Low-Wage Workers: Poverty and Use of Selected Federal Social Safety Net Programs Persist among Working Families
Released: 2017-10-23T00:00:00


Highlights: section_title: Why GAO Did This Study
paragraphs: According to the Department of Labor, private-sector employers have added millions of jobs to the economy since the end of the most recent recession in 2009; however, many are in low-wage occupations. GAO was asked to examine several characteristics of low-wage workers and their families, including their use of federally funded social safety net programs over time.

This report answers the following questions: (1) What are the characteristics of the low-wage workforce and how have they changed over time? (2) To what extent are families with low-wage workers in poverty? and (3) To what extent do families with low-wage workers participate in selected social safety net programs and what factors affect their participation?

GAO analyzed CPS data from 1995, 2000, 2005, 2010, 2015, and 2016 on worker characteristics, family poverty, and participation in social safety net programs. GAO defined low-wage workers as those workers ages 25 to 64 earning $16 or less per hour. In addition, GAO interviewed officials with state and local social safety net programs and other experts in four metropolitan areas—Atlanta, San Francisco, Santa Fe, and Washington, D.C.—representing a range of local minimum wage levels relative to the federal minimum wage, costs of living, and participation rates in five selected federally funded social safety net programs.

section_title: What GAO Found
paragraphs: According to GAO's analysis of data in the Census Bureau's Current Population Survey (CPS), on average, low-wage workers worked fewer hours per week, were more highly concentrated in a few industries and occupations, and had lower educational attainment than workers earning hourly wages above $16 in each year GAO reviewed—1995, 2000, 2005, 2010, 2015 and 2016. Their percentage of the U.S. workforce also stayed relatively constant over time. About 40 percent of the U.S. workforce ages 25 to 64 earned hourly wages of $16 or less (in constant 2016 dollars) over the period 1995 through 2016. The combination of low wages and few hours worked compounded the income disadvantage of low-wage workers and likely contributed to their potential eligibility for federal social safety net programs.

About 20 percent of families with a worker earning up to the federal minimum wage (currently $7.25 per hour), 13 percent of families with a worker earning above federal minimum wage to $12.00 per hour, and 5 percent of families with a worker earning $12.01 to $16 per hour were in poverty in each year GAO reviewed (see figure).The extent of poverty varied considerably by the type of family in which a worker lived. For example, single-parent families earning the federal minimum wage or below comprised a higher percentage of families in poverty. In contrast, married families with no children comprised the lowest percentage of families in poverty, and generally had family incomes at or above the poverty line.

Note: All references to the “federal minimum wage” are based on 110 percent of the hourly federal minimum wage in effect that year or the equivalent hourly calculated wage for salaried workers. Brackets are used to represent margins of error of estimated percentages at a 95 percent confidence level.

Families with a worker earning $16 or less per hour consistently used selected federally funded social safety net programs between 2005 and 2016, with varied factors affecting eligible families' participation. GAO estimated that the percentage of these families enrolled in Medicaid rose significantly over the past 2 decades, almost tripling among families with a worker earning more than the federal minimum wage between 1995 and 2016. In contrast, an estimated 5 percent or less of these families received cash assistance from the Temporary Assistance for Needy Families (TANF) program at least once in the prior calendar year from 1995 through 2016. A low-wage worker's family type also influenced the extent that families used selected social safety net programs. For example, among families with minimum wage earners in 2016, GAO estimated that about half or more married families used none of the programs GAO examined—Medicaid, TANF, Supplemental Nutrition Assistance Program, Earned Income Tax Credit, and Additional Child Tax Credit—while more than half of single-parent families used three or more. Program officials and others told GAO that eligible working families may not participate in programs for a variety of reasons, including time needed to apply for benefits, low benefit amounts, and assumed ineligibility.

section_title: Letter
paragraphs: According to the Department of Labor, private-sector employers have  added millions of jobs to the economy since the end of the most recent  recession in 2009; however, much of this job growth has been  concentrated in low-wage occupations that are less likely to provide full- time hours or employer-sponsored benefits. As a result, some workers  may face difficulty earning enough to meet their families’ basic needs.

Although working families may have one or more employed workers, a  family’s combined income, if reliant on employment in low-wage  occupations, may keep the family in poverty. The Census Bureau  (Census) recently reported that 11.3 percent of families and 6.3 percent  of workers, including 2.4 percent of full-time workers, were in poverty in  2015. We previously reported that most people in poverty lived in  households with at least some earnings. By being in poverty, these  workers and their families may be eligible to participate in one or more  federally funded social safety net programs provided any other applicable  eligibility requirements are also met. These programs assist low-income  individuals and families with cash aid, food, shelter, health care, and other  support. Some programs are administered by the federal government;  others are administered by states.

