Massachusetts Families:
Working and Still Poor

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When it comes to children, the United States is the poorest of rich nations," writes journalist Holly Sklar (1). And when it comes to children, Massachusetts is one of the poorest of rich states.

The Massachusetts economy is booming. Typical family income is third highest in the nation. But the fruits of our state's economic growth have not been shared equally among all families. More than one out of every ten Massachusetts residents lives in poverty (1997 income below $16,050 for a family of four) (2). And children stand out as the poorest of our poor. Nearly one Massachusetts child in six lives in a family with a poverty-level in come, and 6% live in extreme poverty (income 50% below the poverty line) (3).

These statistics might seem to paint a picture of families currently receiving public assistance. However, contrary to common stereotypes, a significant proportion of our poor children come from working families. In the mid-1990s more than half of Massachusetts poor families with children included a worker (see graph). In round numbers, this amounts to 50,000 families, and in 12,000 of them the work was full time. Among poor families with children who received welfare benefits, a significant proportionslightly over 40%included a parent who worked at least part of the year(4). Says J. Lawrence Alber, director of the National Center for Children in Poverty, "Statistics show that if you play by the rules, you can still be poor. Poverty is in every community."

 

Work Effort of Poor Massachusetts Families with Children, Mid-1990s

Source: Center of Budget and Policy Priorities

Because so many of the state's poor children have parents who work, the state's high child poverty rate can be improved significantly by making policy changes designed to help working families. Our challenge is to improve access to fundamental opportunities that help poor families keep on working and to strengthen programs that help them earn more. We need to

• Improve the quality, affordability, and accessibility of child care
  

• Expand health care coverage and improve outreach to eligible families
  

• Encourage education and training to boost earnings
  

• End the assault on affordable housing
  

• Expand the earned income tax credit
  

• Raise the minimum wage and institute job security policies

The statistics are stark: child poverty grew 14% between 1985 and 1994 in Massachusetts(3). By the mid-1990s more than a quarter of a million children, or 15.8% of the state's kids, were poor, compared to a rate of about 10% for adults. Slightly over 40% of poor kids, or approximately 100,000 children, lived in families with working parents(4).

Most of the poor kids in Massachusetts are white. But the rate of poverty among children of color is even higher. A KIDS COUNT analysis of 1990 Census data suggests that on average one out of twelve white children is poor. In contrast, the rate for Latino children is one out of two, with Puerto Rican and Dominican children most affected. Rates are one in three for African-American and Native-American children. Poverty rates among Asian-American children vary widely, with some groups, such as Asian-Indian kids, lower than average and some groups, such as Vietnamese kids, much higher (6).

The things that used to lift a family out of poverty are not effective in today's economy. Living with a spouse doesn't necessarily mean that your income will be adequate: more than a third of Massachusetts working poor families with children are married couples. A general education also does not guarantee a well-paying job: nearly one out of three working poor families is headed by a person who has taken some college courses or finished college, and three out of four working poor parents have a least a high school education. (For more on the need for affordable higher education, see pages 9 and 11.) And working poverty is not a problem just for young parents: nearly half of Massachu setts working poor families are headed by a person over 35 (4).

 

A Profile of Massachusetts Poor Working Families with Children, Mid-1990's
Race	Education
Age of Family Head	Family Type

Source: Center on Budget and Policy Priorities

 

High Costs for Massachusetts Families

Because it has never been updated to capture changes in family spending patterns, the federal government's official poverty line formula is widely believed to underestimate the depth and extent of poverty in the United States. Set by the US Department of Agriculture (USDA) in the mid-1960s, the measure assumes that families spend one-third of their income on food and the other two-thirds on housing, transportation, health care, clothing, taxes, and incidentals. There is no allowance for child care. In a state such as Massachusetts with high housing, fuel, and food costs, the measure is particularly deceptive.

Thirty years ago few women worked outside their homes, and the price of food was high relative to housing, health care, and other basic necessities. Today, working families spend a high proportion of their income on child care and rent, and only about one-fifth on food. Nevertheless, the poverty-line formula remains the same except for an annual adjustment for inflation.

How much money does it really take to buy the basic necessities? In their book on the working poor (7), John Schwarz and Thomas Volgy have estimated that an income of 155% of poverty is needed to meet a family's basic needs. Using the 1997 poverty income guidelines for a family of four, this amounts to $25,000 (that is, 55% more than the $16,050 guideline). The family's $2,000+ per month incomeaccording to the Schwarz and Volgy budgetwould be laid out as follows.

