The Shriver Brief : Poverty Law Commentary & Insights : Sargent Shriver National Center on Poverty Law : Affordable Housing, Healthcare Reform

Illinois will lose 27,000 jobs in 2012, and its unemployment rate will increase from 10% to 10.5%, unless Congress approves extending the Emergency Unemployment Compensation (EUC) program, according to the Economic Policy Institute. EPI’s projection that failure to extend the EUC program will have such a dramatic effect in increasing unemployment is based on standard economic “multiplier” effects and the fact that the long-term unemployed—often the most desperate for resources to meet their basic needs—are apt to immediately spend any benefits they receive. Taking this consumer spending out of the economy, by failing to extend EUC, would result in lost jobs in the stores and businesses where the money would be spent. That is why failing to extend the EUC would increase the unemployment rate.

The EUC program was created as part of the American Recovery and Reinvestment Act of 2009 to provide unemployment insurance benefits to the millions of Americans who lost their jobs in the Great Recession and have exhausted or no longer qualify for unemployment benefits through existing state programs. The EUC program is desperately needed given the anemic pace of job growth since the recession’s end and the long durations of unemployment that a record number of Americans are experiencing.

The EUC program will expire at the end of 2011 if Congress fails to extend it. Rep. Sandy Levin (D-Mich.), the ranking Democratic member on the House Ways and Means Committee and the co-sponsor of legislation to extend the EUC program for a year, explains: "Never before has Congress allowed emergency unemployment benefits to expire with such a large percentage of Americans looking for work and we must not let that happen now.”

The EUC program was extended for one year near the end of 2010 as part of a grand compromise that also included a two-year extension of the Bush tax cuts for the wealthy. The EUC program has been a target of some Tea Party adherents and their supporters in Congress, who believe that extending the period that unemployment compensation is available makes people lazy and unwilling to look for work. Nevertheless, it is currently expected that Congress will agree to extend the EUC program, although what other demands will be made in return for agreeing to such an extension remains to be seen.

This blog is based on analysis and a report by the Economic Policy Institute.

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Officially, the recession ended in June 2009. But for many Americans, the recession is still in full force. New research shows that the recovery is not being evenly shared. Overall, workers’ earnings are down because the jobs that are hiring pay less than the jobs that were lost. Minorities face much higher unemployment and live disproportionately in states which have the worst economic climate. Young people face especially daunting job prospects. So perhaps it’s no surprise that a recent CBS/New York Times poll shows that only 23% of Americans think the economy is getting better.

Meanwhile, politicians in Washington are discussing budget cuts that could derail the recovery and undermine our long-term competitiveness. Right now, we need to invest in the infrastructure of job training and education, which is a driver of our economy and will help put Americans back to work.  

Well-Being Is Not Improving After the Recession
The Center on Social Exclusion went beyond just measuring gross domestic product to examine 14 indicators of well-being in four categories (housing, health, jobs, and socio-fiscal). Looking back over the last 18 months, the study found that most states had not improved their well-being. Many are still treading water, and 15-24 states have actually continued to lose ground in each of the categories. Furthermore, states with higher percentage minority populations have fared worse on these measures than predominantly white states.  

Unemployment Is Improving Slightly,
But Long-Term Unemployment Continues to Worsen
Private sector hiring is improving, but even with 216,000 new jobs in March we have a long way to go. There is still only one job opening for every four unemployed workers. We need to add 127,000 new jobs every month just to keep up with population growth. At this rate it would take five and a half years just to halve the unemployment rate down to a more acceptable 4.4%. There at 13.5 million unemployed Americans who are actively seeking work, plus 8.4 million Americans who are working part-time only because they can’t find full-time jobs, and at least another 2.4 million who would like to work but aren’t looking right now. The length of time workers are unemployed is still inching up; half of those unemployed have been looking for five months or longer (the average amount of time out of work is now nine months and rising). The overall unemployment rate is 8.8%, but the rate remains especially high for those with limited education, Hispanics (11.9%), Blacks (15.5%), teenagers (24.5%), those aged 20-24 (15.0%), veterans who’ve served since 2001 (10.9%), and persons with a disability (15.6%).  

Real Earnings Are Falling While Corporate Profits Soar
While more Americans are finding work, wages and earnings are heading in the wrong direction.

The economy has been expanding for almost two years. Real corporate profits neared an all-time high in 2010, and top CEOs earned 23% more in 2010 than 2009. But the gains in productivity generated by American workers are not ending up in their pocketbooks. Instead, the Wall Street Journal reported last month that, while productivity has climbed 5.2% in the first 18 months of the recovery, that had translated into record profits for shareholders, not higher wages for workers. In fact, since that story broke, real hourly wages have fallen more than 1% in the last two months alone. And that’s not an isolated blip. From March 2009 to March 2011, the average American worker lost 1% of their total earnings in real terms. 