You asked us to examine several aspects of low-wage workers and their  families including their use of federally funded social safety net programs  over time. In this report, we answer the following questions: (1) What are  the characteristics of the low-wage workforce and how have they  changed over time? (2) To what extent are families with a low-wage  worker in poverty? and (3) To what extent do families with a low-wage  worker participate in selected social safety net programs and what factors  affect their participation?

To answer these questions, we analyzed data from 1995 through 2016  included in the Current Population Survey (CPS)—a national survey  designed and administered jointly by Census and the Bureau of Labor  Statistics (BLS) that serves as a key source of official government  statistics on employment and unemployment in the United States. After  discussions with Census and BLS officials, we selected the CPS and a  supplemental CPS survey—the Annual Social and Economic Supplement  (ASEC)—as the data sources best suited to answer our research  questions because together they included hourly wage data, large sample  sizes, data over time, and data on eligibility for and participation in social  safety net programs. We selected these years to provide a historical view  of the workforce at certain points in time extending across 2 decades. We  assessed the reliability of the CPS and ASEC data by reviewing data  documentation and interviewing officials at BLS and Census who use and  maintain the dataset. We determined that the data from these sources  were reliable for the purposes of our report. For the purposes of our  analysis, we defined a “worker” as a wage or salary earner ages 25 to 64  in the civilian labor force with positive weekly earnings. We defined a “low  wage” worker to be an individual who earned $16 per hour or less,  measured in constant 2016 dollars. We divided low-wage workers into  three mutually exclusive categories, based on their estimated hourly  wages:  federal minimum wage or below; above federal minimum wage to $12.00; and $12.01 to $16.00.

For the first objective, we used CPS and ASEC data to describe selected  characteristics of low-wage workers, including the industries in which they  worked, their occupations, the number of jobs that they held, and the  number of hours that they worked. To determine if the characteristics of  low-wage workers changed over time, we examined these variables using  every fifth year of data from 1995 to 2015 (i.e., 1995, 2000, 2005, 2010,  and 2015), as well as the most recent CPS data from 2016.

For the second objective, because poverty is determined on the basis of  annual family income we used “families” as the unit of analysis. We  examined four different types of families with a low-wage worker: (1)  married families with children; (2) married families without children; (3)  single-parent families with children; and (4) other families. The “other  families” category covers a wide variety of living situations, such as single  adults living alone, but does not include married couples or a single  parent living with children. We determined the extent of poverty among  families with a low-wage worker using CPS variables on two poverty  measures—the official poverty measure and the Supplemental Poverty  Measure (SPM). Our dataset derived from CPS data included families  with at least one low-wage worker. We placed families with more than  one low-wage worker in one or more of the categories we examined,  depending on that worker’s wages. For example, we included the family  in both groups if a family had low-wage workers in more than one  category (such as a worker earning the federal minimum wage and a  worker earning between $12.01 and 16). To estimate the number and  percentage of families in our sample that were in poverty, we relied on the  CPS poverty variable which uses a modified poverty index adopted by a  Federal Interagency Committee in 1969 to provide a range of income  cutoffs or “poverty thresholds” adjusted to take into account family size,  number of children, and age of the family householder or unrelated  individual. We calculated the percentage and number of these families in  poverty in each of the 6 years we analyzed from 1995 through 2016.

For the third objective, we used the same CPS dataset on families with a  low-wage worker to examine the extent to which families with a low-wage  worker participated in five social safety net programs for low-income  individuals: (1) Medicaid (health care); (2) the Supplemental Nutrition  Assistance Program (SNAP) (formerly food stamps); (3) Temporary  Assistance for Needy Families (TANF) (cash assistance); (4) the Earned  Income Tax Credit (EITC); and (5) the Additional Child Tax Credit  (ACTC). We selected these five programs because they were large or  well known, and were included in the CPS data. For each of the selected  programs, we determined the number and types of families in each of our  three wage categories that, according to CPS, reported participating in  the program. We also analyzed whether families with a low-wage worker  participated in more than one of these programs and which combinations  of programs they used. We compared our results to existing reports, and  interviewed staff at BLS and Census. To examine what is known about  the reasons eligible working families do not participate in these selected  programs, we conducted a literature review and interviewed public policy  researchers and officials at state and local benefit agencies and/or  community nonprofit organizations, including interviews in four  metropolitan areas. We selected four locations—Atlanta, San Francisco,  Santa Fe, and Washington, D.C.—because they represented a range of  local minimum wage levels relative to the federal minimum wage, costs of  living, and participation rates in our five selected social safety net  programs. The content of our interviews and literature review is not  generalizable, but provides examples of factors affecting working families  who are eligible for, but do not receive assistance from social safety net  programs.