 

A Monthly Budget for a Four-Person Family with Earnings 155% Above Poverty
Food	$ 399
Rent	466
Phone, heat, electricity	155
Transportation	326
Medical expenses	157
Clothing	100
Personal items like soap	40
Incidentals	130
Taxes	300
Child care	0
TOTAL	$ 2073

Source: Adapted from Schwarz and Volgy, 1992

As you can see, an annual income of $25,000 doesn't go very far in Massachusetts. A family would need to nearly double its housing budget to pay the "fair market rental" of $839 for a 2-bedroom Boston-area apartment. And following the poverty guidelines, there is no money at all for child care costs, even though families typically lay out $375 per month for day care, according to federal government figures(8). Expenses like these would leave a 4-person family cold and hungryand without access to food stamps, Head Start, and other benefits. The continued use of this inadequate measure of poverty means that there are many thousands of uncounted "invisible poor" in our wealthy state.

 

The Consequences of Child Poverty

How do poor parents cope? Many poor families cut back on food, which interferes with kids' development and can create health problems for everyone in the house hold. Many rent substandard housing, do without health insurance, and are forced to settle for poor quality child care(5).

Poverty is tough on children. When it's cold in the house and there's not much to eat, kids get sick more often and can do worse in school. This affects their long-term health and future job prospects. Family stress increases and so can emo tional and physical abuse. When parents work and still can't pay for their family's basic needs, society is saying to children: it doesn't make sense to play by the rules. This is not a good message for kids to grow up with.

A recent national comparison of poor and nonpoor families (9) found that

• Poor mothers' medical care during pregnancy is three times more likely to be inadequate. This lack of care can result in low-birthweight babies who can have life-long health problems.
  

• Members of poor families are twice as likely to be victims of violent crimes.
  

• Poor families' housing is twice as likely to be crowded and rundown.
  

• Poor children are twice as likely to repeat a grade and three times as likely to be expelled from school.

Ed and Karen Silva are an "invisible" Massachusetts working poor family. They live in Somerville with their six children. In June 1995 they told a Boston Globe reporter that although they have always worked hard, they've been poor all of their married life. Ed, a full-time warehouse manager, earned $27,000 at the time they were interviewed. Karen, a data-entry clerk, worked at night. Although Ed's income placed them above the 1995 poverty line, which made them ineligible for food stamps, their wages didn't stretch far enough to provide them with a healthy diet. Instead, they were forced to depend on food pantries, free school meals, and food vouchers.

The Silvas are fairly typical of the Commonwealth's "invisible poor" working families with children (incomes 100% to 200% above poverty). There were 108,000 of these families with children in Massachusetts in the mid-1990s. Nearly all of these families, 97.3%, had a working parent, and in 70% of the families the parent worked full time(4).

 

Why Working Families Are Poor

"People are working harder and harder for less and less." Bill Clinton's election year statement holds a key to the puzzle of why hard work isn't lifting families out of poverty. In the past two decades the wages of working families have declined or grown stagnant while the incomes of the rich have soared. Nationally, the wage gap is so extreme that the top 4% earn more than the entire bottom half(1).

The Massachusetts economy by most standards is healthy now. But our state went through a severe recession starting in 1989, and for many workers wages still have not recovered. Between 1989 and 1994, the typical worker saw a 4% drop in his or her real (adjusted-for-inflation) hourly wages, and the earnings of the lowest-paid workers (those just above the minimum wage) fell by more than 9% (2).

 

Real Hourly Wages of Typical Earners and Low Earners in Massachusetts, 1989 and 1995 In 1995 Dollars
Typical Workers	Low-Wage Workers

Source: Economic Policy Institute

The government has encouraged low wages by letting the value of the minimum wage fall so far that even after the recent increase its value in 1998 will be only about 80% of the poverty line for a family of three. As economists at the Economic Policy Institute point out, most minimum-wage earners are not teenagers, but adults providing a significant share of their family's earnings(2). In the Boston area, it would take 90% of one minimum wage earner's annual before -tax income to cover the "fair market" rent on a 2-bedroom apartment.

 

Jobs Shift to Low-Paying Industries

A common explanation for falling wages is that workers don't produce enough and their fringe benefits cost too much. These excuses don't work for New England. Our labor productivity was third highest in the nation in 1992, having increased 28% since 1977. And while productivity was going up, benefits were going down. Between 1977 and 1992, the percentage of workers covered by health insurance droppedfrom 91% to 87%(10)despite the fact that health care costs have recently leveled off (2). By 1996, according to a recent study by the Boston University School of Public Health, 766,000 Massachusetts residents, or 12.4% of our to tal population, had no health insurance at all.

