among those who had been unemployed but did
not also experience low earnings. For those un-
employed persons who also had low earnings,
the rate was dramatically higher—37 percent.
Similarly, those who were forced to work part
time at least some of the year even though they
would have preferred full-time work had only
about a 2-percent chance of being poor if they
experienced no other labor market problem.
Those who also had low earnings, though, had
a poverty rate of 26 percent. Thus, among full-
time workers, low earnings alone are an impor-
tant contributor to poverty, and they greatly
increase the probability of poverty among those
with other labor market problems.

While low weekly earnings (stemming from
low hourly wage rates) were the most common
problem for those working poor who usually
worked full time, it should be noted that, as with
the unemployed, most low-wage earners were
not in poverty. In fact, for each low-wage
worker in a poor family, three were in families
that were not poor. The poor families were most
often those in which no one other than the low
earner had worked.

As an illustration, table 4 indicates that,
among persons earning low wages, husbands in
married-couple families, persons who maintain
families without a spouse, and unrelated indi-
viduals had the highest probability of being poor.
These individuals are more likely than others to
be the sole support of their families or house-
holds. In contrast, when wives or other persons
related to a householder work for low pay, their
earnings are generally supplemented by others.
Hence, their poverty rates are relatively low.

Overall, a full-time wage and salary worker
with low earnings had a 25-percent probability
of being poor. By comparison, full-time work-
ers who earned more than the low-earnings level
had only a 2-percent chance of being below the
poverty level.

Low-earning levels were only estimated for
full-time workers because past research has
found that weekly earnings calculated from
annual data for part-time workers are quite unre-
liable.” Although part-time workers work fewer
hours, the hourly wages of poor part-time
workers, could, in theory, be higher than those
earned by full-time workers. Still, given the rel-
atively low wages paid part-time workers in
general, it is reasonable to infer that a large
Proportion of poor part-time workers also earned
wage rates below the $4.18 “low-wage” level.

The group most affected by low wages was
women heading families containing children
(not shown in table 4). Three-fourths of these
women who worked full time at low wages were
living below the poverty level. More will be

Table 2.

[Numbers in thousands]

Incidence of labor market problems among poor
and nonpoor workers in the labor force
27 weeks or more in 1987

Poor workers | Nonpoor workers
Labor market problem rate?
Number | Percent! | Number | Percent

Total... ee cece 6,400 107,089 56

ager | 447 | 12743] 119 183

: 1530 | 260 | 10425] 97 129

27 weeks or more 1,322 | 207 2318 | 22 | 363

Involuntary part-time work . 1,795 | 280 as3 | 78 176

110 26 weeks ..... 1228 | 192 6302] 59 163

27 weeks or more .. 567 89 2001 | 20 | 213
Full-time wage and salary

workers ......... ate | .... | 83,428 ef ee

Low eamings? . 2127 | 873 6550 | 79 | 245

urement of low earings.”

1 Individuals can have more than one labor market problem. The percent shown for low earners:
applies only to those persons who usually worked in fulltime wage and salary jobs.
2 Percent of workers with each labor markat problem who are poor. Percent poor among those
with low earings uses full-time wage and salary workers as the denominator.
3 Low earnings are equal to or less than $167.20 per full-time workweek. See “Appendix: Meas-

said about these workers later.

Of all readily observable personal character-
istics, researchers have repeatedly found educa-
tion to have the most consistently powerful
effect on earnings. Aside from education, only
one’s family background seems to influence
earnings and poverty to a large extent, and it
does so primarily indirectly, through its influ-
ence on education. Other factors, such as years
of work experience and test scores, have been
found to have less impact in and of themselves.®
The following tabulation demonstrates the
marked difference in the poverty profiles of
workers in 1987 in terms of their levels of
education:

Numbers Percent
{in millions) poor
Total, in the labor force
27 weeks or more ....... 113.5 5.6
Fewer than 4 years
of high school ........ 18.5 13.3
4 years of high
school only .......... 46.0 5.7
1-3 years of college .... 23.1 3.8
4 years of college
ormore ...........45 25.9 17

Numerous explanations are available for the
relatively low earnings profiles of blacks and
women. To begin with, blacks have lower
educational levels than whites. This, by itself,
tends to lower blacks’ earnings (relative to
white men’s) and, hence, raise their poverty
rates. In addition, both blacks and women have

Monthly Labor Review October 1989 7

en © ial


Almost 40 percent
of poor families
were maintained
by women as the
sole earners.

