Blog Posts, One Story Up

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

I wrote this post in Nov. 2009 and it’s one of my most viewed posts of all time. I think the concept is one that helps people think about poverty and programs that are supposed to help people get out of poverty in a new way. Take a look:

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.

Take a look at this chart by economist Clifford Thies, via Greg Mankiw’s blog.

The Dead ZoneFrom the green dot, you can see that earned income rises… for a while. Then there’s this screwy wavy line. That’s the mother making a little more, but earning a little less.

$40,000 a year is about $19 an hour. Over 40 percent of Chicagoans don’t earn that much.

There aren’t that many jobs out there that make $19 an hour. Bank Teller? $13.33 an hour. Office clerk? $15.60. Retail salesperson? $11.80. Security guard? $16.14. (Statistics via Chicago Rehab network).

Our tax incentives work… initially. Then they only serve to hurt people. They say the poor don’t work hard enough, but that single mother sounds like a pretty hard working person to me. The story goes on to say that she got a weekend job, to try to make ends meet. Except after childcare and gas, it didn’t help at all.

So if working harder means people might actually earn less, how is it that we expect people to work harder?

Blog Posts

The real nanny diaries: Domestic workers struggle with no minimum wage and poor working conditions

No minimum wage, no overtime pay and working ’round the clock? It may sound illegal, but it’s perfectly legit when it comes to domestic workers. Nannies, housekeepers and caregivers don’t enjoy the basic labor rights the rest of us have, and a new report shows just how much they’re suffering because of it.

The average live-in nanny makes $6.76 an hour. Half of them worked long hours without breaks and a quarter were allowed less than 5 hours of uninterrupted sleep. On average, domestic workers make $10 and nearly a quarter of them make less than their state’s minimum wage. These are just a few of the stats released in Home Economics: The Invisible and Unregulated World of Domestic Work, released Tuesday by the National Domestic Workers’ Alliance and researched by the University of Illinois in Chicago’s Center for Urban Economic Development and DataCenter.

What I found most interesting is why these disparities in labor rights came to be. According to the report, laws like the National Labor Standards Act exclude domestic workers and farm hands from their protections. So do Illinois laws and most other states as well. Why? Because the NLSA was passed in the 1930s, and in order to get the votes needed to pass Congress, lawmakers excluded domestic and agricultural workers from labor protections to get the votes of Southern politicians, the report explains. Who did those jobs in the South? Black people. By excluding those professions, Southern officials could ensure that the black labor force couldn’t form a union and demand better conditions.

So, the law was drafted that way specifically to keep minority citizens from getting too much economic power, and it’s never been amended.

And since domestic workers are still primarily women of color, the law reinforces long-standing economic disparities. A racist law still creating racial inequity.

Sounds like it’s time for change.

This post was originally published on Nov. 28, 2012 at Chicago Muckrakers.