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 …


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.

Recession Puts Damper On Workers’ Wages

September 20, 2010

We’ve been reading a lot about people who’ve lost their jobs and are still desperately looking for work. What we haven’t read much about are the impacts of the recession on people who weren’t laid off or those who were but found new jobs.

A new brief by the Economic Policy Institute focuses on them. It shows that, in the last two years, they’ve suffered a “broad-based collapse of wage growth.” It’s part of longer-term trends that have left workers with a shrinking share of the benefits of both productivity and total income growth in our nominally egalitarian society.

First, the recession impacts. In 2007, private-sector wages increased by an average of 3.6%. In 2008 and again in 2009, the average increase was just 1.6%. The 2009 growth was actually less than the inflation rate. In other words, paychecks may have been a little bit bigger, but workers actually lost purchasing power.

We see the recent “wage deceleration” in all major occupational groups except those related to sales, where some percent of pay reflects “outputs” like how much employees sell. It’s been greatest for relatively low-paid jobs, i.e., service occupations and office and administrative support. But management and professional occupations have also been affected.

EPI says we can expect such sluggish wage growth until the unemployment rate drops to pre-recession levels. That probably won’t happen until 2015, if then. But full recovery won’t be the end of the story — unless something else changes dramatically.

Economists generally assume that faster productivity growth raises living standards, as workers get a share in higher compensation. But throughout the last business cycle, i.e., from the recession in 2000 to the onset of the recession we’re in now, productivity increased far more than compensation.

The pay-productivity gap widened as the boom took off. Between 2002 and 2007, productivity increased by 11%. The average hourly compensation for both high school and college graduates actually fell — more for the former than the latter.

Adjusted for inflation, the median income for working families dropped by more than $2,000. EPI says this is the only business cycle on record where the typical working family wound up with less at the beginning than at the end.

At the same time, the income gap between the wealthiest households and the rest of us grew exponentially. The Center on Budget and Policy Priorities reports that, between 2002 and 2007, the average inflation-adjusted income gains for the top 1% of households rose nearly 62%. The bottom 90% of households gained, on average, 4%.

This represents the continuation of a longer-term trend — one that EPI says laid the foundation for the current recession. If I understand correctly, it’s referring to the collapse of debt-fueled consumption by consumers whose incomes couldn’t keep pace with their felt needs.

In the future, it says, “we need consumption growth to be driven by strong employment growth and higher real [inflation-adjusted] wages for most workers.”

How, I wonder, will we get there when we can’t get consensus on even some modest job-creating investments — let alone any legislation that would channel a greater share of business profits into wages.

New Report Warns of Growing Race Gap In Employment

January 22, 2010

The Economic Policy Institute has issued what it rightly calls “grim 2010 projections” for the employment prospects of our nation’s racial minorities.

Here are some lowlights from the “downcast” forecast, along with some calculations by yours truly.

The overall unemployment rate is expected to peak at 10.7% in the third quarter of 2010. But for blacks, the projected rate is 17.2%. This is in part because minorities “began the recession in a recession,” with the black unemployment rate more than double the white unemployment rate–higher, in fact, than the current white rate.

In the third quarter of 2009, the white unemployment rate was at or below 9% in all but nine states. In the 18 states for which there are reliable data black unemployment rates were all double digit. By the projected 2010 peak, the black unemployment rate will be over 17% in 11 of these states and over 20% in five.

The race gap is writ large in the District of Columbia.

  • In the third quarter of 2009, the black unemployment rate was 11.9% higher than the white unemployment rate. This is larger than any of the reported state race gaps except South Carolina’s, which is a mere 0.1% higher.
  • By the 2010 peak, the white unemployment rate will have increased by 0.4% and the black unemployment rate by 1.3%–more than three times as much as the white rate.
  • The difference between the white and black rates will have grown to 12.8%–again greater than the difference in any state except South Carolina.
  • Yet the increase in the black unemployment rate since the recession set in will be just about at the median–another indicator that black unemployment in the District is a long-standing problem.

The EPI report is a call to action for a job creation strategy that targets states and populations with the severest employment problems. And, indeed, the race gaps it documents clearly show that we can’t count on a rising tide to lift all boats.

The administration and Congress are going to be under pressure to put as many people as possible back to work as soon as possible. But if they focus only on raw numbers, low-income minorities and their communities will again be left behind.

In December, the unemployment rate for adults over 25 without a high school diploma was more than three times greater than the rate for those with a bachelor’s degree or higher. For teens, the rate was 23.6% and for black teens an appalling 48.4%.

So there’s an urgent need to build education and training into job creation programs, including meaningful work-learning opportunities for low-income youth. And we need, at long last, to commit to resolving other problems underlying the employment race gap.

And what if we don’t? Well, according to EPI, the black child poverty rate will increase to more than 50%–more than half of all black children beginning life with two strikes against them. A recipe for millions more trapped on the bad side of the economic divide.

We Need Action On the Job Crisis Now

December 14, 2009

For months, President Obama has been preoccupied with Afghanistan, the climate change summit and getting a health care reform bill passed. The rest of the country has been saying, Do something about JOBS!

And with good reason. We’re told that the November unemployment figures are good news. But 15.4 million American workers are unemployed–over 38% of them for more than six months. An additional 10 million have given up looking for work or are working part-time because that’s the best they can do.

The situation is even worse for black and Hispanic workers. Unemployment rates for them are 15.6% and 12.7% respectively. The Economic Policy Institute says it expects 40% of them to be unemployed or under-employed at some point over the next year. Worst off are black teenagers, with an unemployment rate close to 50%.

The economy continues to shed jobs, though at a much lower rate than earlier this year. Looking at the Bureau of Labor Statistics’ latest job openings and labor turnover survey, EPI figures there were 6.3 job seekers for every job opening in October.

The ratio of seekers to jobs will grow unless something dramatic happens. Because it won’t be enough for employers to stop eliminating jobs. EPI says the labor market would have to grow by an average of 581,000 jobs a month to bring the unemployment rate back down to its pre-recession level.

Now the President has outlined a plan to jump-start job creation, using funds appropriated for the bank-bailout. I’m still chewing it over. So, I suspect, are members of Congress–except, of course, the House Republican leadership, which is dead set against more spending.

What Congress can–and should–do is act on the most urgent elements now. Otherwise, the extended unemployment insurance provisions in the economic stimulus package will expire–notwithstanding the recent legislation to extend them.

A new brief by the Center for American Progress Action Fund and the National Employment Law Project says that 1 million workers will lose job benefits in January unless Congress acts. By March, the number will have increased to 3.2 million. NELP has a customizable e-mail we can send to support the needed legislation.

Congress should also immediately extend the COBRA health insurance subsidies. Beneficiaries have already started losing these. Millions more could face a tripling of their premiums in the months to come.

A third priority are the stimulus provisions that have helped states balance their over-stressed budgets. An estimated 900,000 jobs will be lost unless Congress extends these ASAP.

More about them in another posting.