If workers are producing more and the cost of their benefits has not risen, what explains falling wages and rising working poverty? A driving force is the disappearance of high-paying, semi-skilled manufacturing jobs from Massachusetts as corporations have automated or shifted their operations out of state and overseas in search of lower labor costs. In 1982, manufacturing was the second-largest employer in Massachusetts and accounted for one job in every four. By 1995, manufacturing had declined 30%, accounting for only one job in six (10).

The Commonwealth has added plenty of new jobs since the early eighties. Unfortunately for the state's workers, most of these jobs are in the service and retail trade industries, which have the lowest average weekly pay of any sector of the economy. An additional 300,000 jobs in service industries and 77,000 jobs in retail trade between 1982 and 1995 increased service employment by 50% and retail employment by 17%. Not surprisingly, by the mid-1990s these indus tries were where a majority of the Commonwealth's parents with low earnings were working: 46% in service industries and 29% in retail sales. A mere 11% held manufacturing jobs (4).

 

Where the Jobs Went in Massachusetts, 1982 to 1995
Thousands of Jobs

Source: Center on Budget and Policy Priorities

 

Workers: A Disposable Commodity

Driven Out of the Middle Class
Larry Sullivan of Framingham used to have a manufacturing job. For 27 years, until General Motors moved its Buick Century and Chevrolet Celebrity operations from Framingham to Mexico and Canada, Sullivan built cars for $21 per hour, a salary that enabled him to provide comfortably for his family of seven. At age 59, he's still at the old GM plant, but it's now a giant used-car auction house. For $7 per hour part-time, he drives used cars around the lot. The work earns him barely enough to buy groceries for his family. They get by on his partial pension and other part-time work and his wife's part-time earnings. "I've got a lot of memories every time I go into that old plant and see it all stripped down," he says. "They've gutted the inside. The good jobs are gone. Long gone."

The Sullivans' experience offers compelling evidence that if wages are low enough, the hard work of two people won't be enough to lift a family out of poverty (11).

Low-skill, low-pay, part-time jobs like Larry Sullivan's offer few benefits and are disconnected from the promotion ladder. Sullivan's situation is increasingly common: today part-timers make up 18% of the workforce. The growth of part-time work has been described as a slowly rising tide. What's new and particularly worrisome, ac cording to economist Chris Tilly, is that

• all of the increase in the past 20 years is due to an expanding involuntary part-time workforce, and
  

• although the percentage of involuntary part-time workers usually drops when times are good, in the current "recovery" the percentage has actually
  increased(12).

Many families have low incomes because a working parent faces limited job opportunities and cannot work as much as he or she would like. Forty-five percent—26,000—of the Commonwealth's working parents in poor families with children worked less than they would have liked in the mid-1990s. Approximately 15,000 of those individu als were involuntary part-timers(4).

What about those people counted as voluntary part-timers? Many are trapped in part-time hours by lack of child care or elder care. Nearly 35% of part-time working women say they would work more hours if good child care were available. Some of these part-timers find themselves working for less than those doing the same work full time. Most are simply stuck in low-wage occupations. Tilly recently reported that on average part-timers earn half the hourly wages of full-timers ($7.38 versus $14.16 per hour on average) and they get few if any benefits. Fewer than one-fifth of part-timers receive health insurance from their employers compared with three-quarters of full-time workers (11).

Occupational changes—an increase in high-skilled white-collar jobs and a drop in blue-collar skilled and semi-skilled employment—are also a factor in the huge jump in the number of working poor families in New England, according to Northeastern University economist Andrew Sum(10). This occupational shift is evident even in the hard-pressed manufacturing sector. In 1980, for ex ample, only about 20% of New England's manufacturing jobs were in white-collar professional, managerial, techni cal, and high-level salescategories that typically require a college degree. By 1994, the proportion of college-level, white-collar manufacturing jobs had grown to 33%. Dur ing the same period, the proportion of blue-collar jobs fell from 57% to 45% of manufacturing employment(10).

 

How Staffing Patterns Have Changed in New England, 1983 to 1994
Percentage Changes in Employment

Source: Sum et al., 1996

Improving the occupational skills of low-wage workers to help them get better-paying jobs remains a mainstay of efforts to reduce poverty. As a policy analyst for the David and Lucile Packard Foundation points out, adult low-wage earners can benefit from effective education and training programs in two ways: (1) the skills help them compete more effectively for higher-paying jobs and (2) since the training reduces the over-supply of workers with low skills, employ ers may have to pay more to find people to get the job done (13).