Profile of the Working Poor

present) has risen dramatically over the past
several decades—from less than 20 nt in
1950 to more than 40 percent in the 1980’s.!6
Part of the rise stems from a dramatic increase
over this period in the proportion of never-
married black women who head families. Also,
black women have much higher separation and
divorce rates than white women, and the differ-
ences are exaggerated by the very low remar-
riage rates among blacks. !7

Much of the literature related to the increase
in the proportion of black female-headed
families focuses on the role of various welfare
Programs, particularly AFDC, in encouraging
such a family structure. In particular, William
Julius Wilson and Kathryn M. Neckerman have
suggested that the relatively poor economic
status of young black men, as evidenced by their
low labor force participation rates, has reduced
the pool of “marriageable” black men.!8

Poverty is also relatively common among
workers living alone or with unrelated individu-
als. Three out of 10 poor workers fall into this
category. They are younger than most workers,
a large proportion being 16 to 24 years of age.
They generally work at low wages, and, while
they have no family to support, neither can they
depend on the earnings of other family members
to keep them out of poverty. Of course, many
such persons live with others and may share
housing costs and possibly other expenses. If
their household units were treated as families, it
is possible that the combined financial contribu-
tions of all members would result in higher-
than-poverty incomes. But regardless of living
arrangement, each unrelated individual is held
to a poverty standard for a one-person economic
unit.

The dynamics of poverty

The view presented here, which also appears in
many earlier reports on economic hardship, re-
lies primarily on cross-sectional data that pro-
vide a snapshot of the working poor. This type
of data, however, cannot be used to study the
long-term status of the working poor. Most im-
portantly, it cannot be used to determine the
extent to which families with workers are per-
sistently poor or the extent to which their
poverty is transitory.

Longitudinal surveys, that is, those which in-
terview the same people over a period of years,
are the best source of information on the dynam-
ics of poverty. Some research using data from
the Panel Survey of Income Dynamics (Psip), a
study of 5,000 households which began in
1968, has been conducted on issues related to
labor market problems and poverty. For exam-

10 Monthly Labor Review October 1989

i

Table 5. Poverty rates of workers in
the labor force 27 weeks
or more, by educational
attainment, sex, and race,
1987

Poverty rates
Men

Educational attainment Women

White

White | Black Black

Total ..........] 47 | 105 | 48

Fewer than 4 years of
high school .........

16.0

11.7 | 174 | 11.8 | 287

tee 44] 96] 50 | 178

1 to 3 years of
college 2... 30 | 74] 34] 86

4 years of college
OF MOM... eevee 16 | 35} 13] 32

Note: Poverty rates are the percent of persons in the labor
force 27 weeks or more who are poor.

ple, in addition to Levy’s study mentioned ear-
lier, Mary Corcoran and Martha S. Hill have
investigated the effect of unemployment on
poverty status.'° These researchers’ findings in-
dicate that 10 percent fewer persons would be
living in “poor” families if family householders
had experienced no unemployment. In their
study, they defined poverty as the condition of
having an average income, during the 9-year
period 1967-75, below 125 percent of the aver-
age poverty level. Their findings might have
been quite different using cross-sectional data;
Perhaps unemployment has a greater influence
on a family’s income and poverty status in any
given year than it does over an extended period
of time. While the Corcoran and Hill study had
a narrow focus—unemployment—it does dem-
onstrate the different view that longitudinal data
provide when examining poverty issues.
Research on the entire poverty population
using data from the PsiD indicates that poverty is
rarely a permanent state for a family over a long
period of time. Many individuals enter poverty
because of a major change in their circum-
stances, such as divorce, the death of a spouse,
illness, or unemployment. The PSiD results show
that, while fully a quarter of all U.S. families
(including families with and without workers)
spent at least 1 year in poverty between 1969
and 1978, fewer than 3 percent were “persis-
tently poor”—that is, below the poverty level in
at least 8 of the 10 years studied.?° Those who
were poor only temporarily had characteristics
quite similar to those of the general population,
supporting the notion that poverty was the tem-


6 Monthly Labor Review

TT

Profile of the Working Poor

The low-wage level chosen for this analysis is
an average of the minimum-wage levels in ef-
fect from 1967 to 1987, calculated from each
year’s value, expressed in 1987 dollars.® The
average minimum-wage value for the entire 21-
year period, in 1987 dollars, was $4.18 per
hour. Assuming a 40-hour week, this would
translate to weekly earnings of $167.20. This
figure was then compared with the weekly earn-
ings for each full-time wage and salary worker
to determine whether actual 1987 earnings were
above or below the “low-earnings” threshold.

About 2.1 million poor full-time wage and
salary workers who were in the labor force at
least half the year earned the low-earnings level
of $167.20 per week or less. To place this meas-
ure in perspective, 1.6 million earned the pre-
vailing minimum wage of $3.35 or less, while
2.6 million earned 150 percent of the minimum

or less ($5.03). (See the appendix for details on
determining the low-earnings figure.)