Although CPS is a widely used source of labor force information, it is  important to note that these data have some limitations. CPS is self- reported survey data collected from a probability sample. We did not  independently verify the accuracy of the self-reported data. Specifically,  CPS data on program participation are known to be underreported, for  reasons that are not fully understood. In addition, Census officials told us  that CPS data on EITC and ACTC are modeled on who would be eligible  rather than reported participation in these tax credit programs. All  estimates produced from samples, such as the CPS data, are subject to  sampling error. In addition to percentage estimates, we calculated  margins of errors and include them in figures and tables. We include  standard errors associated with certain poverty and program participation  estimates in appendix II. The differences we discuss are statistically  significant unless otherwise noted. For additional information on the  methodology used in this report, see appendix I.

We conducted this performance audit from May 2016 to September 2017  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.
subsections: section_title: Background
subsections: section_title: Federal Minimum Wage
paragraphs: The lowest wage that a worker can earn is generally the federal minimum  wage. The Fair Labor Standards Act of 1938 first established a minimum  wage of 25 cents per hour, which has been raised numerous times  eventually reaching its current level of $7.25 per hour. Since 1980 the  federal government has increased the federal minimum wage various  times; however, the actual purchase power after adjusting for inflation  (i.e., the real value) of the minimum wage has trended downward (see fig.  1).

Many states have enacted their own minimum wage laws, and under the  provisions of the Fair Labor Standards Act of 1938, an individual is  generally covered by the higher of the state or federal minimum-wage  rates. As of January 1, 2017, according to the Department of Labor, 29  states and the District of Columbia had minimum wage rates above the  federal minimum rate, and 2 states had minimum wage rates below the  federal minimum rate. State minimum wages ranged from $5.15 per hour  in Georgia and Wyoming to $11.50 per hour in the District of Columbia  (see fig. 2).

According to BLS data, hourly workers earning at or below the federal  minimum wage of $7.25 per hour made up 1.6 percent of total wage and  salary workers.in 2016. The number of minimum wage workers since  1995 ranged from a low of 1.7 million in 2006 to a high of 4.8 million in  1997 (see fig. 3).

According to BLS, more than one-half of hourly workers earning the  federal minimum wage were employed part-time in 2016, in contrast to  about one-quarter of all hourly workers. By working part-time—defined by  BLS as 1 to 34 hours per week—these workers are less likely to receive  health insurance and other benefits from their employers. Research has  also shown that many contingent workers, including some part-time  workers, experience fluctuations in their earnings and employment status,  making them more likely to seek assistance from federally funded social  safety net programs, if eligible.

section_title: Poverty Measurement
paragraphs: As we previously reported, the official poverty measure used to provide  information on how many people are “in poverty” in the United States was  developed in the 1960s, based on the cost of food at that time. Each  year Census updates its poverty thresholds—the income thresholds by  which households are considered to be in poverty depending on family  size. In 2016, the poverty thresholds ranged from $11,511 to $53,413,  depending on family size and the age of the head of household (see table  1).

The Department of Health and Human Services (HHS) uses these  poverty thresholds to update its poverty guidelines each year. These  guidelines are used as an eligibility criterion of a number of federal  programs, including certain low-income programs.

We also previously reported that the official poverty measure had not  changed substantially since it was first developed, and concerns about its  inadequacies had resulted in efforts to develop a new measure. For  example, poverty threshold (the income level used to determine who is “in  poverty” each year) is based on three times the cost of food and does not  take into account the cost of other basic necessities, such as shelter and  utilities. Additionally, the official poverty measure considers cash income  in determining a household’s income, but does not include additions to  income based on the value of noncash assistance (e.g., food assistance)  or reductions based on other necessary living expenses (e.g., medical  expenses or taxes paid). A National Academy of Sciences panel on  poverty and an interagency technical working group suggested ways that  a new poverty measure could address some of these concerns. Based on  these suggestions, Census, with support from BLS, developed a new  poverty measure—the Supplemental Poverty Measure (SPM)—in 2010.  Unlike the official poverty measure, the SPM adds other forms of non- cash benefits, such as tax credits and SNAP benefits, and subtracts  expenses, such as federal, state, and local income taxes, when  calculating a household’s resources.

section_title: Federally Funded Social Safety Net Programs
paragraphs: We have previously reported that federally funded social safety net  programs generally provide targeted assistance to specific groups within  the low-income population, such as people with disabilities and workers  with children. In 2015, we identified more than 80 federal programs  (including 6 tax expenditures) that provided aid to individuals and families  who may earn too little to meet their basic needs, cannot support  themselves through work, or are disadvantaged in other ways. According  to the Congressional Research Service, five of these programs— Medicaid, SNAP, TANF, EITC, and ACTC—accounted for $551.2 billion  in spending in fiscal year 2015, or two-thirds of total federal spending on  low-income assistance programs in that year.