Good Jobs Lost During the Recession Are Being Replaced By Low-Wage Jobs
The National Employment Law Project released a report that shows that while the recession’s job losses were concentrated in higher-wage industries (especially construction, non-durable manufacturing, finance/insurance, and information), the limited job gains since have come disproportionately in the low-wage industries (temporary jobs, retail, administrative support, and the service sector).  

We Must Re-Invest in an Equitable Recovery That Creates Jobs
We need to invest in education and training for American workers so we can innovate, grow the economy, and create jobs that pay a family-sustaining wage. The president has called on all Americans to get at least one year of education or training after high school. That extra education is critical; workers over 25 with some college or an associate’s degree currently have an unemployment rate of 7.7%, compared to 10.5% for high school grads and 15.2% for those with no high school degree. Last year, the federal Workforce Investment Act system, which provides training and job search assistance, served 8.4 million Americans and helped 4.3 million get jobs.

But our national infrastructure for job training and education is under threat. The continuing resolution recently passed by Congress to fund the government through fiscal year 2011 cut $1 billion from our nation’s investments in job training and education, though even further cuts were averted. And House Budget Chairman Paul Ryan’s long-term budget proposal, which passed the House on April 15, included naïve assumptions about Pell grants, community colleges and the workforce development system, and drastic (though still vague) cuts to these critical programs. It should be obvious, but now is not the time to cut job training and employment services. Solving our budget crisis is important, but slashing the workforce development system will undermine our future competiveness and growth. Right now, we need to get Americans back to work.

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The Working Poor Families Project has released its winter policy brief detailing the toll the recession has taken on America’s working poor. While headlines during the recession have primarily focused on the high unemployment rate, they have often ignored the millions of working families who are still employed, but have been squeezed by reduced pay and reduced hours. The brief includes some sobering statistics on the challenges facing America’s working poor.

More than half (55%) of the American labor force has “suffered a spell of unemployment, a cut in pay, a reduction in hours or have become involuntary part-time workers.” The consequence has been a significant rise in the number of working families who are not earning enough to have any kind of economic security. The Working Poor Families Project defines low-income as earning less than 200% of the federal poverty line. A low-income family of four is earning just about $44,000. 

Census data summarized in the policy brief reveal that in 2009 there were more than 10 million low-income working families – that’s more than 45 million Americans, including 22 million children. Now 30 percent of all working families are low-income. The increase from 2008 is stark – 1.5 million Americans joined the ranks of low-income working families.

The recession has not hit all groups equally. 

• Because a disproportionate job losses have been in traditionally male-dominated fields (especially construction and manufacturing), male unemployment has significantly exceeded female unemployment during the recession. As a consequence, the proportion of married women who are working and have an unemployed husband has more than doubled in just two years. Women still earn just about 77 cents to the dollar earned by men. This means more families are relying exclusively or primarily on the generally lower income of women to make ends meet. 
• Racial minorities continue to earn less money than non-Hispanic whites. Nearly twice as many working families with at least one minority parent were considered low-income in 2009 as white families. This is in part because minorities on average have lesser educational attainment, and education continues to be critical both for preventing unemployment, and to increase wages.  
• Meanwhile, income inequality continued to rise in 2009 – with the highest 20% of earners earning ten times what the bottom 20% did.
• Children have been hit hard by this recession – nearly half the increase in members of low-income families is made up of children. Over 700,000 children joined the ranks of low-income families last year. Growing up in poverty has long term consequences for children, their families, and all our community. As Professor Holzer has argued, in order to have long-term growth, we need robust employment and poverty-reduction measures over the near-term to mitigate this recession’s harm to parents and their children.

Far too many hard-working American families are not able to earn enough money to achieve economic security. As we address the challenges of this recession, we must consider not only the unemployment crisis, but also the ongoing crisis for families who cannot find a job that pays a family-sustaining wage. The president has already begun to address the need to increase enrollment and success in post-secondary education. Cities around the country are working to improve wages and benefits for low-income working families. Health care reform is already being implemented around the country. This landmark success will increase access to health insurance, improve coverage, and reduce premiums for millions of low-income working families, helping make ends meet. Low-income families want to contribute to this country’s economic prosperity, we all have a stake in creating the opportunity for each American to succeed. Together, we must recommit to make work pay. 

