"As long as the poor can scrape by with two or three jobs, it will be hard for people to realize how serious this issue is. Instead, we will slowly become a nation where the police have to protect the rich from the poor.... And that will threaten our democracy. But until you get to that point, America won’t see it."
--Richard Freman
Harvard University Economist1
Despite having the third highest per capita income in the nation, poverty remains a persistent problem in Massachusetts. This report examines Census Bureau data from the early 1990s to help understand the parameters and "face" of poverty in Massachusetts. Beyond recognizing that the poverty rate in Massachusetts during the early 1990s averaged 10.4 percent — that is, with more than one resident in ten living below the poverty line — the report looks at the prevalence of poverty from a number of perspectives including race, family structure, age, education, and residential patterns.
Of particular importance is the emphasis placed on poverty among working families. While much of the debate over welfare reform seems to assume that poor people are unwilling to work, the Census Bureau data reveal that nearly half of all poor families — 48 percent — have at least one adult working in the household.
Highlights from the report include the following:
Nearly two-thirds of poor people in Massachusetts are non-Hispanic whites.
Nearly a quarter million children in Massachusetts are poor, with a poverty rate at 16 percent that is nearly double the rate for adults.
While most poor children are white, the poverty rates for children of color is far higher than that for whites. Specifically, 10 percent of white children are poor, while 46 percent of black children and 61 percent of Hispanic children are poor.
Young children are particularly poor, with nearly one in five children below the age of six living in poverty.
Over one-third of poor families are headed by a parent with some post-high school education.
The prevalence of child poverty despite the work efforts of parents is particularly troubling. Among poor families with children, 45 percent have an adult worker in the home, usually with significant work efforts.
On average, these working poor families with children work 38 weeks per year, or nine months out of the year.
Nearly one in five of these families — 18 percent — work at least 50 weeks a year, and one in ten works full time, year round.
The prevalence of working poor families cannot be explained merely by citing single parents; nearly half of all working poor families with children are headed by a married couple.
High-school drop-outs cannot explain working poverty either; three-quarters of working poor families with children have at least a high school diploma.
Finally, poverty despite work is not merely a factor of young parents. Only 10 percent of household heads in working poor families with children are under 25, while half are over 35.
The proponents of the welfare reform bill that passed Congress last year believed that eliminating entitlements to public assistance would force adults into the job market and, presumably, reduce poverty. This report shows that those receiving cash assistance already are in the work force.
While 45 percent of poor families with children have an adult worker, over half of poor individuals and families without children have a worker in the household.
Working poor families receive the largest share of their income from earnings, not cash assistance. Specifically, 43 percent of their income comes from earnings, while just 34 percent comes from cash assistance.
The official poverty line used to differentiate those who are "poor" from other low-income families is both an historic accident and an anachronism that understates what a reasonable person would consider to be "poor." A mother with two children in Boston earning $13,000 a year would have a very hard time paying rent, shopping for groceries, and buying school clothes, yet she would not be technically "poor." While there have been dramatic changes in the economy since the methodology for establishing an official poverty line was established in the early 1960s, the poverty measure itself reflects only the effect of inflation. Changes such as the increased need for child care, increases in federal payroll taxes to pay for social security, and the number of single parents are not reflected in what is described as poor.
As a result, it may be more reasonable to consider poverty to start at a level well above the official poverty line. Using a level 50 percent above the poverty line to determine families with "very low incomes" — a level that is still less than half the median income in the state — gives a more complete picture of those who are effectively, if not technically, poor. Census Bureau data suggest the following characteristics of families with very low incomes:
Over one million people accounting for 17 percent of the population have incomes below 150 percent of the poverty line.
While whites make up a large majority of those with very low incomes, one in seven whites, four in 10 blacks, and nearly six in 10 Hispanics have very low incomes.
There are over 331,000 children in families with very low incomes. This includes 62 percent of black children and 71 percent of Hispanic children.
