Spotlight Exclusives

Short-Term Labor Solutions Can Help Persistent Poverty among Minorities in the Long Term, By Christian Weller, Senior Fellow, and Luke Reidenbach, Research Assistant, Center for American Progress

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Nearly 40 million Americans were living in poverty in 2008. That۪s 13.2 percent of the country. Including those who struggle to make ends meet at twice the poverty level brings the count up to almost one in three Americans. It۪s an issue that affects Americans from every demographic group. Yet we will not be able to eliminate poverty in America without serious consideration of the unique economic challenges facing minorities, who are more likely to be poor and have been disproportionately harmed by the economic downturn.

There are many promising pathways to significantly reduce poverty, but one of the best is the strong and durable growth of good jobs. And particularly vulnerable groups such as minorities, job market entrants, and low-skilled workers have historically been the last to see the benefits of economic growth and employment gains and the first to experience job losses and poverty surges when the labor market slows. These gaps in income and employment will remain unless we take action, undermining the fight to reduce poverty in the long term. Moving forward, policy must focus on both short-term job creation across the board and on overcoming the entrenched obstacles that prevent all groups from benefitting equally from strong and durable labor market growth. Targeted employment initiatives, educational job training, and more opportunities for workers to bargain collectively for wages and benefits can all help reduce the disparities that have existed for so long.

The recession that began in December 2007 has had a devastating effect on households and families across the country. The economy has shed 8.4 million jobs since the start of the recession, and the unemployment rate increased at its sharpest rate during a recession since World War II. According to the Census Bureau, from 2007 to 2008, the last year for which data are available, median family income dropped at its sharpest rate since 1948. And the poverty rate rose to 13.2 percent in 2008its highest rate since 1997. The poverty rate for children under the age of 18 rose to 19.0 percentalso the highest level since 1997.

Fewer jobs during the recession mean less income and thus rising poverty, especially among vulnerable groups. According the Bureau for Labor Statistics, the African-American poverty rate was 24.7 percent, the Hispanic rate was 23.2 percent, and the white rate was 8.6 percent in 2008. More than one-third of African-American children 34.7 percent lived in poverty in 2008, compared with 10.6 percent of white children and 30.6 percent of Hispanic children. And unemployment rates have shot up since the end of 2007, with African-American and Hispanic rates climbing to 15.8 percent and 12.9 percent respectively, while the unemployment rate for whites is at 9.2 percent.

It is clear that this recession has been disproportionally bad for minoritiesbut what about the period of economic growth that led up to it? The data show that little has changed for minorities between the start of the last business cycle in March 2001 and today۪s economic situation. The unemployment rates for minorities remained roughly the same and consistently higher than that of whites between March 2001 and December 2007, despite economic and job market growth. When the crisis hit at the end of 2007, minorities were already more vulnerable to an increase in poverty.

And structural differences by race and ethnicity persist outside the job market, such as in wages. The earnings gaps by race and ethnicity have changed little since 2001. In the third quarter of 2009, whites۪ usual median weekly earnings were $144.86 (in 2008 dollars) more than African Americans۪ and $226.06 more than Hispanics۪. In the first quarter of 2001, weekly earnings for whites were $151.68 more than African Americans and $241.40 more than Hispanics. Again, minorities were more vulnerable to lower incomes and thus higher poverty rates even before the onset of the current crisis.

Higher unemployment, less job growth, and lower wages combine to create lower total incomes and sharper income drops. Minority incomes have decreased more than three times faster than white incomes between 2000 and 2008. Median household income for African Americans has decreased 1.0 percent per year, Hispanic income has decreased 1.1 percent per year, and white Americans۪ income has fallen by 0.34 percent per year. Disparities in income have held fast, as well. Hispanic and African-American incomes were 66.7 percent of median household income for whites in 2001. And by 2008, Hispanics and African Americans۪ incomes were 65.1 percent of whites۪ incomes.

Minorities have been consistently more vulnerable to the threat of poverty because structural obstacles persisted in the labor market. These gaps cannot simply be attributed to factors such as education and age. African Americans and Hispanics have had consistently far higher unemployment than whites, regardless of age or education level. Young men ages 16 to 19 have been hit very hard across the board in this recession, with 30.8 percent total unemployment at the end of last quarter. At the end of 2009, though, young African-American men had a staggering unemployment rate of 51.3 percent, and young male Hispanics had an unemployment rate of 40.0 percent, while the respective rate for young white men was much lower at 27.3 percent.

Employment differences similarly persist between ethnic groups with the same educational attainment. The unemployment rate at the end of 2009 was 6.3 percent for college-educated African Americans, 5.4 percent for college-educated Hispanics, and 4.3 percent for college-educated whites. A college education still offers some measure of protection during a recessionunemployment rates are far lower for those with degrees than for those without. But African Americans and Hispanics still do worse in the recession than whites, even in highly educated segments of the population.

