It is generally acknowledged that for the first twenty years after the end of WWII, about one in every five Americans fell below a conservatively estimated poverty line. Today, it is closer to one in seven but nearly one quarter of those falling below the national poverty threshold spent at least 27 weeks in the labor force. Thus, today, unlike fifty years ago when poverty in America was a much discussed topic, we have a new social aggregate called the working poor. According to a 2013 Kaiser Family Foundation study based on US Census Bureau data, about 34% of all US households are at 200% of the federal poverty line or below with the federal poverty line for that year being a gross adjusted annual household income of $18,751 for a family of two adults and one child. Since it is generally believed that most American families require an annual disposable income of at least twice the poverty threshold just to afford basic needs, it is safe to say that one in three American families is financially insecure or could be considered working poor by any reasonable definition whether or not they have full time employment.
In the first thirty years or so following WWII, most urban poor households suffered from chronic unemployment. Today, more and more poor households have at least one full time earner. The problem is no longer employment per se. The problem is low and declining real household income. Thus, the concept of the “working poor” became a standard feature of the global age. The problem now is not just jobs but jobs that pay a living wage! One recent study by the Economic Policy Institute (EPI) notes that;
Over the entire 34-year period between 1979 and 2013, the hourly wages of middle-wage workers (median-wage workers who earned more than half the workforce but less than the other half) were stagnant, rising just 6 percent—less than 0.2 percent per year. This wage growth, in fact, occurred only because wages grew in the late 1990s when labor markets got tight enough—unemployment, for instance, fell to 4 percent in 1999 and 2000—to finally deliver across-the-board hourly wage growth. The wages of middle-wage workers were totally flat or in decline over the 1980s, 1990s and 2000s, except for the late 1990s. The wages of low-wage workers fared even worse, falling 5 percent from 1979 to 2013. In contrast, the hourly wages of high-wage workers rose 41 percent.
According to a recent Pew Center Research study, the inflation adjusted (in 2014 dollars) US federal minimum wage peaked in 1968 at $8.54/hour. The Center also noted that since the current federal minimum wage of $7.25 was passed in 2009, it lost 8.1% of its purchasing power due to inflation. The Pew Center also noted that in using BLS and other government data they calculated that those hourly, employed workers earning somewhere between the federal minimum wage and $10.10/hour, about 20.6 million workers, accounted for roughly 30% of the 77 million employed hourly workers in 2014 and when these “near minimum wage workers” are combined with the 3 million workers at or below the federal minimum, they account for nearly one third of all hourly employees in the US. Contrary to popular belief, most of these workers are above age sixteen and are helping to support families. According to a recent US Department of Labor press release, about 89% of minimum wage workers are 20 years old or older. They are the working poor in a very sense.
In 2013, the Bureau of Labor Statistics (BLS) came out with a report called A Profile of the Working Poor whereby a basic definition of this category was developed. The report stated that the working poor were the 10.5 million people who in 2013, spent at least 27 weeks in the labor force but whose incomes still fell below the official poverty line. These workers represented about 7% of the total workforce. But those in this group engaged in full time or near full time employment that year still accounted for 4.1% of the total workforce by the BLS definition. Part time workers represented 15.8% of the working poor! Thus, an increasing number of the nation’s poor work at some point during the year and not infrequently full time or very nearly so. Since it is commonly held that most US households require an annual income of at least twice the federal poverty line just to afford basic necessities, the fact that fully one in three US households is at this level of subsistence or below is shocking! Unlike many years ago, the typical poor household in America is increasingly a working household.
The BLS report also noted that the main reason for full time employed workers falling below the poverty line was low wages. About 66% of the working poor cited low wages as at least one reason for their poverty while about 23% cited low wages as the only reason. Most of these workers don’t work for small businesses. According to an oft cited study by the National Employment Law Project in 2012, just over two thirds of all low wage workers are employed by large corporations such as Walmart and McDonalds. Most of the big corporations paying at or near the minimum wage have been consistently profitable. Most of the fifty corporations surveyed by the NELP Study were profitable with the start of the recovery from the recession and crisis which began in 2007 and were able to return nearly $175 billion in dividends or share buybacks between 2007 and 2012. The CEOs of these fifty corporations averaged well over $9 million in annual compensation! It is fairly clear that a fifteen dollar an hour minimum wage is affordable for these corporations. There is little excuse for the persistence of workers in poverty.
David Rolf, in a book published just this year called The Fight for $15: The Right Wage for a Working America, confirms that the growth of inequality and the persistence of low wages is the real reason behind poverty in America. Working no longer guarantees that one will remain above the conservatively estimated poverty threshold. He cites a study showing that inequality is largely responsible; in 2010, the first year of a discernible job market recovery from the Great Recession, the top ten percent of households emerged with over fifty percent of the income, a ratio not seen since the late 1920s! (Rolf, The Fight for $15, 2016, p.12) He further notes that CEO compensation has increased a whopping 937% between 1978 and 2013 which exceeds double the stock market growth over this period (Rolf, 10).
It is well known since the publication of French economist Thomas Piketty’s brilliant and voluminous study, Capital (2013), not only has most of the income growth gone to the top one percent over the past couple decades or more but that in the new era of increasing concentration of wealth and income, the growth of capital is greater than that of either wage income or even the rate of economic growth itself! This shows that capital is growing not merely faster than other fundamentals in the economy such as average incomes or Gross Domestic Product, it is doing so at the expense of average incomes and the economy in general. This is easily explained by the fact that between 1945 and 1973, average annual rates of GDP growth are known to have been nearly four percent. Since 2001, it has averaged less than two percent! Even over the course of the 1980s and 1990s, GDP growth never reached pre-1973 levels. Yet, all throughout the time since the 1980s, there has been a massive and uninterrupted growth of the real incomes of the corporate rich. This is utterly undeniable. It is quite clear that the woeful and curious trend in the growth of the working poor to nearly one third of all US households, despite a well known doubling of labor productivity since the late 1970s, is related not to structural weaknesses in the economy itself but to increasing exploitation of labor by capital. The marked shift of income upward is also understood to be a major source of the slowed GDP growth overall since the 1980s. The emergence and growth of the working poor to such a large share of the US economy is emblematic of our globalized epoch of late capitalism. Only movement politics for labor rights and a mixed economy to replace free market corporate dominated capitalism can reverse this trend.