Eligibility criteria vary for these five federally funded programs and can  include both financial and nonfinancial criteria. As we have previously  reported, some programs are administered by states, which may apply  their own eligibility criteria. Assistance may be provided to an individual,  a family, or household. More recently, we reported that these programs’  eligibility criteria varied significantly in terms of the income limits used.  In addition, we found that programs differed in the ways they measured  applicants’ income, the standards and methods used to determine the  income limit (i.e., the maximum income an applicant may have and still be  eligible for the program), whether this limit is set nationwide or varies by  state or locality, and the amount of the income limit itself. We also found  that rules for determining the maximum allowable income that an  applicant may have a recipient could earn and still be eligible, the  amounts themselves, and whether they are set nationwide or vary by  state or locality, also varied significantly. For example, in TANF, income  limits are determined by states. We found that some states use HHS’s  poverty guidelines, which are adjusted annually, while others had a limit  set in state law, which is not adjusted. In addition to having income tests,  we found that some programs limit assets that an eligible individual or  family may hold, while others do not. Furthermore, we found that  programs may have ongoing requirements that families must satisfy to  remain enrolled and receiving assistance. For example, we found that  some programs periodically require participants to recertify that their  income remains below the income limit.

section_title: Characteristics of the Low-Wage Workforce Changed Little from 1995 through 2016
subsections: section_title: Low-Wage Workers Comprised About 40 Percent of the U.S. Workforce Ages 25 to 64
paragraphs: About 40 percent of U.S. workers ages 25 to 64 earned hourly wages of  $16 or less (in constant 2016 dollars) over the period 1995 through 2016,  according to our analysis of CPS data (see fig. 4). In each of the 6 years  we reviewed, an estimated 1 to 5 percent of these workers earned an  hourly wage or less of that year’s federal minimum wage, about 17  percent earned above federal minimum wage to $12 per hour, and about  18 percent earned above $12 per hour to $16 per hour.

The stagnation of low-wage workers in the workforce as depicted in our  analysis of CPS data is also consistent with the literature on income  inequality. Recent studies have found that while average wages  experienced little or no change from 1973 through 2011 (when held in  constant 2011 dollars), income inequality increased as a result of income  growth among high-wage workers.

section_title: Limited Hours Compounded Low-Wage Workers’ Income Disadvantage
paragraphs: Low-wage workers, on average, worked fewer hours per week from 1995  through 2016 than similar workers earning higher wages, according to our  analysis of CPS data. In each of the years we reviewed, our estimates  showed that workers who earned the federal minimum wage or less  worked an average of about 30 hours per week, workers earning above  the federal minimum wage to $12 per hour worked an average of about  33 hours per week, and those earning $12.01 to $16 per hour worked an  average of about 37 hours per week (see fig. 5).

One option that a worker has to increase earnings is working multiple  jobs. Our analysis of CPS data found that few low-wage workers held  multiple jobs and low-wage workers tended to work multiple jobs at the  same rate as workers earning higher wages. Specifically, our estimates  showed that about 5 percent of low-wage workers in each low-wage  category worked multiple jobs, or about the same percent as workers  earning more than $16 per hour in each of the years we reviewed.

The combination of low wages and limited hours can affect a worker’s  earnings and potential eligibility for federal social safety net programs.  The reported growth of involuntary part-time workers—workers who  would prefer to work more hours but are limited by economic conditions  such as employers cutting hours or lack of full-time job opportunities—has  likely reduced the average hours that low-wage workers can work.  According to BLS, the number of these involuntary part-time workers  peaked during the Great Recession and has yet to return to pre-recession  levels. In 2016, BLS estimated that 5.6 million workers were involuntary  part-time workers, of which about 61 percent said they were part-time  because of business conditions and 34 percent said they could only find  part-time employment. In previous reports, we found that low-wage  workers employed on a contingent basis were more likely to earn low  wages, less likely to have employer-sponsored benefits, and more likely  to rely on social safety net programs. Low-wage workers who provide  the sole income for a family may have income that is low enough to  qualify them for federally funded social safety net programs. As shown in  table 2, a hypothetical low-wage single parent who served as the sole  income provider for a family of three would qualify for several programs of  the five that we included in our analysis provided any other applicable  eligibility requirements were also met.

section_title: Low-Wage Workers Remained Highly Concentrated in Five Industries and Six Occupations
paragraphs: The same five industries consistently employed the majority of low-wage  workers from 1995 through 2016—leisure and hospitality, education and  health, professional and business services, wholesale and retail trade,  and manufacturing. Specifically, in each of the years we reviewed, these  five industries employed approximately 70 percent of low-wage workers.  Comparatively, these five industries also employed about 62 percent of  workers earning more than $16. (See fig. 6). Our estimates showed the  highest concentration of low-wage workers to be in the health and  education industry with an estimated 22 to 25 percent of workers in each  of our wage categories in this industry.

