Wages that can leave Workers in Poverty

Sottotitolo: 
Over the past 30 years, large shares of U.S. workers have had jobs that have paid wages so low that, even with full-time, year-round employment, their earnings would still fall below federal poverty guideline for their family size

On the 50th anniversary of the 1968 Poor People’s Campaign, EPI has reflected on how the campaign called attention to the injustice of poverty, government’s ability to fight it, and the importance of raising wages to mitigate poverty. The Poor People’s Campaign also called for a government commitment to full employment. The campaign understood that it is much easier to combat poverty when everyone who can and wants to work is able to find a job. This is true both because work provides a source of income and because, when jobs are plentiful, workers’ bargaining power is strengthened—making it easier for them to find higher-paying jobs or to negotiate wage increases at their current jobs. The potential to reduce poverty through work depends on the availability of jobs with adequate hours and decent wages.

Over the past 30 years, large shares of U.S. workers have had jobs that have paid wages so low that, even with full-time, year-round employment, their earnings would still fall below federal poverty guideline for their family size. Figure A shows the share of workers overall, and the shares of men and women workers, who have been paid poverty-level wages since 1986—the first year for which Census microdata allow for this calculation. A poverty-level wage is an hourly wage that would leave a full-time, full-year worker below the federal poverty guideline for their family size if they are the sole earner in the family. In 1986, 17.3 percent of workers overall (more than one in six U.S. workers) were paid poverty wages, including nearly one in four (23.2 percent of) women workers. By 2017, the share of all workers earning poverty wages had fallen to 11.4 percent. This is a significant decline from the 1995 peak of 17.6 percent, yet it still means that more than one in nine workers are being paid too little to escape poverty for their family size.

Tight labor markets are critical to reducing the share of workers earning poverty-level wagesShare of workers earning poverty-level wages, overall and by gender, 1986–2017

Year Overall MenWomen
198617.3%12.3% 23.2% 
198716.5%11.7%22.1%
198816.3%11.6%21.6%
198915.4%11.1%20.3%
199016.9%12.7%21.6%
199116.9%13.0%21.3%
199217.1%13.5%21.1%
199317.0%13.6%20.8%
199417.5%13.9%21.6%
199517.6%13.7%22.0%
199616.8%13.4%20.7%
199717.1%13.6%21.1%
199815.5%12.1%19.3%
199914.9%11.4%18.6%
200013.8%10.9%17.0%
200113.3%10.4%16.5%
200213.2%10.6%16.0%
200312.7%10.3%15.2%
200413.5%11.1%16.2%
200513.2%10.7%15.9%
200612.6%10.1%15.2%
200712.7%10.1%15.6%
200812.7%10.3%15.3%
200913.8%11.6%16.2%
201013.5%11.6%15.6%
201113.5%11.7%15.5%
201214.6%12.4%17.0%
201314.4%12.4%16.5%
201414.4%12.2%16.9%
201514.2%12.0%16.5%
201612.5%10.7%14.5%
201711.4%9.6%13.5%
 
17.3%17.6%12.6%11.4%12.3%13.7%10.1%9.6%23.2%22.0%15.2%13.5%OverallMenWomen1985199019952000200520102015

Notes: A “poverty-level wage” is a wage that would leave a full-time, year-round worker below the federal poverty guideline for their family size if they are the sole earner in the family. Poverty wage thresholds are specific to each family size, and family sizes are calculated using the total number of people in each family or subfamily within the CPS data.

Source: EPI analysis of Current Population Survey Outgoing Rotation Group microdata

Since 1986, the largest declines in the share of workers earning poverty wages have occurred in periods when the labor market has been relatively tight, with low unemployment and jobs available for those that can work—such as from 1998 to 2001, and, more recently, from 2015 to 2017. From 2015 to 2017, the U.S. also had uncharacteristically low inflation, which made it easier for even tepid nominal wage growth to result in higher inflation-adjusted wages and thus fewer workers earning poverty wages.

Much of the overall decline has also been driven by a decrease in the share of women earning poverty wages. As women workers have grown as a share of the workforce, the relatively large improvement in their poverty-wage rate has had a growing impact on the overall poverty-wage rate. Indeed, the share of men earning poverty wages has been relatively flat. As recently as 2014, the share of men earning poverty wages was as high as it was back in 1986.

Any agenda to fight poverty should include labor market policies targeting each of the three factors affecting families’ incomes: jobs, hours, and wages. Higher minimum wages would boost hourly pay, especially for workers in low-income families; fair workweek policies would help to increase and stabilize workers’ hours; and monetary policy that prioritizes full employment, combined with a program of public job creation that targets areas of persistent high unemployment, would make jobs available to many more people.

(From Economic Policy Institute - "One in nine U.S. workers are paid wages that can leave them in poverty, even when working full time")

David Cooper