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Poverty in the Nation

Two weeks ago, the Census Bureau released data on the national poverty rate. As was discussed in our previous blog, the number of people in poverty in 2009 is the largest in the 51 years for which poverty estimates are available. There were 43.6 million people in poverty in 2009, up from 39.8 million in 2008, and the nation's official poverty rate in 2009 was 14.3 percent, up from 13.2 percent in 2008.

This week, the American Community Survey (ACS) data was released. The ACS is a sort of mini-census conducted annually that polls roughly three million homes per year. This survey provides demographic, social, economic, and housing data for states, congressional districts, counties and other localities. In other words, it provides much more data on what is happening at local levels.

According to the ACS, thirty-one states saw increases in both the number and percentage of people in poverty between 2008 and 2009. Poverty rates from the 2009 ACS for the 50 states and the the District of Columbia ranged from a low of 8.5 percent in New Hampshire to a high of 21.9 percent in Mississippi.

Poverty in Illinois

The percentage of Illinoisans living below the poverty line rose dramatically over the last decade. In 1999, the poverty rate in Illinois was 10.7 percent. The 2009 data show that 13.3 percent of Illinois residents were living in poverty last year.

The Heartland Alliance for Human Rights and Human Needs analyzed the 2009 data for the region. The Illinois fact sheet developed by Heartland Alliance reveals that the Illinois poverty rate in 2009 was 13.3%, an increase from 12.2% in 2008. Moreover, the Illinois child poverty rate in 2009 was 18.6%, an increase from 16.8% in 2008.

Other poverty measures in Illinois showed that median household income fell from nearly $60,000 in 1999 to just under $54,000 last year, a 10-percent decrease. The proportion of the population in "extreme poverty"--that is, living on less than half the federal poverty guideline--rose 18 percent over the same period, with 140,000 new Illinoisans joining the ranks of the extremely poor. Six percent of the state's population now lives below that threshold, which comes out to $11,025 per year for a family of four.

Recession Over?

Although the National Bureau of Economic Research, the organization that determines when economic downturns begin and end, recently reported that the Great Recession ended in June 2009, it acknowledged that economic conditions since then have not been favorable or that the economy has returned to operating at normal capacity. The effects of the recession, which began in December 2007, lasted 18 months, and was the longest and deepest downturn for the U.S. economy since the Great Depression, will continue for years.

Experts agree that the number of people in poverty could have been worse if the Recovery Act had not expanded benefits and federal support for programs like P-12 education, Medicaid, TANF, the Child Tax Credit, the Earned Income Tax Credit, and SNAP/Food Stamp programs. This federal support created jobs, helped both employed and unemployed low-income families make ends meet, kept some of them out of poverty, and allowed them to contribute to local economies by spending their paychecks and benefits in their communities, thereby supporting state budgets during dire financial times. Unfortunately, these important social safety net programs are in jeopardy due to the impending expiration of the Recovery Act and the ongoing massive state budget shortfalls, which are fueled by unwillingness in most states to raise necessary tax revenues. If federal and state politicians do not rise to the task, more people could fall into poverty and less money will be spent in local economies, which could trigger another recession.

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Today the Census Bureau released the 2009 poverty data which shows that the number of people in poverty in 2009 is the largest number in the 51 years for which poverty estimates are available. There were 43.6 million people in poverty in 2009, up from 39.8 million in 2008 — the third consecutive annual increase. The nation's official poverty rate in 2009 was 14.3 percent, up from 13.2 percent in 2008. The data also show that nearly 21% percent of children, or roughly 15.5 million, were in poverty in 2009 versus 19% in 2008, or approximately 14.1 million in 2008.

Living in poverty means deprivation and hardship. For a family of four, life at the poverty level means trying to provide children with a roof over their heads, clothing, adequate health care and a nutritious diet on an annual income of $21,947.

The 2009 poverty data grimly illustrates the heavy toll that the recession has taken on the American people. The increase in poverty is made even more painful by the fact that it follows an economic recovery that utterly failed to reduce poverty--indeed, it was the first economic recovery on record where the poverty level at the peak of the recovery (2007) was actually higher than it was in the previous recession (2001).  

The unprecedented increases in poverty and child poverty are consistent with other data that show the severity of the current recession. For example, the unemployment rate in the United States doubled between 2007 (when the recession began) and 2009, going from 4.6 to 9.3 percent.  Also during this time, the number of Americans receiving food stamps increased by 33 percent, to over 35 million people.