Occupational Concentration of Low-Wage Workers  The following six occupational categories employed the majority of low-wage  workers:  Food preparation and serving - fast food workers, cafeteria, and restaurant  workers

Sales - cashiers, retail salespersons, and sales representatives

Office and administrative support - secretaries and administrative  assistants, payroll and time-keeping clerks, and mail carriers

Building grounds cleaning and maintenance - janitors and building keepers,  maids and housekeeping workers, and grounds maintenance workers

Personal care and service - hairdressers and barbers, child care workers,  and home care aides  Transportation and materials moving - bus drivers, taxi drivers, ambulance  drivers, and parking lot attendants  Low-wage workers were also highly concentrated in six occupational  categories in 2016—food preparation and serving, sales, office and  administrative support, building and grounds cleaning and maintenance,  personal care and service, and transportation and material moving. (See  textbox above for more detailed descriptions of these occupational  categories). Our estimates showed that half or more of low-wage workers  were employed in one of these six occupational categories in 2016  whereas 26 percent of higher-wage workers were employed in these  categories (see fig. 7).

Although low-wage workers were concentrated in these six occupations,  the amount of concentration varied by the amount of wages earned. For  example, our estimates showed that workers earning hourly wages of  federal minimum wage or below in 2016 were most concentrated in  personal care and services, sales, and food service and preparation, with  an estimated 11 to 12 percent of these workers participating in each  occupation. In contrast, our estimates showed that workers earning  $12.01 to $16 per hour were concentrated in office and administrative  support occupations, with an estimated 18 percent of these workers  participating in this occupation.

section_title: Increases in Educational Attainment Have Not Led to Higher Wages
paragraphs: While low-wage workers had lower levels of education, on average, than  workers earning higher wages, increases in their educational attainment  from 1995 through 2016 generally did not lead to higher wages.  Specifically, in each year we reviewed, about 68 percent of low-wage  workers and about half of higher-wage workers had a high school  diploma. However, the proportion of low-wage workers with college  degrees also increased during this time. Our estimates showed that the  percentage of workers earning $12.01 to $16 per hour with college  degrees increased from 16 percent in 1995 to 22 percent in 2016. A  similar trend occurred in the other low-wage categories. For example, the  percentage of workers who had at least a high-school diploma yet earned  the federal minimum wage or below increased from an estimated 70  percent in 1995 to 80 percent in 2016.

section_title: Poverty Persisted among Working Families, Affecting Those with Minimum Wage Earners and Children the Most
paragraphs: Families with a low-wage worker ages 25 to 64 shared several common  characteristics, according to our estimates based on CPS data. For  example, our estimates showed that the majority of these families were  not in poverty, had just one low-wage worker, and derived 80 percent or  more of their family income from wages and salaries. In addition, on  average, married families had two workers (contributing to a family  income that often exceeded the poverty threshold); families with children  had two children; and between 5 and 9 percent of families included  someone over age 65.
subsections: section_title: Percentage of Working Families in Poverty Has Remained Relatively Constant
paragraphs: The majority of families with a low-wage worker were not in poverty, yet  the percentage of families that were in poverty persisted in each of the  years we reviewed and in each of the low-wage categories we  examined. While higher wages were generally associated with a lower  percentage of families in poverty in a given year, poverty levels among  families of low-wage workers changed little in the past 2 decades across  all three wage categories that we examined. (See fig. 8.)

section_title: Poverty Was Most Prevalent among Families with Minimum Wage Earners and Children
paragraphs: In almost all of the years we reviewed, the presence of a child in a family  with a low-wage worker was associated with higher rates of poverty  regardless of the worker’s wage category or marital status. For example,  across all low-wage categories we examined from 1995 through 2016, 4  to 20 percent of married families with children were in poverty compared  to 7 percent or fewer of married families without children. However, in  1995 the higher rate of poverty was not statistically different based on  children for unmarried households in all of the wage categories. In  addition, while poverty was most prevalent among families with a worker  earning the federal minimum wage or below, it was most prevalent among  single-parent families earning this amount. (See fig. 9.)

