as much as $2.00 in economic boost.

Using a more conservative multiplier, EPI finds that the UI extensions will increase GDP, i.e., the total value of domestic economic activity, by $72 billion.*

This, it calculates, translates into 560,000 jobs created or saved.

The workers who hold those jobs pay federal taxes. They don’t depend — at least, not solely — on publicly-funded benefits.

EPI figures that the federal government would thus recoup $26.9 billion of what it would spend for the extra weeks of UI benefits — partly in tax revenues and partly in savings on safety net programs like food stamps and Medicaid.

Bottom line then is that, in real terms, the extensions would cost only $18.1 billion — far less than what the price tag seems to be.

Turn the story around. If Congress doesn’t extend the federal UI benefits programs, the economy will shed well over half a million more jobs. Our already sluggish GDP would lose a half-percent boost.

Economist Mark Zandi — a guru on such matters — puts the negative GDP impact a tad lower. Even so, he estimates the loss at $58 billion.

Makes the UI benefits extensions look like a good dollars-and-cents choice as well as a simple act of compassion.

* EPI uses a somewhat higher cost estimate than CBO because it assumes that Congress would adopt a technical fix to the so-called “look-back” provision in the Emergency Benefits law. Without it, states couldn’t get EB funds unless their unemployment rates had risen in the last two or three years.

Employer Tax Holiday Won’t Jump Start Hiring

June 25, 2011

The White House seems well aware that the upcoming Presidential election will pivot on the economy — and more specifically, the unemployment rate. Prospects for a spontaneous burst of growth are too dim to see with the naked eye.

But the President and his people are understandably wary of proposing anything that could be labeled stimulus spending.

Facts notwithstanding, the Republicans seem to have convinced a majority of Americans that the economic recovery act failed. Also that Congress must cut federal spending now to begin dealing with the deficit.

But tax cuts are good, right? At least so long as they benefit us.

Republicans continue to insist that cutting businesses taxes will create jobs — though we need big cuts in spending and regulations too.

For his part, the President seems eager to prove that he’s listening to business leaders, who, of course, would like lower taxes.

Not so eager, however, as to support another “tax holiday” that would let multi-national corporations bring foreign earnings home at a drastically lower rate. Or at least, say Treasury officials, not unless the giveaway is part of a broader tax reform package. In short, not right now.

But what about giving businesses a temporary reprieve from payroll taxes? They’d like it. Congressional Republicans should like. They sure used to, though they’re reportedly iffy now.

Best of all, it can be cited to show that the President has done something about the jobs crisis.

I’m no economist. But when I read about the payroll tax holiday, I said to myself, it’s not going to get businesses hiring people they wouldn’t have hired anyway.

Businesses aren’t holding back on new hires because they feel they can’t afford the additional 7.65% they’d have to pay on top of the wages.

They’re not hiring because their current workforce is sufficient — if not more than sufficient — to meet the demand for their products and services.

Corporations are sitting on a pile of dough. If they wanted to hire here in the U.S., they would. Small businesses — those putative engines of job growth — are shrinking their payrolls. And a short-term nick in labor costs won’t stop them — let alone get them hiring again.

“I hire workers to do jobs,” says the president of a North Carolina graphics firm. “If we don’t have the work coming in, nothing will make me hire another worker.”

In any event, businesses are adding jobs, though at a pretty sluggish pace. The unemployment rate isn’t budging because state and local governments are still shedding jobs — another 30,000 in the month of May.

A payroll tax holiday won’t save one of them. Another round of fiscal aid to the states could. But a proposal for that would be DOA in Congress.

The Atlantic‘s Daniel Inviglio has some other ideas. Maybe a couple of these would fly. Maybe they’d step up hiring a bit.

But the Economic Policy Institute tells us that the economy would have to create 11 million jobs for the unemployment rate to settle back to its pre-recession rate.

This figure keeps growing as the labor market fails to make up for the many millions of jobs lost and add enough to keep up with the increasing number of youth who’ve become old enough for full-time work.

Those who don’t get jobs soon are likely to face years of lower earnings and future unemployment. And they generally don’t have much by way of safety net supports to tide them over while they’re looking.

People at the other end of the working-age range may be left on the sidelines, even if jobs proliferate faster than anyone expects.

So we’ve got a complex policy problem that I don’t think anyone in Washington wants to confront. It’s bigger than how to create a whole lot more jobs quickly. Bigger than how to rapidly retrofit workers whose jobs aren’t coming back.

I don’t have the glimmer of an answer. But I’m sure as can be that an employer payroll tax holiday isn’t it.

Also sure as can be that the President’s in trouble if he doesn’t come out with a plan that gives us some hope we can believe in.

New Study Finds Labor Market Discrimination Against Black Men

April 25, 2011

Much attention of late has been paid to the economic situation of black Americans — men especially. The recession has hit them harder than any other racial/ethnic group. And they weren’t doing so great before.