Programs of education and training designed to help low-skilled parents compete in the labor market have produced only small increases in income, leaving most families well below the poverty line. This is not surprising, considering that most families had very low incomes to begin with and that most participants earned a GED or received modest post-high school trainingneither of which equip people for high-skilled work. Larger income gains require the devel opment of college-level programs that will give a bigger boost to families' earning power and the implementation of economic and social policies that will make it easier for poor families to increase their earnings (13).

 

Strategies to Support Work and Reduce Poverty

Because so many Massachusetts children live in poverty despite their parents' substantial work effort, any effective strategy to reduce poverty must (1) ensure that families have access to opportunities fundamental to full participation in the work force and to maintaining healthy families and (2) expand programs that make work pay.

Improve the Quality, Affordability, and Accessibility of Child Care
Massachusetts's low-income families cannot afford the child care that they need to be able to work. Full-time, high-quality, unsubsidized child care for a preschool child costs an average of $5,000 to $8,000 per year per child, an outlay that can con sume 40% of the income of a family just above the poverty line. The need for subsi dized child care far outstrips the supply, even though every dollar spent on quality early childhood care saves $7 in remedial education, criminal justice, and welfare costs. The Massachusetts legislature took a major step toward improving access to affordable care in the 1998 budget by significantly increasing funding for state child care programs.

• The impact of the additional dollars could be maximized by guaranteeing child care for welfare recipients in edu cation and training, those in their first year of work after leaving welfare, and low-income working families.
  

• Meeting the need for subsidized care will also require expanding the supply of licensed, quality care in appropriate facilities.
  

• All working families would benefit from universally available school-age child care for those times when parents are working and school is not in session.

Expand Health Care Coverage and Improve Outreach to Eligible Families
Massachusetts now makes available continuous, affordable health care to all its children, but many kids are still not getting the health care they need. Many working poor families are unaware that health coverage is available for their children, and many other families find that their children are eligible for only a limited package of benefits. Recently enacted federal legislation will provide the Commonwealth with about $42 million annually for the next 5 years to ex pand health care options for all our children. With this money available, Massachusetts has an opportunity to further improve health care access.

To provide health care for all our children, Massachusetts needs to

1. Expand the full-benefit MassHealth (Medicaid) program, extending eligibility from age 12 to age 18 for families with incomes up to 200% of poverty ($26,660 for a family of three)
   

2. Enhance and expand the state's Children's Medical Security Plan (CMSP) to include dental care, hearing and eye exams, outpatient surgery, mental health services, and an increased allowance for prescription drugs
   

3. Increase the effort to enroll hard-to-reach families through aggressive community-based outreach

Encourage Education and Training to Boost Earnings
Historically, between 55% and 60% of job training for poor people in Massachusetts has been for low-skilled office and clerical occupations rather than for higher-skilled careers. Essential elements in an effective training system are skills preparation for well-paid jobs with career ladders, programs of adequate length, and provision of support services such as child care and transportation.

• Massachusetts policy makers should consider expanding access to community colleges and other institutions of higher education with tuition reduction and other financial supports for the poor and working poor.
  

• Education and training should count as work experience under welfare reform.

End the Assault on Affordable Housing
In Massachusetts—once a national leader in assisting production of low-income housing—rising rents and declining state subsidies have created a crisis in affordable housing. The state's rental assis tance program has been gutted. More than 15,000 housing units built with federal subsidies in the 1960s and 1970s are at risk of be ing lost as housing for low- and moderate-income families. Local housing authorities are now permitted to demolish federal public housing stock without replacing the units lost. This is already happening in Massachusetts(14).

• The social and policy implications of these drastic changes have yet to be seriously debated, let alone addressed.

Expand the Earned Income Tax Credit (EIC) to Supplement the Earnings of the Working Poor
The federal EIC is a tax break for low-income parents who work. Designed to offset the burden of Social Security payroll taxes, it gives families a refund of 40 cents for each dollar earned up to $9,140 for a family with two or more children. Its maximum value of $3,656 is gradually reduced as income rises above that level. Massachusetts recently joined eight other states in piggybacking a state EIC onto the federal EIC. It is designed to offset state taxes, particu larly property and sales taxes, which disproportionately affect poor working families.

• While credit is due the policymakers who pushed through the state EIC, at 10% of the federal level it is one of the lowest state EICs. An increase to 15% to 20% would provide up to $360 in additional tax relief for poor working families with two or more children.
  

• Outreach is needed to the many eligible Massachusetts working families who do not apply for this benefit be cause they don't know it is available.