The data for 1987 indicate that fully two-
thirds of the poor who usually worked in full-
time wage and salary jobs had earnings at or
below the low-earnings threshold. Three-
quarters of these low earners had average
weekly earnings of $134 or less, which would
be the equivalent of earning the minimum wage
of $3.35 for a 40-hour week.

Analysis shows that there is considerable
evidence that a strong relationship exists between
low earings and poverty status. Two-thirds of
poor full-time workers experienced low earnings.
Furthermore, even among the poor full-time wage
and salary workers who also experienced either
unemployment or involuntary part-time work,
most had low earnings. (See table 3.) By contrast,
the poverty rate was quite low—only 7 percent—

Exhibit 1.

Comparing poor with nonpoor workers

Nonpoor workers

class of worker

Dimension Poor workers
Definition Persons who worked or sought
work for 27 weeks or more during
the year and lived below the pover-
ty level
Industry and About 10 percent were agricultural

workers; 12 percent were nonagri-
cultural self-employed; and 78 per-
cent were nonagricultural wage and
salary workers

Those who worked or sought work
for 27 weeks or more during the
year and lived at or above the pov-
erty level

Only 3 percent worked in agricul-
ture; 9 percent were nonagricultural
self-employed; and 88 percent were
nonagricultural wage and salary
workers

Of the 107 million nonpoor work-
ers, 75 million (70 percent) worked
full time, year round

Two in 10 lived in nonmetropolitan
areas

36 percent were husbands; 25 per-
cent were wives; 5 percent were
women who maintained families;
and 17 percent were persons living
outside of families

87 percent were white; 10 percent
were black

15 percent were dropouts; 40 per-
cent were high school graduates; 45
percent had attended college

Work schedules Of the 6.4 million working poor,
1.9 million (29 percent) worked full
time, year round

Location Three in 10 lived in nonmetropoli-
tan areas

Family 26 percent were husbands; 11 per-

relationship cent were wives; 17 percent were
women who maintained families;
and 30 percent were persons living
outside of families

Race 73 percent were white; 24 percent
were black

Education About 40 percent were dropouts; 40
percent had completed high school;
only 20 percent had attended college

October 1989



Profile of the Working Poor

lower earnings than white men at all levels of
educational attainment, which also contributes
to the relatively high poverty rates of blacks, as
shown in table 5. (Women’s rates are not af-
fected as much as blacks’ because women’s earn-
ings are so often supplemented by those of a
working husband.) The earning differentials be-
tween white men and blacks and women have
often been attributed to discrimination, and a vari-
ety of theories have been proposed by economists
and sociologists which seek to explain the effect
of discrimination on differences in earnings.?
One factor explaining why blacks and women
have lower earnings is that they tend to be in
jobs that provide less on-the-job training. Saul
Hoffman, in a 1981 article entitled “On-the-job
training: difference by race and sex,” suggests
that this is one reason why blacks and women
have lower earnings than white men even when
educational levels are similar.'° Hoffman found
that blacks and women were seldom in jobs in
which they were currently receiving training.
Similarly, jobs held by blacks and women re-
quired a relatively short period before workers
felt that they were “fully trained and qualified,”
the assumption being that such time is spent
acquiring skills. By virtue of their increased
skills over time, which are generally associated
with job or career advancement, the earnings of

with selected labor mai
below the poverty level, 1987

[Numbers in thousands}

Table 3. Number of full-time wage and salary workers
et problems living

white men tend to rise at a faster rate than the
earnings of blacks and women. Hence, Hoff-
man concludes that white men are less likely to
be trapped at very low wages.

Meeting family needs with earnings

As noted earlier, poverty is a condition closely
tied to one’s family situation, that is, to the
amount of family resources and to the number of
people who need to share those resources. For
example, the family of a worker with minimum-
wage earnings and extensive unemployment
will not be poor if another member earns enough
to keep the family’s income above the poverty
threshold. Indeed, most individuals who experi-
enced the labor market problems identified in
this analysis were not members of poor families
in 1987.

Researchers have also noted how closely a
family’s economic status is linked to the size or
composition of the family. Divorce, the death of
a spouse, marriage, birth, or the departure of a
child from the home can radically alter both
family composition and earnings and thus have
as profound an effect on poverty status as unem-
ployment or a decline in wage rates.!!

Families of the working poor. Of the 7 mil-
lion families that were in poverty in 1987, 3.4
million were there despite the fact that at least
one member was in the labor force most of the
year. This represents about 6 percent of all
families with a working member. The median
income of these families that were below the
poverty level was $6,805, compared with

Number | Percent | Poverty $36,716 for nonpoor families with workers. The
Labor market problems y ior
Poor | distribution | rate! fact that 83 percent of the families of the work-
ing poor had children, compared with only 55
Total, 1 : ® as
6 years ane! over 3.161 87 percent of nonpoor families, shows the strong
With at least one labor market problem 2727 144 impact of family composition on poverty.