Our analysis of CPS data found sizeable percentages of families with a  low-wage worker who had incomes just above the poverty threshold,  potentially limiting their access to certain federal social safety net  programs. The estimated percentage of families with incomes placing  them just beyond the poverty thresholds remained relatively unchanged  across the years we reviewed (see table 3).

section_title: Families of Low- Wage Workers Consistently Use Certain Federal Social Safety Net Programs, but Several Factors May Limit Eligible Families’ Use
paragraphs: Families with a low-wage worker may be eligible for and use one or more  federal social safety net programs. The largest of these programs is  Medicaid, which HHS reported had 69 million individuals enrolled in April  2017. Our estimates based on CPS data found that the percentage of  families with a low-wage worker enrolled in Medicaid rose significantly  over the past 2 decades, almost tripling for families with a worker earning  more than the federal minimum wage between 1995 and 2016 (see fig.  10). In 2016, about 29 percent of families with a worker earning federal  minimum wage or below, 31 percent of families with a worker earning  above federal minimum wage to $12 per hour, and 21 percent of families  with a worker earning $12.01 to $16 per hour were enrolled in Medicaid.  This growth in enrollment coincided with a rise in overall Medicaid  enrollment (i.e., not just families with a low-wage worker), which  according to HHS, doubled during this time frame. Researchers have  noted that key factors affecting the growth in Medicaid enrollment in the  past decade were the 2008 recession and the expansion of Medicaid in  some states under the Patient Protection and Affordable Care Act.

Families with a low-wage worker may also be eligible for and use other  federal social safety net programs (e.g., TANF, SNAP, EITC, and ACTC).  Our estimates showed that 5 percent or less of families with a low-wage  worker received TANF cash assistance at least once in the prior calendar  year from 1995 through 2016. In previous work, we reported that as of  July 2015, TANF income eligibility thresholds for a family of three ranged  from $0 to $1,660 per month, depending on the state, with a median  income threshold of $817. Given these thresholds, most low-wage  workers, including workers earning federal minimum wage or below,  would generally earn too much to qualify for TANF cash assistance in  most states. In this report, our estimates showed that the percentage of  families with a worker earning more than the federal minimum wage  receiving SNAP benefits at least once in a calendar year doubled from  1995 to 2016. In 2016, about 16 percent of families with a worker earning  federal minimum wage or below, 15 percent of families with a worker  earning above federal minimum wage to $12 per hour, and 8 percent of  families with a worker earning $12.01 to $16 per hour received SNAP  benefits. The U.S. Department of Agriculture (USDA), which administers  SNAP, has reported that the overall increase in SNAP enrollment from  1995 to 2014 was influenced by economic conditions, such as higher  poverty rates during recessionary periods, and policy changes, such as  increases the value of a vehicle that could be excluded when calculating  a family’s income. Finally, our estimates showed that EITC eligibility  generally increased among families with a worker earning above federal  minimum wage over this time frame, with an estimated 23 to 35 percent  of those families eligible in 2016; whereas eligibility for the ACTC  generally remained unchanged among families with a low-wage worker.

A low-wage worker’s family type also influenced the extent that families  used social safety net programs. When comparing program usage across  different family types, we generally found that regardless of the low-wage  workers’ wages, a greater percentage of single-parent families used  selected programs than the other family types we examined. For  example, among families with a worker earning federal minimum wage or  below in 2016, our estimates showed that two-thirds of married families  without children and about half of married families with children used  none of the aforementioned programs. In contrast, more than half of  single-parent families used three or more of the programs (see fig. 11).
subsections: section_title: Several Factors May Affect Eligible Families’ Participation in Social Safety Net Programs
paragraphs: Agencies that administer the selected social safety net programs  indicated that eligible working families participate in these programs at a  lower rate than the total eligible population for reasons that are not well  known. For example, IRS reported that in 2013, 80 percent of eligible  filers—all of whom had earnings—claimed the EITC, with state rates  ranging from 72 percent in the District of Columbia to 85 percent in  Hawaii. Additionally, USDA estimates show that a significantly smaller  percentage of eligible households with a wage earner participated in  SNAP than other eligible households—70 percent compared to 83  percent in fiscal year 2014. Although some research has examined the  reasons why eligible people choose not to participate in social safety net  programs, our literature review found few studies that focused specifically  on working families rather than the general eligible population, none of  which had findings that were generalizable to the experiences of working  families nationwide.

Our interviews with state and local officials for the selected social safety  net programs, representatives from nonprofit organizations, and  researchers helped provide additional context for the experiences of  working families. Specifically, the officials we interviewed identified  several reasons why families with a low-wage worker may decline to  participate in assistance programs for which they are eligible.

Assumed ineligibility. Some workers may assume that earning  income at a job automatically makes them ineligible for benefits, even  if their earnings are low enough to qualify for assistance. A program  official in Atlanta told us that eligible families are generally aware of  the existence of a program, but assume they have to hit “rock bottom”  before they can qualify for assistance. A researcher also told us that  families that had exceeded the eligibility threshold in the past may  assume they remain ineligible, even if their income has decreased.