In April 2009, the Center on American Progress took a hard look at how black men were “weathering the storm.” Not well.

At the time, four out of every five jobs lost had been held by black men. The unemployment rate for them was more than twice the rate for white men — 15.4%. As of the latest Bureau of Labor Statistics report, it’s now 16.8%, as compared to 7.7% for white men.*

Yet, as CAP says, “black men have long faced limited employment prospects and disproportionately high unemployment rates.”

Income is a telling indicator here. An American Prospect article on the black/white wage gap tells us that, in 2006, when the economy was booming, black men with full-time, year-round jobs earned, on average, 72% of what white men working comparable hours earned.

It’s customary to attribute the black/white employment and wage gaps to a combination of factors.

Need I say that disparate levels of education loom large?

Numbers experts comment on the impacts of the shift in our economy from manufacturing to other sectors what require more than a high school diploma — health care, professional and business services, government, etc.

In the 2007/8 school year, only 47% of black male students got so far as high school graduation. According to a recent analysis by Inside Higher Ed, only 40.5% of those who enrolled in a four-year college or university graduate within six years.

Also high on the explanations list is the extraordinary rate at which black men are imprisoned. We’re told that they constitute 48% of all inmates. And criminal record is, of course, a huge barrier to employment — apparently even greater for blacks than whites.

And then there’s the notion, backed by some research, that black men are often disadvantaged by the view that they lack “soft skills” — an amorphous, but critical set of qualifications that readily admit of covert race discrimination.

A recent brief issued by the Economic Policy Institute puts some of these explanations to the test — and poses another theory.

Basically, the authors looked at the ratio of black men to white men in all but one of the 469 occupations used in the annual American Community Survey. They found that:

  • 87% of the occupations could be classified as racially segregated, even when level of education is accounted for.
  • Occupations in which black men were over-represented paid, on average, $13,328 per year less than the occupations in which white men were over-represented.
  • Every $10,000 increase in the average annual wage of an occupation was correlated with a 7% decrease in black male representation.

Then the authors tested a couple of common explanations for such occupational segregation.

What about the purported lack of soft skills, for example? Totally at odds with the data.

Black men are either well-represented, i.e., as level of education would predict, or over-represented in service industries, where soft skills are a high priority and wages relatively low. They’re under-represented in construction, extraction and manufacturing industries, where soft skills are less important (except at the highest levels) and pay generally higher.

What about differences in career interests? Not the answer — at least so far as one can judge from the fields in which black and white male college students received their bachelors degrees.

I’m compressing the reported results of the analysis. The authors report many more within-industry and cross-occupation comparisons.

But I think the data here are sufficient to show why they conclude that labor market discrimination is the most plausible explanation for the black/white earnings gap.

In other words, for whatever reasons, black men jobs are denied jobs in high-wage occupations. As a result, they’re “crowded” in low-wage occupations. And the very fact of their “over-crowding” depresses the wages further.

None of this is to say that we needn’t deal with black/white learning gaps in our public schools. Black youth who don’t graduate from high school — or who do graduate but can barely read or solve practical numerical problems — aren’t going to fare well in our economy, even if the labor market were genuinely color-blind.

But closing these gaps won’t eliminate the earnings gaps the EPI authors identify. Hard to know what will. As Algernon Austin, also at EPI, has written, race discrimination in the post-civil rights era is complex and difficult to address.

Still, it’s important to have studies that show we’ve got a long way to go before equal employment opportunity is a reality as well as a legal right.

* These are figures for men ages 20 and older. I use them because the figure in the CAP report represents this age bracket. Current figures for men 16 years and older are higher and the gap somewhat smaller.

Deficit Double-Talk

February 1, 2011

About 10 years ago, arch-conservative Grover Norquist revealed the impetus behind the Bush tax cuts. “My goal,” he said, “is to cut government … down to the size where we can drag it into the bathroom and drown it in the bathtub.

I cite this fine display of candor because it’s notably absent from what Congressional Republicans are saying now. But it’s nonetheless applicable to the course they claim reflects the will of the American voters

First, they adamantly insist that all the Bush tax cuts must be extended. Also that even more wealth must be exempted from the estate tax. These measures, of course, increase the deficit — though the “middle class” tax cut extensions the President also wanted made up the largest part of the impact.

Then the Republican-controlled House adopts new rules that will exempt further tax cuts from budget discipline. At the same time, it subjects all spending increases to new constraints, requiring that they be offset only by spending cuts.

A good way to “cut the government down to size,” but no way to reduce the deficit.

The House Republican leadership also reaffirms its pledge to roll back federal spending to the pre-Recovery Act level. At this point, that  would seem to entail $60 billion in immediate cuts, plus an additional $40 billion beginning in October — assuming Congress passes a Fiscal Year 2012 budget on time.