Low earings, total. coven . 2,126 100.0 24.5, The most dramatic difference between poor ‘

ie comron oy ne f ony es 3 eS and nonpoor families is the percent with only

ployment . ° .

Low earnings and involuntary part time? only 206 97 263 one earner. As shown in the following tabula-

All three problems. a 276 13.0 38.9 tion, 76 percent of poor families had only one

Unemployment, total 4,527 100.0 142 working member, while the majority of nonpoor
Unemployment only veces een eres 440 28.8 65 families had two or more earners. '
Unemployment and low earnings only | 683 447 36.5 1

Unemployment and involuntary part time only ..... | 128 84 a9

All three problems . vetetneees ‘| 276 184 38.9 pair fomes
Involuntary part time, total . . 642 100.0 127 ae i
Involuntary part time only : 32 5.0 15 All families with a member {
Involuntary part time and low ings only 206 32.1 26.3 in the labor force 27 weeks H
Involuntary part time and unemployment only 128 19.9 89 i
All problems eye 276 430 389 or more (thousands) ....... 50,012 3,382 |
Percent with: |

1 Percent of workers with each set of labor market problems who are poor.

2 Includes 434,000 poor full-time wage and salary workers who did not experience any of the three
labor market problems listed.

Persons who usually work full ime are included in the category of working part time for economic
reasons (involuntary part-time workers) if they worked less than 35 hours at least one week when
they would have preferred full-time work.

One member in the labor
force 27 weeks or more .. 39.3 75.9

i
Two or more members in |
the labor force 27 weeks |

or more 60.7 24.1

8 Monthly Labor Review October 1989 |

Tt


porary result of sudden changes in family or
economic status. The persistently poor were
even more concentrated in two overlapping
groups—blacks and women who head fam-
ilies—than they are found to be in the annual
cps-derived poverty data. While blacks made up
only 12 percent of the U.S. population, they
were found to constitute 62 percent of the per-
sons who were persistently poor, a far larger
proportion than are poor in any one year. Black
women made up a third of the total.

Whether poverty among families with work-
ers is in fact mostly transitory is difficult to infer
from these data representing all poor families.
Perhaps poverty is more permanent among
families of the working poor, because this group
is less affected by events such as divorce or
death than are the nonworking poor. On the
other hand, some poor workers may have
enough upward mobility in their jobs or careers
that they are able to earn their way out of
poverty, an option that is unlikely for a poor
disabled person or an elderly woman living
alone. In any event, it is fairly clear that, as in
all poor families, the persistently poor among

Footnotes

families with workers are overrepresented by
blacks and, particularly, black women.

The policy implications of the differences be-
tween the persistently poor and the temporarily
poor are important, because measures to deal
with temporary poverty would necessarily be
quite different from those designed to deal with
long-term poverty.

Conclusion

While unfortunate circumstances can leave
many families temporarily below poverty,
among workers poverty is chiefly a feature of
those with a particular profile. This article sug-
gests that 6.4 million persons in 3.4 million
poor families were either employed or in search
of a job during at least half of 1987. Poor work-
ers tend to have low levels of education and,
often as a result, to be employed at very low
wages. Workers most likely to be poor are those
who have children and are the only earners in
their families. Thus, among workers, women
who head families are in the greatest jeopardy of
living in poverty. Oo

' For studies on labor market-related hardship, see: U.S.
Department of Labor, Manpower Report of the President,
1967, pp. 74~76; William Spring, Bennett Harrison, and
Thomas Vietorisz, “Crisis of the Underemployed,” The New
York Times Magazine, Nov. 5, 1972; Herman P. Miller,
“Subemployment in poverty areas of large U.S. cities,”
Monthly Labor Review, October 1973, pp. 10-17; Sar A.
Levitan and Robert Taggart, Employment and Earnings In-
adequacy: A New Social Indicator (Baltimore, The Johns
Hopkins University Press, 1974); Thomas Vietorisz, Robert
Mier, and John Giblin, “Subemployment: exclusion and
inadequacy indexes,” Monthly Labor Review, May 1975,
pp. 3-12; Francis Horvath and Janet Scholl, “Measurement
of Labor Market Related Economic Hardship,” unpublished
paper prepared for the National Commission on Employ-
ment and Unemployment Statistics, 1977; National Com-
mission on Employment and Unemployment Statistics,
Counting the Labor Force (Washington, U.S. Government
Printing Office, 1979), pp. 57-81; Bruce W. Klein, “The
Adequacy of the Earnings Capacity of the Subemployed and
Its Policy Implications,” Ph.D. diss., The George Washing-
ton University, 1981; Robert Taggart, Hardship—The Wel-
fare Consequences of Labor Market Problems: A Policy
Discussion Paper (Kalamazoo, Mi, The W.E. Upjohn Insti-
tute for Employment Research, 1982); and Bruce W. Klein,
“Measuring Labor Market Related Hardship Using sip
Data,” American Statistical Association: 1986 Proceedings
of the Social Statistics Section (Washington, American
Statistical Association, 1986).