Lack of time. Some workers may find it difficult to take time off from  work to apply for benefits in person at a program office, if required.  Some states have implemented online or phone application processes  to make programs more accessible to working families. However, as  a nonprofit director in Santa Fe cautioned, not all families have  Internet access and the proficiency required to complete an  application online.

Complex program requirements. Some families may find program  documentation requirements complex and difficult to fulfill. For  example, the state TANF application in one city we reviewed requires  applicants to provide information verifying their earned and unearned  income, money in the bank, immigration status, identity, vehicle  registration, and immunizations of children under 7 years of age.  Other program documents state that beneficiaries must also resubmit  financial information, along with verification of their children’s school  attendance, semi-annually or whenever changes occur that would  affect their eligibility. Researchers have found that recent changes in  the SNAP income documentation requirements, such as requiring less  frequent recertification of income and eligibility, increased participation  and retention of SNAP benefits. In addition, some states have   combined applications for TANF, SNAP, and/or Medicaid into a single  form, reducing the amount of paperwork that applicants must  submit.

Stigma. Some working families may be especially sensitive to the  stigma associated with some social safety net programs, because  their earnings did not make them as self-sufficient as they hoped. To  avoid this stigma, according to several officials we interviewed,  eligible working families may choose not to participate in a program if  their income is sufficient for them to survive without assistance. For  example, a 2007 study of 115 EITC recipients in the Boston area  found that respondents who had received TANF benefits desired to  leave the program as soon as possible. In contrast, according to a  caseworker in San Francisco, while unemployed families face the  same stigma, they cannot afford to refuse any benefits for which they  qualify.

Minimal benefit amounts. SNAP, TANF, EITC, and ACTC have  means-tested structures that may reduce benefit levels as recipients’  incomes increase. Several officials told us that at some point the  benefits may become too small to be worth the effort of obtaining  them. For example, a study of low-income customers of a large tax  preparation service in two counties in California during the 2007 tax  season found that 16 percent of those who had previously applied for  SNAP had stopped pursuing the benefits because the “hassle was not  worth it.”

Confusing tax rules. Some families may find the process of claiming  the EITC and ACTC on their tax returns to be confusing. For example,  a nonprofit director in the District of Columbia told us that applying for  these tax credits can be complex, especially the requirements for  qualifying children and filing status, and families claiming the credits  may need high quality and costly assistance to prepare their taxes. To  help mitigate this complexity, IRS encourages individuals who may  qualify for the tax credits to visit one of the more than 12,000 free tax  help locations across the country, but this task may also interfere with  some individuals’ working hours.

section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to the Secretary of Labor and the  Secretary of Commerce for comment. Each agency provided technical  comments, which we incorporated in the report, as appropriate.

As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the Department of Labor,  the Department of Commerce, and other interested parties. In addition,  the report will be available at no charge on the GAO website at  http://www.gao.gov.

If you or your staff have any questions about this report, please contact  Cindy Brown-Barnes at (202) 512-7215 or Oliver Richard at (202) 512- 8424.You may also reach us by e-mail at brownbarnesc@gao.gov or  richardo@gao.gov. Contact points for our Offices of Congressional   Relations and Public Affairs may be found on the last page of this report.  GAO staff who contributed to this report are listed in appendix IV.

section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: Our review focused on the following questions: (1) what are the  characteristics of the low-wage workforce and how have they changed  over time, (2) to what extent are families with low-wage workers in  poverty, and (3) to what extent do families with low-wage workers  participate in selected social safety net programs and what factors affect  their participation.
subsections: section_title: Analysis of Current Population Survey Data
paragraphs: After discussions with agency officials, we identified the Current  Population Survey (CPS) as the data source best suited to answer our  research questions. The CPS is a national survey designed and  administered jointly by the Census Bureau (Census) and the Department  of Labor’s Bureau of Labor Statistics (BLS) and it contains data on  individual earnings, as well as poverty rates of families and individuals.  CPS is a key source of official government statistics on employment and  unemployment in the United States and is the data source for several  BLS and Census reports addressing issues similar to those in our  objectives. For example, it is used to produce a BLS report on the  characteristics of minimum wage workers and a Census report on the  supplemental poverty rate.

The CPS is conducted on a monthly basis, but different questions are  asked in different months during the year. Respondents are surveyed  over two separate 4-month periods. Information on hourly wages and  other labor force topics are collected on a monthly basis of a sub-sample  of respondents. Information on poverty, program participation and income  over the prior calendar year is collected annually in the Annual Social and  Economic Supplement (ASEC), conducted in March. In consultation with  Census officials, we combined information on hourly wages and poverty  and program participation, by linking respondents of the ASEC to the  months those respondents answered questions about hourly wages  (March, April, May, and June). We used the CPS years 1995, 2000,  2005, 2010, 2015 and 2016.