The elderly fall heavily in this region of the not-quite-poor. While the official poverty rate for seniors is 13 percent, a third of all seniors have incomes below 150 percent of the poverty line.
Six out of seven families with incomes between the poverty line and 50 percent above the poverty line — who could be called the near-poor — have an adult worker in the household.
While only eight percent of white families with a worker present have very low incomes, over a quarter of black families with a worker and over a third of Hispanic families with a worker are poor.
Finally, it is worth emphasizing that a large number of children live in working families that have very low incomes. While 14 percent of all children fit into this category, nearly half of all black and Hispanic children live in families where one or more parents work and yet their income is less than half the Massachusetts median. This experience of poverty or near-poverty despite work efforts must send a disturbing message about the value of work — and the way workers are valued — to minority youths.
Many of the problems that lead to low incomes and poverty despite work efforts — such as low skill levels, geographic separation between potential workers and jobs, and the loss of public benefits that often accompany entrance into the labor force — are likely to get worse as a result of welfare reform. While the wage levels for unskilled workers have deteriorated in recent decades, any substantial increase in the number of poorly-educated and low-skilled individuals into the work force will likely drive wages for this group lower still. Recent studies suggest that even in a growing job market, there could well be 50 percent more people looking for low-skill jobs than there are new jobs opening. In short, there are likely to be far too many low-skilled people chasing too few jobs under current labor market conditions.
Finally, this report ends with a series of modest policy recommendations that would increase the likelihood that working parents and their children would no longer be poor, or at least reduce the impact of poverty on their lives. While each these recommendations alone would not necessarily reduce the levels of poverty in Massachusetts dramatically, they could — together — improve the conditions of working adults and help ensure that, in Massachusetts at least, work still pays.
Index the Minimum Wage for Inflation — In recent decades and in spite of periodic legislative increases, the value of the minimum wage has eroded due to inflation. Twice in the last decade — in 1989 and again in 1996 — the federal minimum wage, after adjusting for inflation, reached its lowest level since 1955. While Massachusetts recently raised its minimum wage to $5.25 and the federal minimum wage will rise to $5.15 on July 1, 1997, the state minimum wage will still leave a single parent who works full time and is raising two children nearly $2,000 below the poverty line. Moreover, this gap will again grow larger as inflation takes its toll. Policy makers should follow the example set in the social security program — the most effective anti-poverty program ever — and index the minimum wage for inflation. That way, automatic increases would prevent steady erosion in the minimum wage’s value.
Establish a State-Funded Property Tax Circuit Breaker — Housing costs are a major share of the cost of living for poor families, particularly here in Massachusetts. One appropriate way to reduce the cost of housing is to provide property tax relief to those with high housing costs relative to their income. For low-income homeowners, a property tax circuit breaker would rebate any property tax in excess of 10 percent of a family’s income. Renters — who pay property taxes indirectly through their rent — would also benefit from a well-designed property tax circuit breaker. State legislation that deemed a certain share of rent to be property tax — 25 percent is typical in states that provide similar tax relief — would allow renters to make the same calculation as homeowners. If the share of rent deemed to be indirect property tax payments exceeded 10 percent of income, the state would rebate the excess property tax payment in the form of a tax refund. Thus at modest cost and in a targetted fashion, the state could thus reduce the impact taxes have on poor families.
Protect the Revenue Base — Effective programs to reduce poverty and to mitigate the effects of poverty require that government funds be available to finance these programs. There is ample evidence that when state funds run short, programs for low-income families are typically the first to be cut — long before corporate welfare programs face the budget scalpel. Given this tendency to balance the state budget on the backs of the poor, it is essential that the state reject the massive tax cuts benefitting primarily high-income households and businesses that have been proposed in recent months. In particular, proposals to cut $1.2 billion in state revenue by reducing the personal income tax rate and to cut another $260 million in taxes paid mostly by wealthy investors should be rejected by the legislature.
