July 24, 2001

Contact: Tom Kiley (202) 331-5540

Families well above official poverty line still face hardships

Washington D.C. – Twenty-nine percent of working families in the United States with one to three children under age 12 do not earn enough income to afford basic necessities like food, housing, health care, and child care, even during a period of national prosperity.

Hardships in America: The Real Story of Working Families, released today by the Economic Policy Institute, shows that the majority of these families are two parent families, often with one or more workers, and for the most part earning incomes above the official federal poverty level.

“Work alone doesn’t ensure a decent standard of living,” said Heather Boushey, an EPI economist and lead author of the study. “This report shows that official poverty measures don’t tell the real story of working families today, and it provides strong evidence of the need for policies that strengthen our social safety net and boost wages.”

Hardships in America is the most comprehensive study of family hardships ever published. It examines the cost of living in every community nationwide and determines separate “basic family budgets” – the amount a family would need to earn to afford food, housing, child care, health insurance, transportation, and utilities – for each community.

Basic family budgets for a two-parent, two-child family range from $27,005 a year in Hattiesburg, Mississippi, to $52,114 in Nassau-Suffolk County, New York. The national median is $33,511, roughly twice the official federal poverty line of $17,463 for a family that size.

Two-and-half times more families fall below basic family budget levels than below the federal poverty line, according to the report by Boushey and co-authors Chauna Brocht, Bethney Gundersen, and Jared Bernstein.

The authors describe two kinds of hardships faced by these low-income families. The first, critical hardships, occur when families are unable to meet their basic needs. The second, serious hardships, occur when families lack the tools to maintain employment and a healthy, stable home environment.

A leading indicator of hardships is not whether a parent works, but whether the family has health insurance.

The report’s other key findings include:

• Nearly one-third of families with incomes below twice the poverty threshold – a close proxy for the basic family budget level – faced at least one critical hardship, like going without food, getting evicted or having to “double up” in housing with another family, or not having access to medical care during an acute illness.
• Even for families that include a full-time worker, nearly a quarter of families below twice the poverty line face one or more critical hardship.
• Nearly three-quarters of families below twice the poverty threshold faced at least one serious hardship, like worrying about food, failing to pay rent, using the emergency room as their main source of health care, having the telephone disconnected, or having children in inadequate child care arrangements.
• Families with incomes between the poverty line and twice the poverty line were almost as likely to experience hardships as families below the poverty line. The shares of each type of family experiencing hardships were 25 percent and 29 percent, respectively.
• Food insufficiency is the most common hardship. Eighteen percent of families below twice the poverty line missed meals involuntarily. Forty percent worried about having enough food to keep from going hungry. For single-parent families, food insecurities were experienced at rates of 23 percent and 57 percent, respectively.
• The study closely examined hardships in thirteen states, and found that Californians living below twice the poverty threshold were the most likely (21.4 percent) to miss meals involuntarily. Coloradoans in this group were the most likely (15.4 percent) not to receive necessary medical treatment. But Texans are the most likely to worry about food (nearly half) and to lack health insurance (nearly half).
• Of families with incomes below basic budget levels, half include a parent who works full-time. Nearly 60 percent are two-parent families. More than three-quarters are headed by a worker with a high school degree or more. And nearly half are headed by a worker over the age of thirty. About one-third live in the suburbs, one-third live in cities, and one-third live in rural areas.
• Three-quarters of single parent families with two children fall below basic budget levels. Families headed by a single mother are the most likely to experience hardships, although nearly 60 percent of families with incomes below the family budget level have two parents.
• Just over half of all families living below basic budget levels are white families. However, about half of all black and Hispanic families fall below family budget levels, compared with just one-fifth of white families. Still, white and black families have about the same probability of facing one or more critical hardships, while Hispanic families are more likely to experience critical hardships.

The authors offer policy proposals for raising the earnings of low-income and poor families, including a minimum wage hike, the removal of obstacles to obtaining union representation, an expanded Earned Income Tax Credit, more comprehensive job training programs, and stronger pay equity policies that help to ensure that women are paid as much as men.

Policies to boost income, however, are only part of a plan to ensure that all American families can afford a safe and decent standard of living, according to the report. Families that earn enough income to be ineligible for Medicaid, for example, are still often unable to afford private health insurance. These experiences indicate that Americans at all income levels need a stronger social safety net, including:

• Universal health insurance. Families that lack private health insurance are far more likely to face other kinds of hardships. They are over twice as likely to miss meals and fail to pay housing or utility bills, even after accounting for income. The problem becomes a cycle when, for example, inadequate nutrition leads to other health problems.
• Federally funded child care for children of all ages. Families at all income levels have a hard time finding day care centers with the adult-to-child ratio recommended by the American Academy of Pediatrics. In 49 states, child care costs are greater than the tuition to public colleges.
• Affordable housing and economic development. Affordable homes must be closer to work. One way to accomplish this is through “transit lead development,” where mixed-use, high-density developments are built near transit hubs. Increased funds for affordable housingshould also be made available, since national housing policy is biased in favor of middle-income homeowners.

“Even high school graduates working full time may not be able to support a family,” said Boushey. “If the American Dream is to become a reality for all Americans, then there is a role for government in helping working families meet their basic needs.”

Heather Boushey is an economist at EPI and co-author of When Work Just Isn’t Enough, an examination of hardships faced by former welfare families. She holds a Ph.D. in economics from the New School for Social Research in New York City.

Chauna Brocht is a policy analyst at EPI and co-author of How Much is Enough? She has a master’s from the Hubert Humphr
ey Institute of Public Affairs at the University of Minnesota.

Bethney Gundersen is a research fellow at EPI and co-author of When Work Just Isn’t Enough. She has a master’s in economics from Washington University in St. Louis, where she is now a doctoral candidate in social work.

Jared Bernstein is a labor economist at EPI and co-author of How Much is Enough?, a report that examines the best practices in developing family budget estimates. He holds a Ph.D. in social welfare from Columbia University.

The Economic Policy Institute is a non-profit, non-partisan economic think tank founded in 1986. The Institute is located on the web at http://www.epi.org.