The 2009 poverty data calls for two policy responses. First, Congress should extend or make permanent several key pieces of the Recovery Act aimed at low- and moderate-income households that otherwise will expire this year. Second, Congress should not extend the Bush tax cuts for the wealthy that are due to expire this year.

Continuing Recovery Act Provisions

The 2009 poverty data demonstrate the need to continue several provisions of the Recovery Act that help low- and moderate-income people make ends meet and begin to rebuild assets, while also stimulating the economy through consumer spending:

1. The Temporary Assistance for Needy Families (TANF) emergency contingency fund (ECF) must be extended for one year. This fund has created 240,000 jobs in 37 states, making it the most successful direct job creation initiative since the Great Depression. It will expire at the end of September unless Congress takes action.
   
   
2. The 2009 improvements to the Child Tax Credit due to expire at the end of the year must be made permanent. This credit provides assistance for parents in helping to defray the costs of having a child such as child care costs. The Recovery Act allowed low-income working families to count more of their earnings below $13,000 in calculating the value of their Child Tax Credit. These improvements have a dramatic effect for low-income families--for example, a parent working for the minimum wage and raising two kids saw her credit increase from $250 to $1,725. These changes will expire at the end of the year unless Congress takes action.
   
   
3. Similarly, the 2009 improvements to the Earned Income Tax Credit (EITC) due to expire at the end of the year must be made permanent.  The EITC supports low- and moderate-income working people by providing a refundable tax credit.  These credits were expanded to help families deal with the recession. Specifically, the Recovery Act provided a temporary increase in the EITC for taxpayers with three or more qualifying children. The maximum EITC for this new category is $5,657. The Recovery Act also temporarily increased the beginning point of the phase out range for the credit. Since these credits help 13 million children currently living in poverty and millions of working families, Congress must ensure that these changes are made permanent.
   
   
4. Extra weeks of unemployment benefits for the long-term unemployed will expire on November 30, and it is clear that they too need to be extended.
   

The Bush Tax Cuts for the Wealthy

The unprecedented level of poverty in the U.S. is further evidence that the Bush tax cuts for the wealthy should not be extended beyond the end of this year, when they are scheduled to expire.

The income gap between rich and poor--now at its widest since the Great Depression--was exacerbated by the Bush tax cuts. Households in the bottom fifth of the income spectrum received tax cuts averaging $29, while the top 1 percent of households received tax cuts averaging $41,077.

In addition, a recent report by the non-partisan Congressional Budget Office (CBO) concluded that extending the Bush tax cuts for the wealthy was the worst available policy option for stimulating the economy since wealthy people are much more likely to save their tax cuts than spend them. The CBO found that creating a temporary jobs tax credit or extending unemployment insurance benefits would generate three to five times more economic growth and create four to six times more jobs than extending the Bush tax cuts for the wealthy.

The increase in poverty and child poverty between 2008 and 2009 is further evidence that the Bush tax cuts for the wealthy should not be extended.

Note: On September 28, the American Community Survey data will be released. This data will provide more specific information about poverty levels in each state including, among other things, how median income differs by race/ethnicity, gender, family structure and education in each state and how that compares to the national average. Look for our blog’s analysis of this data as soon as it is released.

This blog post was co-authored by Dan Lesser.

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A recent editorial in the Chicago Tribune professes to have some "heart" for the long-term unemployed, but it calls upon Congress to vote down an extension of unemployment benefits anyway. We disagree. Congress should approve the extension as soon as possible.

Some may blame lingering unemployment on the unemployed, accusing them of failing to look for or take jobs "on employers' terms." But the main cause today is that there simply are no jobs. There are currently five workers for every job opening, according to a U.S. Department of Labor survey of employers. In normal times, this ratio is one to one. In the last recession, it was two to one. Employers are not waiting for workers to show up for vacant jobs. There is no relationship whatsoever between unemployment benefits and American productivity; indeed, even if an insured worker fails to take a job (which we do not concede), there are millions of uninsured and unemployed workers to snap them up.

In fact unemployment insurance allows laid-off workers the ability to preserve their retirement accounts and life-insurance policies, it helps them avoid foreclosures and bankruptcies, it maintains a minimally decent standard of living and it keeps them consuming goods and services. They buy things with the benefits at stores who employ people, who get paychecks and who make their own purchases. This "multiplier" effect has been estimated at $1.61 of positive economic impact for each dollar of benefits.

Yes we can and should have a "heart" for these workers, but we should also know that unemployment insurance helps to fight the recession and maintain jobs. Its minimal cost is well worth it.

This post was co-authored by Andrew Stettner, deputy director, National Employment Law Project, and Carrie Thomas, associate director, Chicago Jobs Council.

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