2 Updated tables 1-19 from the aforementioned reports
are available upon request from the Bureau of Labor Statis-
tics, Office of Employment and Unemployment Statistics,
Division of Labor Force Statistics, Washington, pc 20212.

3 Like past ats efforts, this one utilizes the March work
experience and income supplements to the Current Popula-
tion Survey. These supplements have questions on individu-
als’ work activity during the entire previous calendar year,

im |

such as weeks worked, weeks spent in search of a job, and
weeks spent out of the labor force, and about income and
earnings over the period. The data reported were collected
in March 1988 and refer to calendar year 1987.

Data on the self-employed relate to nonagricultural
workers only. For this article, we did not investigate the
characteristics of the poor self-employed, although an anal-
ysis of their detailed occupational characteristics would
probably help to understand the group.

5 See Frank Levy, “How Big Is the American Under-
class?” Working Paper 0090-01 (Washington, The Urban
Institute, 1977).

© This measure is meant for research use only and is in no
way intended as an endorsement for indexing of the mini-
mum wage.

7 Shirley J. Smith and Nancy F. Rytina, “Testing a New
Measure of Annual Hours of Work,” presented at the annua!
meeting of the American Statistical Association, Toronto,
Canada, August 1983, p. 12.

8 Christopher Jenks and others, Who Gets Ahead? (New
York, Basic Books, Inc., 1979), pp. 229-30; and Greg J.
Duncan and others, Years of Poverty, Years of Plenty (Ann
Arbor, Mi, Institute for Social Research, University of
Michigan, 1984), pp. 111-14.

° See, for example, Glen G. Cain, “The Economic Anal-
ysis of Labor Market Discrimination: A Survey,” in Orley
Ashenfelter and Richard Layard, eds., Handbook of Labor
Economics, Volume I (New York, North-Holland, 1986);
and the classic work by Gary S. Becker, The Economics of
Discrimination (Chicago, Chicago University Press, 1957).

© Saul D. Hoffman, “On-the-job training: difference by
race and sex,” Monthly Labor Review, July 1981, p. 34

1 Duncan and others, Years of Poverty, Years of Plenty,
p. 10.

'2 Rosemary Kern and Jack A. Meyer, “Reforming Wel-

Monthly Labor Review October 1989

Mt

rs © il


Bruce W. Klein
and
Philip L. Rones

Bruce W. Klein and Philip
L. Rones are economists
in the Division of Labor
Force Statistics, Bureau of
Labor Statistics.

A profile

of the working poor

More than 6 million persons who spent

at least half of 1987 in the labor force

were poor; among families with workers,

those headed by unmarried women with children

have the highest poverty rates

terested for a long time in the link between

the labor market problems of workers and
the economic status of their families. When
workers are either unemployed or limited to
part-time work, or when they have to work at
very low wages, their personal finances suffer.
But the impact on their families varies. In many
cases, it may not be severe. At the extreme,
however, several million families live below the
official poverty level, even when some of their
members are active in the work force. This situ-
ation is most common when only one family
member works and earns low wages.

This article focuses on persons who are labor
force participants but live in poor families. The
labor market experiences and family circum-
stances of these persons are contrasted with
those of persons in the work force who are not
poor. Some general findings are as follows:

Piesicite and researchers have been in-

¢ The working poor made up about one-third of
all persons age 16 and over who were in
poverty. These are the more than 6 million
persons whose family income was below the
official poverty level in 1987, even though
they worked or looked for work at least half of
the year.

e Labor market problems such as unemploy-
ment or the inability to find full-time work are
most likely to cause poverty when they occur
in conjunction with low wages. Two-thirds of

the working poor who usually work full time
have weekly earnings that are below a “low-
earnings” threshold used in this analysis.

© The presence of more than one worker in a
family dramatically lowers the probability of
poverty. In particular, poverty is rare in
husband-and-wife families where both are
employed.

e Unmarried women maintaining families are
the workers with the greatest risk of living in
poverty. Their earnings are rarely supple-
mented by those of other family members,
and their wages, like those of women in gen-
eral, are substantially lower than men’s. Al-
most one-fourth of single-earner families
maintained by women are poor.

