WASHINGTON – A new report from the Bureau of Labor Statistics shows that the country’s number of working poor grew by 1.4 million in 2008, with a total 8.9 million working adults now unable to make a living that keeps them above the federal poverty line.
The report, titled “A Profile of the Working Poor,” shows that finding a job is not always a path out of poverty. In fact, among Americans who are below the poverty line and in the labor force (either currently employed or looking for work), nearly 7 out of 10 have jobs that do not provide sufficient income.
“This depiction of the working poor highlights the need for public policies that will help Americans stretch their paychecks further,” said Michael Saltsman, research fellow at the Employment Policies Institute (EPI).
Well-intentioned legislators often advocate for increases in the federal minimum wage – like the 40 percent increase that occurred between July 2007 and July 2009 – as an effective tool to help the working poor.
However, new EPI research from economists at the University of Alabama and East Carolina University demonstrates that an expansion of the Earned Income Tax Credit (EITC) would have put more dollars in the pockets of working Americans living in poverty, lifting 2.5 times more people out of poverty than the minimum wage increase.
“Over 85 percent of all poor families received no benefit from the most recent increase in the federal minimum wage,” Saltsman continued. “This badly targeted policy gave a larger income boost to middle-class Americans than for those who needed it most.”
Census Bureau data shows that the average family income of a minimum wage earner is over $48,000 a year. Many of those earning this starting wage are from middle-class families, demonstrating why increasing the wage is not a targeted or effective way to help the working poor.
In 2007, the University of New Hampshire found an overwhelming 70 percent of labor economists surveyed in agreement that an EITC was the best way to meet the income needs of poor families; in contrast, only 9 percent said the same thing about a higher minimum wage.
“Today’s economic environment is especially challenging for the working poor,” Saltsman concluded. “It’s time for federal and state legislators to choose poverty-reducing policies based on what works best, not on political agendas.”