Thursday, April 15, 2010

The poverty trap. . .

One of our organizational goals is to move toward the day, as quickly as possible, when the minimum wage inside Central Dallas Ministries is a "living wage." 

But, what exactly does that mean in real dollars? 

Often, in such discussions, people will throw out a range of $12-$15 an hour. 

John Greenan, Executive Director of the Central Dallas Community Development Corporation, sent me a link to what follows as it appeared on Aaron M. Renn's provocative blog, Urbanophile. 

Poverty is complicated when you are living in its midst.  Poverty is awfully hard to escape, harder than the vast majority of Americans can even begin to understand. 

What follows should give us great pause.

Megan Cottrell: Don’t Fall in the Poverty Trap – You May Never Get Out

[ Megan Cottrell's One Story Up blog might be one of the most important in the United States. It is certainly a must-read for anyone in Chicago. She covers housing and poverty, two un-glamorous subjects that have all but been abandoned by newspapers. These aren't topics beloved of urbanist blogs either, but they are critical to understanding our cities and building successful lives for all citizens. As Megan notes, the phenomenon she describes affects up to 40% of all Chicagoans. I encourage you to check out her work. ]

Until you earn about $40,000 a year, you’re pretty much stuck in poverty, an economist’s numbers show.

In fact, until you get past $40,000 a year, any raise or higher paying job you get might actually sink you deeper into poverty.

Take a look at this story from economist Jeff Liebman, who now works in the Obama Administration.

The poverty trap is still very much a reality in the U.S.

A woman called me out of the blue last week and told me her self-sufficiency counselor had suggested she get in touch with me. She had moved from a $25,000 a year job to a $35,000 a year job, and suddenly she couldn’t make ends meet any more. I told her I didn’t know what I could do for her, but agreed to meet with her. She showed me all her pay stubs, etc. She really did come out behind by several hundred dollars a month. She lost free health insurance and instead had to pay $230 a month for her employer-provided health insurance. Her rent associated with her section 8 voucher went up by 30% of the income gain (which is the rule). She lost the ($280 a month) subsidized child care voucher she had for after-school care for her child. She lost around $1600 a year of the EITC. She paid payroll tax on the additional income. Finally, the new job was in Boston, and she lived in a suburb. So now she has $300 a month of additional gas and parking charges. She asked me if she should go back to earning $25,000.

To continue reading and to view a very revealing graph, click here.

5 comments:

  1. The point is, LJ, that she wasn't just earning $25k when she was earning a $25k salary. She was earning the $25k salary PLUS the value of the so-called "free" health care. The accounting here needs to be honest accounting, not selective accounting to make a point.

    That is one of the sinister things about this whole "employer-provided benefits" thing; it has buried the actual costs of those benefits so that employEES do not pay attention to the total value of their compensation. So, naturally, when they seek a so-called "higher-paying" job, they do the math only on the salary part of the ledger, and it looks so good...a $10k raise? Who wouldn't like that? But the benefits weren't "free" to begin with, despite the blogger's careless use of the word.

    qb

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  2. Of course, qb, it was health care coverage "at no cost to her"--likely Medicaid. When employed, she had to come up with her part of the cost for coverage, thus cutting into her wage and its affect.

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  3. Of course, qb, it was health care coverage "at no cost to her"--likely Medicaid. When employed, she had to come up with her part of the cost for coverage, thus cutting into her wage and its affect.

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  4. Let's all make $25K and qualify for "free" healthcare & supplemental benefits, then we would be equal. Maybe the Chinese or Indians will send us the money to pay for the benefits. After all, their economies are growing. Or maybe she could get another job or work hard and earn a promotion, to move in the other direction. Then her increased taxes could be used to assist others incapable of getting a job or a better job.

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  5. gb -

    Re: "That is one of the sinister things about this whole 'employer-provided benefits' thing; it has buried the actual costs of those benefits so that employEES do not pay attention to the total value of their compensation."

    Sinister? Sinister? Are you serious? Let's use your logic with a few substitutions:

    "That is one of the sinister things about this whole 'GOVERNMENT-provided benefits' thing; it has buried the actual costs of those benefits so that WELFARE STAKEHOLDERS do not pay attention to the total COST of the PROGRAMS TO CITIZENS."

    The woman in Larry's post seems ready and willing to reduce her income so the rest of us can pick up the tab. Larry doesn't respond to this aspect of her request. Larry, did you counsel her to get a second job?

    Just so you know, I currently work for three separate employers, one full time and the others part time.

    Employers have a right to offer benefits, as well as a right not to, unless agreed upon in a labor contract. Nothing sinister about it.

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