The basic lesson here is that it is not sufficient to simply create more jobsnew jobs must be durable, and we must adopt supporting policies that can ensure that all Americans benefit from a growing labor market, regardless of ethnicity, education, or age. Only if there are more good jobs that are accessible to everyone can we make a lasting dent in poverty. Policymakers must craft solutions to not only address the short-term issue of high unemployment, but also move toward removing the long-term structural obstacles that block equitable labor market participationobstacles that significantly hinder sustainable poverty reduction and disproportionally affect communities of color.

Policymakers are already engaged in substantive discussions about how to stimulate strong and durable job growth. Our attention thus lies primarily on supporting policies that could help to overcome structural obstacles in the labor market and that could help those populations most vulnerable to high and persistent poverty gain economic security. These initiatives consist of targeted employment initiatives for some of the most vulnerable groups, educational job training, and more opportunities for workers to bargain collectively for wages and benefits.

Young workers, especially minority youth, are among those most vulnerable to persistent unemployment and poverty. Employment initiatives that are especially targeted toward young workers could consequently serve as an important building block in the fight against persistent labor market obstacles. Investments in national service programs such as AmeriCorps, VISTA, Youth Corps, and Youth Build would create more full-time employment opportunities for young people. These investments, which would largely be paid for by public and private resources, would result in thousands of additional jobs. An estimated investment of $625 million in 2010 would yield an additional 42,000 jobs. With more than 50 percent of African-American and 40 percent of Hispanic young men out of work, such an investment could have an enormously positive and long-term effect, especially for the minority populations most vulnerable to high and persistent poverty.

Additional aid to states is another targeted employment initiative that will help stem damage caused by state spending cuts and again protect those most vulnerable. Extending the increased Federal Medical Assistance Percentage established by the American Recovery and Reinvestment Act into 2011 and providing additional funding through a state stabilization fund as done through ARRA could save thousands of jobs. African-American workers are disproportionally represented, compared with other racial and ethnic groups, in education, health services, and public administration jobs, the types of jobs most hurt by cuts from states. They would thus especially benefit from more support for the struggling finances of the states.

Policymakers should also make strong investments in human capital so that all workers are better equipped to thrive during a recovery and get good jobs that pay a living wage with health and pension benefits. Funding programs that support skills development, especially for low-income workers in the construction and manufacturing industries, will be essential to get them back on track. For example, investments in training for green jobs, such as energy efficiency and renewable-energy installations, would transition workers into the green economy and allow many workers who are currently struggling in manufacturing and construction to participate in these growth sectors. These training initiatives would benefit minority workers since African-Americans are disproportionately represented in manufacturing and Hispanics in construction.

Finally, we must enact policies that make joining a union easier, for instance by passing the Employee Free Choice Act that makes it easier for people to join a union by better protecting the fundamental human right of workers to bargain collectively. Unions are an important tool to make sure that workers are getting livable wages and benefits, and can therefore be an important way to level the playing field. According to the Bureau of Labor Statistics, the median usual weekly earnings of a union member in 2009 were $908 compared with $710 for nonunion workers. It is Hispanics, especially Hispanic women, who have the most to gain from joining unions. Only 10.2 percent of Hispanics and 9.7 percent of Hispanic women were in unions in 2009. Meanwhile, 13.9 percent of African Americans and 12.1 percent of whites were in unions. Increasing access to union membership would be an effective way to ensure improved economic security for minority workers. Gaining the right to bargain collectively is a proven way to substantially and sustainably reduce the chance of persistent poverty. The benefits of greater unionization would especially benefit Hispanics and African Americans and could prove to be an important anti-poverty tool.

This recession has produced enormous hardships on families across the country. It has also highlighted a trend that has continued in the United States۪ economy for far too longlarge, persistent economic disparities between racial and ethnic groups, with communities of color being hit hardest in recessions and benefitting the least from economic growth. This reality has enormous implications for the fight to reduce poverty in the United States. We still need to look to meaningful long-term solutions that address the obstacles that minorities face in America۪s economy, even though the immediate job situation is dire. This means specifically that policymakers need to concentrate on creating a strong labor market recovery in the short run, maintaining substantial job growth in the medium-to-long term, and establishing supporting policies to make sure that job gains especially benefit the most vulnerable. Only the combination of these approaches holds the promise to reduce poverty on a permanent basis.

Christian Weller is Associate Professor in the Department of Public Policy and Public Affairs at the University of Massachusetts Boston and a Senior Fellow at the Center for American Progress. Luke Reidenbach is a Research Assistant at the Center for American Progress.

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