Because education has a strong influence on
earnings, individuals with low levels of
schooling are overrepresented among the
working poor. Most at risk are black workers
and women, because, at every level of educa-
tion, they have lower earnings than white
men.

Background and definitions

A number of substantial efforts have been made
to study issues which have been broadly labeled
“economic hardship.”! The Bureau of Labor
Statistics issued annual reports between 1982
and 1987 entitled Linking Employment Prob-
lems to Economic Status. Jn these reports, Cur-

Monthly Labor Review October 1989 3.



Almost 40 percent of poor families were
maintained by women, compared with just 12
percent of nonpoor families. The fact that so
many poor families are maintained by women
reflects several of the influences on poverty al-
ready discussed: these women’s relatively low
level of education and their resultant low wages;
less career advancement among both women
and blacks (female family heads are dispropor-
tionately black); the lack of other earners in
those families; and the interrelationship between
family size and the poverty threshold. As the
next tabulation shows, when only the family
head worked, the poverty rate in such families
was 24 percent. Among married-couple fam-
ilies, in contrast, even when only one spouse
worked, the poverty rate was only 8 percent.
This is because, in the latter case, the one earner
is most often a man, and few married men earn
the low wages that result in poverty.

Percent
below the
poverty level

All families with at least one
person in the labor force 27 weeks

OF MOTE 6... ee cece eee eee e eee 6.3
Married-couple families, total ........ 44
Only one member in the labor
force 27 weeks or more ..........- 8.2
Two or more members in the
labor force 27 weeks or more ....... 2.3
Families maintained by
women, total ...........--.. 00s ee 17.2
Householder is the only person
in the labor force 27 weeks
or more: 24.2
Families maintained by men, total ..... 78
Householder is the only person
in the labor force 27 weeks
OF MOTE... eee eee ee eee eee eee 11.6

When a woman maintains a family and her
earning potential is at or near the minimum
wage, she generally cannot keep out of poverty.
Researchers have found that, to many in this
circumstance, welfare, generally in the form
of Aid to Families with Dependent Children
(AFDC), becomes a more attractive alternative. !?
Even when the welfare benefit is less than the
potential earnings, receiving welfare may still
be attractive because it does not involve such
employment-related costs as child care, trans-
portation, clothing, taxes, and Social Security
withholding.

In the study mentioned earlier, Levy found
that poverty among working women was not
primarily a function of unemployment, or of
voluntarily working less than year-round, full-

relationship, 1987

Table 4. Poverty rates and percent distribution of poor
full-time wage and salary workers who earn less
than the low-earnings level, by family type and

Full-time wage and
salary workers earning
tess than low. cietbation
Family type and relationship ‘earnings level of poor low.
Number | Poverty | "##° earners
(thousands) | rate!
Total, 16 years and over . 28.676 245 100.0
In martied-couple families 4914 136 315
Husbands ........... 1,116 36.5 18.6
Wives .. 2,193 88 9A
Other ..... 1 49 37
In families maintained by women . 1,517 B32 25.9
Householder ........ 6.5 699 58.9 19.4
Other 2... B18 16.9 65
In families maintained by men 388 178 32
Householder ........ . 115 38.3 241
Other ........ . 274 91 1.2
Unrelated individuals 1,758 444 7

1 Percent of workers in each category who are poor.

elsewhere in the table.

Nore: Because of rounding, sums of individual itams may not equal totals.

2 Total includes 99,000 persons who are members of unrelated subfamilies which are not shown

time hours, or even of earning lower wage rates
than other women. In fact, even if poor female
heads of household earned a “normal” wage—
that is, a wage equal to that of nonpoor women
with similar characteristics, such as age and ed-
ucation—for a full-time work year, few would
tise above poverty. This reflects the concentra-
tion of women, both poor and nonpoor, at low
wage rates relative to men and underscores the
fact that those women who are the sole earners
in their families often have a difficult time stay-
ing out of poverty.

Women who maintain families actually have
median average weekly earnings for full-time
work that are nearly identical to those of married
women. The latter, however, almost always
have a working husband. Another, perhaps
more meaningful, comparison is that families
maintained by women have only half the me-
dian earnings of married-couple families.'* Yet
their financial requirements are not much less,
because their average family size is little differ-
ent from that of married-couple families.'

Families headed by black women are over-
represented among the poor, not because black
women’s earnings are that much lower than
white women’s (they are not), but because such
a large proportion of these women are the sole
earners in their families. The proportion of all
black families headed by women (no spouse

Monthly Labor Review October 1989 9



Blacks and
women are at
higher risk of
Poverty because
they have lower
earnings than
white men at all
levels of
education.

4 Monthly Labor Review

i?