Improve Child Care Access — Few concerns arise more quickly for low-income working parents than the cost of child care. The high cost of child care can be a serious impediment for parents attempting to leave public assistance and enter the work force. An important first step would be to fully fund the child care subsidy for low-income parents. There are estimated to be between 6,000 and 10,000 poor parents eligible for child care subsidies who have been placed on a waiting list due to inadequate funds. The state should also increase the earnings limit for this subsidy up to 85 percent of the median income.
Reform the Poverty Definition — Members of the state’s congressional delegation should support efforts to revise the official poverty definition. In particular, a new definition would take into account the differences in cost of living among the various states, it should take into account the increased costs of working today compared to 40 years ago, and consideration should be given to establishing a relative measure of poverty tied to median incomes.
Increase the State Earned Income Credit (EIC) — Taken as a share of the broadly popular federal EIC, a state EIC rewards parents who work while raising children. While the legislature has recently adopted a state EIC that will go into effect for those who file their taxes next year, the state credit is only 10 percent of the federal EIC, one of the lowest rates in the country. Increasing that to 15 percent or 20 percent of the federal credit would cost a modest $15 million to $30 million, while providing up to $360 in additional assistance to low-income working parents — a far better use of any funds available for tax cuts than most of those enacted in recent years.
Establish a Job Training Credit for Low-Skilled Workers — While some employers do a reasonably good job of providing training and skill-enhancement for their workers, too often these benefits are aimed at staff with higher skills. From the employers perspective, training for low-skill workers may not be seen as a good investment, since these workers tend to move in and out of jobs more often than others. By providing a tax subsidy for employers that are expanding their workforce and providing training to low-skilled workers, the state can both encourage this sort of good corporate citizenship and improve the earning potential of its most vulnerable workers.
Protect Low-Income Families During Energy Deregulation — As a result of federal laws, technical demands, and a changing economy, the energy industry will be largely deregulated during the coming years. To date, far too little attention has been given to the effect these changes will have on low-income families. Every effort should be made to ensure that low-income households receive real and substantial savings from this deregulation. In addition to a guaranteed rate cut of 15 percent that all households should receive, low-income families should be guaranteed a 60 percent discount and community-based non-profit organizations should be encouraged to act on behalf of low-income people to help them organize into buying groups to ensure competitive rates.
Improve Access to Quality Health Care — Since 1987, Massachusetts has fallen from first in the nation in terms of health insurance coverage to 21st, a trend that shows no sign of abating. New data recently released shows that in 1996, while 60,000 new jobs were created in the state, the number of people without health insurance grew by 95,000. To respond to this continuing crisis, Medicaid eligibility should be expanded to include children through age 18 and pregnant women whose family income is up to 200 percent of the poverty line and the benefit package for children served by the Children’s Medical Security Plan should be expanded to include more comprehensive health services. Finally, a significant share of any revenue Massachusetts may receive as a result of a national tobacco settlement should be earmarked to expand health care access among low-income working families.
Expand Education and Training Programs — With new demographic data showing substantial increases in the school-age population and with looming time limits that will push more people off existing welfare rolls, Massachusetts should continue to expand the resources available to education and training programs. In particular, worker retraining programs and school buildings themselves must receive a new emphasis from state policy makers.
Reform Welfare Reform — The federal and state changes enacted in welfare policies in recent years are likely to have a damaging impact on large numbers of Massachusetts families, particularly if and when the economy slows down. To reduce the unnecessarily punishing impact of these changes, Massachusetts should consider several changes in its welfare laws. In particular, the state should begin to consider education and training as fulfilling the work requirements of the new welfare law, it should provide an exemption from work requirements for women who have been subject to domestic violence, and the state should enact a pilot job readiness preparation program for those receiving public assistance to foster the sort of skills and habits necessary to find and keep a job.
1. Boston Globe, July 21, 1997.