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Working Families and Economic Insecurity in the States: The Role of Job Quality and Work Supports

Working Families and Economic Insecurity in the States: The Role of Job Quality and Work Supports

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Working Families and Economic Insecurity in the States: The Role of Job Quality and Work Supports

May 2008, Shawn Fremstad, Rebecca Ray and Hye Jin Rho
Working Families and Economic Insecurity in the States: The Role of Job Quality and Work Supports

May 2008, Shawn Fremstad, Rebecca Ray and Hye Jin Rho

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Published by: Center for Economic and Policy Research on May 20, 2008
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Working Families andEconomic Insecurity in the States:
The Role of Job Quality and Work Supports
Shawn Fremstad, Rebecca Ray and Hye Jin Rho
May 2008
 
Illinois
Center for Urban Economic Development at the University of Illinois-ChicagoHeartland AllianceSargent Shriver National Center on Poverty Law
Iowa
Iowa Policy Project
Massachusetts
Center for Social Policy, University of Massachusetts Boston
Minnesota
Children’s Defense Fund MinnesotaJOBS NOW CoalitionLegal Services Advocacy ProjectMinnesota Budget ProjectMinnesota Community Action Association
New York 
 Fiscal Policy Institute
North Carolina
 
North Carolina Justice Center
Ohio
 
Policy Matters Ohio
Texas
Center for Public Policy PrioritiesRay Marshall Center for the Study of Human Resources at the University of Texas-Austin
Washington
Seattle Jobs Initiative
Washington, DC
DC Fiscal Policy Initiative
About Bridging the Gaps
Bridging the Gaps (BTG) is a research and outreach project intended to provide a full picture of public work supports in the United States. The project is led by theCenter for Economic and Policy Research and the Center for Social Policy at the University of Massachusetts Boston in collaboration with organizations in ninestates (Illinois, Iowa, Massachusetts, Minnesota, New York, North Carolina, Ohio, Texas, and Washington) and the District of Columbia. The conclusionspresented in this report represent only the views of the authors, not necessarily the views of any of the BTG state partners. The BTG partners are:
About the Authors
 
Shawn Fremstad is Director of Bridging the Gaps, Rebecca Ray is a Research Assistant, and Hye Jin Rho is the Domestic Team Intern at the Center for Economicand Policy Research.
Acknowledgements
 
Most of the data in this report is based on an earlier analysis conducted by CEPR’s Heather Boushey, Rebecca Ray, and Ben Zipperer as part of Bridging the Gaps.The good jobs analysis was conducted by John Schmitt of CEPR. The authors thank Randy Albelda, Dean Baker, Alan Barber, Kathryn Bogel, Meghan Morgavan,and John Schmitt for comments and assistance. The maps in this report were created by Hye Jin Rho and Shawn Fremstad using Processing, an open-source pro-gramming language and environment developed by Ben Fry and Casey Reas.This research was funded in part by the Annie E. Casey Foundation and the Ford Foundation. We thank them for their support. The findings and conclusionspresented in this report are those of the authors alone and do not necessarily reflect the opinions of these foundations.
Center for Economic and Policy Research ·
1611 Connecticut Avenue, NW, Suite 400
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Washington, DC 20009
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202-293-5380
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www.cepr.net
 
Executive Summary
This report provides information on job quality and the economic security of working families in the states and the District of Columbia in the first half of thecurrent decade. It also quantifies the important role that public work supports—benefits for workers such as the Earned Income Tax Credit and child care assis-tance—play in helping workers make ends meet. Using a new approach to measuring economic insecurity—one that improves on the relatively arbitrary federal poverty measure—we find that about one in five people in working families are economically insecure. Similarly, using a novel measure of job quality that takes both wages and benefits into account, we find that only about one in four jobs are “good jobs” in the typical state.
New Approaches to Measuring Economic Insecurity and Job Quality
The federal poverty line does a poor job of measuring economic insecurity in the UnitedStates. In 2008, the poverty line for a family of four is $21,200. Yet, in a recent poll,more than two-thirds of Americans agreed that an income level of $30,000 made a four-person family poor. When asked in another recent poll how much a family needs to“make ends meet,” 70 percent of those surveyed said $40,000 or more.Instead of the poverty line, we use basic family budgets developed by the EconomicPolicy Institute to determine whether working families have sufficient income to makeends meet. Basic budgets have been used in the United States for more than a century.Unlike the poverty measure, these measures take into account the actual costs of goodsand services needed to have a decent standard of living as well as the variations in thesecosts depending on where one lives. In addition to being a more accurate measure of economic security than the poverty line, basic family budgets are consistent with publicunderstanding of the income needed to make ends meet.When measuring poverty, the government and most researchers do not take into accountmost public work supports. Of the six benefits we classify as work supports—childcare assistance, the Earned Income Tax Credit, food stamps, health insurance providedthrough Medicaid and the State Children’s Health Insurance Program, housing assis-tance, and income supplements provided through Temporary Assistance, only Tempo-rary Assistance supplements are typically counted. By contrast, when we determinewhether a family is able to make ends meet, we take into account the value of all of these benefits.To define a “good” job, we use a simple definition based on three characteristics: pay,health insurance and retirement benefits. According to this definition, a good job isone that meets all of the following three criteria: it pays at least $17 per hour (about$34,000 on an annual basis), it offers employer-sponsored health insurance (where theemployer pays at least part of the monthly premium), it offers an employer-sponsoredretirement plan (either a “defined contribution plan” like a 401(k) or a “defined benefit”like a traditional pension).
Key Findings
In the typical state, 22 percent of people in working families suffer from economichardship because their earnings and income from other sources, including public worksupports and other public benefits, fall below the basic needs budget standard for wherethey live. By comparison, some 12.6 percent of Americans live below the federal pov-erty line; an even lesser share of individuals in working families live below the povertyline. Thus, our findings reinforce the public’s view that the poverty line is set too low toaccurately measure economic hardship.Most economically insecure workers have jobs that pay low wages and provide few orno benefits. Only a minority of jobs are “good ones,” jobs that pay well and providehealth and retirement benefits. In the typical state, 25 percent of jobs are good jobs.Bad jobs—ones that pay less than $17 an hour and provide neither health nor retirementbenefits—account for about 30 percent of all jobs in the typical state.Few workers in the middle-class and above rely solely on wages to maintain theirstandard of living. Tax preferences underwrite the costs of private social benefits thatpromote the health and economic security of middle-class families, including employer-based health insurance and retirement plans. These benefits are structured in a way thateffectively excludes many workers in low-paid jobs from receiving them.Instead of one system of benefits available to all workers, the United States has two: onefor families supported by low-wage workers and another for middle- and upper-incomefamilies. The former system consists of a patchwork of benefits, typically targeted onthe basis of having income and assets below a certain threshold. Moreover, thesebenefits often are not available to everyone who meets the eligibility requirements.Despite their limitations, these benefits, often referred to as public work supports, playan important and largely unheralded role in promoting economic security and opportu-nity for working families. In the typical state, work supports close more than half of thehardship gap—the gap between a working family’s income and the basic family budgetfor where they live. Nevertheless, substantial numbers of workers in low-paid jobsreceive only modest or no help from work support programs.

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