Profile of the Working Poor

rent Population Survey (cps) data were used to
provide estimates of the number of workers who
had encountered any of a list of labor market
problems during a given year, however slight
they might have been. The number of such per-
sons totaled 33 million in 1985.2

This article focuses on a much smaller uni-
verse. It first identifies famities living in poverty
and then examines the labor market characteris-
tics and problems of the workers in these
families. The approach emphasizes the “work-
ing poor,” a term often used, although with a
wide range of meanings. Here, the working
poor are defined as persons who have devoted at
least half the year to labor market efforts, being
either employed or in search of a job during that
period, but who still lived in poor families.
While the 6-month cutoff is somewhat arbitrary,
it is meant to exclude not only nonparticipants in
the labor force, but also marginal participants.
Such persons may also live in poverty, but their
economic problems are not likely to have
stemmed primarily from their failures in the
workplace, or the failure of the workplace to
provide jobs. Among those falling into this cat-
egory are students who look for work for 1 or 2
weeks before finding summer employment and
persons who are ill or disabled most of the year.

The most complicated aspect of the analysis
presented here is that the working poor, as a
group, owe their poverty status to two sets
of circumstances: (1) low earnings, resulting
from a range of labor market problems, includ-
ing unemployment, inability to find full-time
work, and low wage rates; and (2) a family
Structure that is conducive to poverty, such as
the presence of dependent children and only one
eamer. Because the poverty threshold—that is,
the amount of money needed to stay out of
poverty—is a function of family size, it is actu-
ally possible for a “poor” worker to have earned
much more than a worker who, because of dif-
ferent family circumstances, is classified as
nonpoor. The following are some hypothetical
examples of persons whose employment and
family characteristics leave them in poverty:

© Bob is married, is the father of two children,
worked as a construction laborer, and earned
$5.25 an hour. His wife did not work. Bob
usually worked full time, but because of bad
weather and temporary layoffs, he lost sev-
eral weeks of work. He earned $9,555 in
1987, before taxes.

Barbara is a single mother with two children,

worked in a cleaning store, and earned $3.35

an hour, the minimum wage. She worked all

year, except for 2 weeks when the children

were sick, and earned $6,700.

Jane lives alone, worked in a cafeteria 4 hours

a day, and earned $3.75 an hour. She would

October 1989

have preferred to work full time, but was un-
able to find another job. In 1987, she earned
$3,750 before taxes.

Families of four, like Bob’s, required at least
$11,611 in 1987 to be considered above poverty
by the Federal Government’s definition, Fam-
ilies of three, like Barbara's, required at least
$9,056 to be considered out of poverty, while a
person living alone, such as Jane, needed an
annual income of $5,909 or more. Thus, assum-
ing that their families had no other sources of
income, Bob, Barbara, and Jane would each
have been a member of the “working poor.”

The working poor

Of the 112 million persons who spent at least
half a year in the labor force in 1987, 6.4 mil-
lion were members of poor families. Thus, the
poverty rate among workers was 5.6 percent.
Exhibit 1 profiles poor and nonpoor workers,
comparing their personal traits, labor market
performances, and family situations. Table 1
provides additional detail on the demographic
and personal characteristics ot workers who are
Poor and those who are not.

While persons from every age, race, sex, and
educational group are found among the working
poor, the key variables that relate to poverty
among workers are family relationship and edu-
cation. Family structure largely determines the
number of potential wage earners, and educa-
tion is the best predictor of earnings.

Despite the fact that men’s earnings are gen-
erally much higher than women’s, a working
husband had a higher probability of his family’s
being poor in 1987 (4.2 percent) than did a work-
ing wife (2.5 percent). The reason is that hus-
bands are more likely than wives to be the sole
support of their families. Black workers have
very high poverty rates (13.2 percent, compared
to 4.7 percent for whites), largely because they
tend to live in family arrangements that are most
conducive to poverty. Black men are dispropor-
tionately in the group of unrelated individuals
(those not living with other relatives), and black
women are far more likely than women of other
racial or ethnic groups to maintain families
themselves. Women who maintain families had
the highest poverty rates of any of the major
groups shown in table 1—nearly 18 percent.
The poverty situation for black workers is exac-
erbated by their relatively low levels of educa-
tional attainment (employed blacks are almost 50
percent more likely than whites not to have com-
pleted high school) and the resultant low earnings.

Nonagricultural wage and salary workers
made up the bulk of the working poor, although
10 percent had been employed in agriculture, an
industry with a poverty rate four times that of



the nonagricultural sector. Twelve percent were
self-employed, possibly reflecting work in some
very small-scale enterprises.*

The labor market problems that poor workers
experience are quite different from those of non-
poor workers. Nearly half of the working poor
experienced unemployment at some time during
1987, while only 1 in 8 of the nonpoor did so.
(See table 2.) And the median number of weeks
of unemployment was much higher for the poor
than the nonpoor workers—26 versus 13 weeks.
Also, relative to nonpoor workers, poor workers
were nearly four times as likely to have been
limited, for at least part of the year, to working
part time when they would have preferred full-
time work.