Not good enough, says the Republican Study Committee, representing a majority of Republican House members. We want discretionary spending, i.e., the spending Congress annually approves, rolled back to the 2006 level and frozen there until 2021. Except for Defense — the single biggest chunk of discretionary spending.

The Center on Budget and Policy Priorities reports that the RSC plan would ultimately cut non-defense appropriations 42% below what the Congressional Budget Office says would be needed to maintain the Fiscal Year 2010 funding level, with adjustments for inflation.

No way this much could be cut without decimating key government programs — especially because it’s a sure bet that not all programs would get hit with that 42%.

Such drastic spending cuts aren’t needed to address the long-term deficit. Nor would they do so. As this nifty interactive pie chart shows, all non-defense discretionary spending accounted for just 15% of the Fiscal Year 2010 budget.

Nearly 60% was mandatory spending, i.e., spending that Congress doesn’t vote on each year. And nearly 70% of that was for Social Security, Medicare and Medicaid.

Enter Congressman Paul Ryan’s Roadmap for America’s Future. As the Economic Policy Institute explains, the Roadmap aims to “dismantle Medicare and Medicaid,” replacing them with vouchers that would increasingly fall short of health care costs.

Also cut Social Security benefits while partially privatizing the system. This, says EPI, would mainly benefit wealthier Americans, who would also gain from drastic shifts in the tax burden — so drastic that millionaires would pay taxes at lower rates than middle-class families.

Death knell for what’s historically been our progressive federal income tax system.

These are not deficit-driven conservative proposals. They’re as revolutionary as the Tea Party’s name. Because they would radically define what we the people — well, most of us people — have come to understand as the federal government’s responsibility “to promote the general Welfare.”

The depth of the cuts, combined with the re-engineering of social insurance programs would shift that responsibility to state and local governments. But they have neither the resources nor the budgetary flexibility to assume it — even if they want to. And current evidence suggests some don’t.

Bottom line is that the House Republican majority, seconded by Republican leaders in the Senate, would roll up the safety net and roll back the clock to the nineteenth century, when poverty, education, public health and the like just weren’t any of the federal government’s business.

New Angles On How Many Poor People There Are In The U.S.

January 20, 2011

I remarked some time ago that we didn’t know how many poor people there were in the U.S. We still don’t because the Census Bureau is still working on a measure that would take account of many factors the official measure ignores.

As part of the process, it’s been releasing annual alternative poverty estimates based on recommendations the National Academy of Sciences made back in 1995. The latest set came out in early January — three multi-columned spreadsheets, each with many, many figures.

I couldn’t make heads or tails of them, though I could see that the poverty rate for 2009 might be as low as 12.8% or as high as 17.1%, depending on which NAS recommendations were applied. So  there could have been as relatively few as 39 million people in poverty or as many as 52.5 million.

Fortunately, a new brief from the Economic Policy Institute gives us non-economist the big picture — though not an answer to how many poor people there are.

As EPI explains, the alternative estimates make different kinds of adjustments in the poverty threshold, i.e., the dollar cut-off for counting people as poor, and/or in what’s counted as income.

The official threshold is three times the food budget at the time the official poverty measure was developed, with adjustments for inflation based on the Consumer Price Index for All Urban Consumers.

The Census Bureau produces alternative thresholds by adjusting for out-of-pocket medical expenses, cost-of-living differences in different parts of the country and a different measure of consumer price inflation — the Consumer Expenditure Survey.

Looking only at the alternative thresholds, the share of the population in poverty seems higher than the official 14.3% rate the Bureau reported in September. Hence a high-end estimate of poor people so much greater than the official 43.6 million.

The income adjustments tell a different story.

The official measure counts only cash income, i.e., wages and cash benefits like Social Security and unemployment insurance.

The alternative measures take account of non-cash benefits like food stamps, housing vouchers and Medicaid and of tax credits like the Earned Income Tax Credit and the Child Tax Credit.

With these included, the poverty rate is lower than the official estimate, even when taxes are factored in. As with the thresholds, how much depends on which adjustments are made.

The Center on Budget and Policy Priorities also crunched the numbers. It came to basically the same conclusions about the income adjustments, though with a more political slant aimed at justifying the temporary new and expanded tax credits and benefits in the economic recovery act.

According to CBPP, the recovery act improvements kept 4.5 million people out of poverty. An additional 11 million were lifted above the poverty threshold by the regular versions of five of the programs — the Earned Income and Child Tax Credits, unemployment insurance and food stamps.

And, as EPI also shows, the biggest anti-poverty impact came, as it has in the past, from Social Security retirement benefits. CBPP says these kept more than 20 million people out of poverty. Looking at its table on program impacts as a whole, the number seems more like 21.4 million.

In short, the major federal anti-poverty programs are doing what they’re supposed to do. Without them, a vastly larger number of people would have been poor enough to be counted as such.

I don’t suppose I need add that these programs are at high risk — if not of annihilation, then of significant retrenchments.