Spotlight Exclusives

Families and Communities Still Haven۪t Recovered from the Recession: Here۪s What We Can Do About It

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Today۪s Census Bureau poverty data release confirms what families and communities around the country already know: despite the longest period of private sector job creation on record, millions of people have yet to benefit from the economic recovery. But the outlook isn۪t all bad. There are clear steps we can take now to expand economic opportunity and security for people still struggling in this economy.

First, the numbers themselves suggest we finally already hit rock bottom: the share of families below the official poverty threshold (about $23,850 for a family of four) fell modestly from 2012 (15 percent) to 2013 (14.5 percent). Similarly, the deep poverty rate the share living below half the official poverty line nudged downward from 6.6 percent in 2012 to 6.3 percent in 2013. The share of families with incomes below twice the poverty line also stayed largely the same, from 34.2 percent in 2012 to 33.9 percent in 2013. Remarkably, the child poverty rate fell for the first time since 2000, due to higher employment and earnings among families with children.

There are important limitations to the official poverty measure, and we will learn more after the release of data under the Census Bureau۪s more comprehensive Supplemental Poverty Measure (SPM), this October. Yet the official poverty figures which focus on pre-tax cash income, leaving out near-cash benefits like SNAP and tax credits are nevertheless useful indicators. What they show is an economic recovery that has been genuine, but all too slow and incomplete for large numbers of individuals and families.

Today۪s data are consistent with USDA data showing that about one in seven American households experienced food insecurity in 2013, basically unchanged from 2012, and Federal Reserve data showing widening income and wealth inequality during the recovery. And we learn today that in 2013, four full years after the recession officially ended in June 2009, we had a poverty rate still significantly above the pre-recession rate (12.3 percent rate in 2006, the last full year before the recession began).

Fortunately, there are three key steps that policymakers could take to counter this pattern and spark a recovery shared by all American families.

A top priority for Congress should be to follow the lead of states, counties, and cities around the country and raise the national minimum wage. Minimum wage increases provide significant benefits to workers at very little cost. One extensive analysis found that “if there is some adverse employment effect from minimum-wage raises, it must be of a small and policy-irrelevant magnitude.”

The current $7.25 an hour minimum wage, frozen since 2009, is low by virtually any standard, and the $2.13 subminimum wage for tipped workers has been frozen for nearly a quarter century. A significant minimum wage increase could keep millions people out of poverty and deep poverty, while boosting earnings for many low- and moderate-income workers and their families as well.

But even with a more reasonable minimum wage, earnings from low-paying jobs need to be supplemented to help families, especially those with children, make ends meet. To help ensure work pays adequately, Congress should maintain and build upon recent expansions in the Earned Income Tax Credit (EITC) and Child Tax Credit. Together, these tax credits lifted 10.1 million people, including 5.3 million children out of poverty in 2012 under the SPM.

The EITC not only provides long-term payoffs for young children including greater educational achievement, as well as higher earnings and improved health as adults but it also was significantly more effective than “welfare reform” in boosting single-mother employment in the 1990s. Congress should act on bipartisan support to increase the EITC for working noncustodial parents and childless workers, the only workers that the federal tax code fails to help get out of poverty.

Of course, these credits only work if people have jobs. A crucial complement to these two policies is pursuing full employment at every level of government.

The Federal Reserve should maintain low interest rates as long as is necessary to help achieve full employment in the economy. When this principle was followed in the late 1990s, poverty fell to modern lows, and low- and middle-class households experienced substantial income growth.

To the same end, Congress and states should reverse budget cuts that have actively hindered the recovery, and better yet, they should increase spending on critical public needs as the economy continues to operate below capacity.

We know enough of what works to significantly improve economic opportunity and security, building on our history of success. A long task of building a public insurance system that works for the most vulnerable and disadvantaged remains ahead, especially as the recession further reveals TANF once our major safety net for poor families with children as largely dismantled. But today, the three steps outlined above would substantially improve the well-being of families and communities who are most excluded from economic prosperity, while also providing significant benefits to moderate- and middle-income families and the country as a whole.

To print a PDF version of this document, click here.

Indivar Dutta-Gupta is director of the project on deep poverty and a senior fellow at the Georgetown Center on Poverty and Inequality.

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