Nevertheless, these labor market problems,
by themselves, generally did not make workers
poor. Among both the unemployed and invol-
untary part-time workers, nonpoor persons out-
numbered poor persons by 44 to 1. In fact, the
nonpoor even predominate among those unem-
ployed for half a year or more.

Aside from experiencing unemployment or
being limited to involuntary part-time work, the
working poor have a strong tendency to work in
jobs that pay low wages. Previous research sup-
ports the contention that low pay may be the
primary cause of poverty among workers. In a
1976 study, Frank Levy addressed the effect of
unemployment, measured in terms of work-
hour losses, on the earning levels and poverty
status of workers.> Levy found that merely in-
creasing the number of hours for which poor
workers were paid (at their usual wage rate)
would have removed few of their families from
poverty status. Many of the workers who had
lost work due to unemployment or were unable
to get full-time work were in poverty primarily
because their jobs paid low wage rates.

The situation reflects the workings of low-wage
labor markets. Unemployment and involuntary
part-time work do not occur randomly across
the earnings spectrum. Unemployment, particu-
larly, is most common among workers who
have low-wage jobs, as is evident from data on
the rates of joblessness in individual occupations.

The significance of low earnings

Determining the prevalence of low earnings
among poor and nonpoor workers involves
defining exactly what is meant by low earnings,
establishing a cutoff line, and then applying the
cutoff to the available data on earnings. Infor-
mation is collected in the March cps supplement
on annual earnings in the prior calendar year,
along with weeks worked and usual hours
worked. Using these data, past BLS analyses on
labor market hardship have focused on the earn-

TJ

Table 1. Characteristics of poor and nonpoor workers,
7

{Numbers in thousands]

Poor workers Nonpoor workers
Characteristic roey
Number | Percent | Number | Percent
‘Age, sex, and race
Total, 16 years and over . 6400 | 1000 | 107,089 | 1000 | 56
16 to 19 years 494 77 4,275 40 10.4
20 t0 24 years 1175 | ta4 | 11ea7 | 344 90
25 to 54 yoars : 4163 | 650 | 76490 | 714 | 52
55 years and over... sss... | 568 a9 | 14487 | 135 | 38
Men. 3sse | sea | 6002] seo | 53
Women 3oss | 477 | 47067 | 440 | 61
Write. 4ea7 | 726 | 93669] 874 | 47
Black... 1567 | 245 | 029 | 96 | 192
Family relationship
Husbands 6.6... 2.eescees 1669 | 261 | 38088] 956 | 42
Wives o.oo vcccneee a5 | to7 | 2714] 253 | 25
Women who maintain families .....| 1001 | 170 | sora] 47 | 177
Men who maintain families . 158 25 | 1957] 17 | 78
Others in families... 134 | wo7i| 19 | 48
Unrelated individuals»... 3o3 | 17986] 167 | 98
Education
Fewer than 4 years of high school .. | 2,466 | 385 | 16051 | 150 | 133
4 years of high school. 2620 | 409 | 43355 | 405 | 57
1 10 3 years of college 367 | 135 | 2225} 207 | 38
4 years of collage or more. 487 70 | 25468 | 238 17

1 The number of poor workers as a percent of all workers who spent 27 weeks or more in the labor
force in 1987.

Note: Because of rounding, sums of individual items may not equal totals.

ings of full-time, year-round workers, identify-
ing them as “low-wage” workers if their yearly
earnings fell below the Federal minimum hourly
wage multiplied by 2,000.

The methodology was changed for this article
for two reasons. First, we wanted to examine
the earnings of workers who worked less than
year round, particularly because so many of the
working poor experienced unemployment. Sec-
ond, the number of workers employed at the
Federal minimum wage, set at $3.35 since 1981,
has been gradually declining as nominal wages
have increased. The resulting drop in the num-
ber and proportion of minimum-wage workers
does not necessarily mean that low earnings are
any less of an issue as an employment problem.

The major goal in defining a more relevant
low-earnings level was to choose a method that
accepted the minimum wage as an important
indicator of society’s view of low wages, but
also allowed analytically meaningful compari-
sons to be made over time. There is no one
method which lends itself to this end, and, cer-
tainly, the choice of methodologies largely de-
termines the number of low earners that the
analysis will identify. (See the appendix for a
discussion of the sensitivity of the number of
low earners to several low-wage options.)

Monthly Labor Review October 1989 5

ee