Raise the Minimum Wage and Institute Job Security Policies
Stagnating wages and job insecurity are two of the major challenges now facing working families. If the federal minimum wage, which currently stands at $5.25 per hour, had the buying power it had in 1968, it would now be worth over $7.00 per hour. Back in the 1960s workers could also count on permanent, full-time jobs. Today contingent (that is, temporary, on-call, leased, day-labor, etc.) work and part-time work account for two-thirds of all new nongovern ment jobs.

• Massachusetts needs to raise the state minimum wage, which at $5.35 per hour is only 10 cents above the federal level.
  

• Boston recently passed one of the strongest Living Wage laws in the country, requiring corporations that receive state and local government contracts and subsidies to pay wages based on US poverty income guidelines for a family of four. Massachusetts should do the same.
  

• Contingent and part-time workers need protections that will ensure pay equal to that of permanent workers doing the same job and maternity leave and unemployment insurance eligibility for part-timers.

You Can Make a Difference!
Help get out the word out on programs that benefit all our chil dren. For reports, fact sheets, action suggestions, and flyers in several languages, contact the Massachusetts Campaign for Children, a public education and mobilization initiative to build an informed, organized, and active constituency for children in Massachusetts, 14 Beacon Street, Suite 706, Boston MA 02108 phone: 617-742-8555, e-mail: mail@masskids.org

For additional information:

Affordable child care: contact Parents United for Child Care (30 Winter Street, 7th floor, Bos ton, MA 02108 phone: 617-426-8288);
Children's health care programs, contact Health Care For All (30 Winter Street, 10th floor, Boston, MA 02108 phone 617-350-7279);
Education and training programs, contact Massachusetts Advocacy Center (100 Boylston Street, Boston, MA 02116 phone: 357-8431);
EIC and other tax initiatives, contact Tax Equity Alliance of Massachusetts (37 Temple Place, 3rd floor, Boston, MA 02111 phone 617-426-1228).

This report was prepared by Massachusetts KIDS COUNT, a statewide child data project of the Massachusetts Committee for Children and Youth and the Massachusetts Advocacy Center, funded by the Annie E. Casey Foundation.

(c)1997 Permission to reporduce text portions of this report is granted provided Massachusetts Kids Count 1997 is cited.

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1. Sklar, Holly (1995). Chaos or Community: Seeking Solutions, Not Scapegoats for Bac Economics. Boston: South End Press
2. Mishel, Lawrence, Bernstein, Jared, & Schmitt, John (1997). The State of Working America 1996-97, Economic Policy Institute Series. Armonk, NY: M.E. Sharp.
3. Annie E. Casey Foundation (1997). KIDS COUNT Data Book: State Profiles of Child Well-Being.
4. Lazare, Edward (1997). The Poverty Despite Work Handbook. Washington, DC: Center on Budget and Policy Priorities.
5. Children's Defense Fund and Northeastern University's Center for Labor Market Studies (1992). Vanishing Dreams: The Economic Plight of America's Young Families.
6. Annie E. Casey Foundation (undated). KIDS COUNT Data on Asian, Native American, and Hispanic Children and State Level DAta on Whites, Blacks, and Non-Hispanic Whites.
7. Schwarz, John, & Volgy, Thomas (1992). The Forgotten Americans: Thirty Million Working Poor in the Land of Opportunity. New York: W.W. Norton. Cited in Derber, Charles (1996). "Poor and Poorer: Poverty in America," in Mass Billions (1996). Boston: Massachusetts Human Services Coalition.
8. US Bureau of Census (1995). "What Does it Cost to Mind our Preschoolers/" Current Population Reports, P70-50. Washington, DC: US Government Printing Office
9. Federman, Maya, et al. (May 1996). "What Does it Mean to Be Poor in America," Monthly Labor Review, pp. 3-17.
10. Sum, Andrew, et al. (1996). The State of teh American Dream in New England. Boston: The Massachusetts Institute for a New Commonwealth.
11. Sennot, Charles M. (July 20, 1997). "Framingham Mirrors a Complex Trend," Boston Globe.
12. Tilly, Chris (1996). Half a Job: Bad and Good Part-time Jobs in a Changing Labor Market. Philadelphia: Temple University Press.
13. Plotnick, Robert D. (Summer/Fall 1997). "Child Poverty Can Be Reduced," The Future of Children: Children and Poverty. Los Altos, CA: Center for the Future of Children, David and Lucile Packard Foundation.
14. Allard, MaryAnn, et al. (1997). Over the Edge: Cuts and Changes in Housing, Income Support, and Homeless Assistance Programs in Massachusetts. Boston: McCormack Institute, University of Massachusetts.

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