Estimates produced from CPS data are subject to sampling error. For all  of our estimates we weighted observations based on the monthly weight  and generated standard errors under the assumption of with replacement  sampling using state as a stratification variable. To the extent possible,  we compared our estimates of values published by Census derived from  our weighting procedures and standard errors to reported values for that  year and found them to be consistent. In addition to estimates, we  generated standard errors or the margin of error for the 95 percent  confidence interval, and report them with estimates in figures and tables.  Based on our data checks, review of documentation and interviews with  agency officials, we found the CPS data to be sufficiently reliable for our  purposes. However, our method of estimating variance results in standard  errors that are relatively conservative; that is, the 95 percent confidence  intervals are wider than those resulting from the use of replicate weights.
subsections: section_title: Analysis of Low-Wage Workers
paragraphs: We relied on the monthly CPS information to obtain information about  individual hourly wages to determine whether an individual was a low- wage worker. We relied on estimated hourly wages to determine the  wage rate of salaried individuals, though in some cases we used reported  hourly wages; to estimate hourly wages we used a method provided by  BLS economists. This method included observations of (1) workers who  reported an hourly wage and (2) salaried workers who reported weekly  wages. We included both types of workers in our sample to obtain a  broader spectrum of low-wage workers. This method also takes into  account potential overtime hours worked and individuals working multiple  jobs. We identified three mutually exclusive categories of low-wage  workers earning:

110 percent of the federal minimum wage or below (salaried and  hourly). This group consisted of workers that earned 110 percent of  the federal minimum wage or below (based on the federal minimum  wage in each of the years that we reviewed).

Above 110 percent of the federal minimum wage to $12.00. This  group consisted of workers that earned above110 percent of the  federal minimum wage in that year but not more than $12.00 (in  constant 2016 dollars). $12.01 to $16.00. This group consisted of workers that earned  between $12.01 and $16.00 (in constant 2016 dollars).

To define these groups, we only included workers ages 25 to 64—a  definition used in prior GAO work on the low-wage workforce. We used  this definition to ensure that our sample included workers who were more  likely to be independent, out of school, and less likely to be earning a  retirement pension.

For the groups described above, we reported the following statistics:  occupation, industry, whether an individual worked multiple jobs,  education level, and total number of hours worked at all jobs.

section_title: Analysis of Families with a Low-Wage Worker
paragraphs: As stated above, we relied on the ASEC to obtain information about the  poverty rate and program participation of families.

Family type: The unit of analysis within the CPS data was the “family  record.” We examined four different family types: (1) married couple  families with children; (2) married couple families without children; (3)  single-parent families with children; and (4) other families. The “other  families” category covers a wide variety of living situations, such as  single adults living alone, but does not include married couples or a  single-parent living with children.

Poverty: We relied on Census’ determination within the ASEC survey  to determine whether a family was in poverty. We used two different  poverty measures. The official poverty measure measures a family’s  resources against a poverty threshold that varies by the number of  supported adults and children. However, it excludes certain types of  resources, such as in-kind assistance (such as Supplemental Nutrition  Assistance Program benefits). We also used the Supplemental  Poverty Measure, which is also provided by Census. The  Supplemental Poverty Measure includes some in-kind assistance, but  also deducts certain expenses such as child care from family  resources. In 2016, Census reported that overall, the national rates of  poverty are similar based on the two measures.

Program participation: We relied on Census’ determination within  the ASEC survey to determine whether a family participated in the  following federal social safety net programs: EITC, ACTC, Medicaid,  SNAP, and TANF cash assistance. Specifically, we measured the use  of programs in the following ways:

Medicaid enrollment: Anyone in the family enrolled in Medicaid,  based on self-report.

SNAP participation: The family received SNAP benefits during  the prior calendar year, based on self-report.

TANF participation: Anyone in the family received TANF cash  assistance during the prior calendar year, based on self-report.

EITC eligibility: Anyone in the family eligible for EITC receipt  during the prior calendar year. Census determines EITC eligibility  based on income and family structure.

ACTC eligibility: Anyone in the family eligible for ACTC receipt  during the prior calendar year. Census determines ACTC eligibility  based on income and family structure.

An important limitation to our analysis on program participation is that the  use of the programs reported by CPS has been noted by researchers to  be imprecise. The sources of imprecision are not fully known, and likely  depend on the program. In the cases of Medicaid, SNAP, and TANF cash  assistance, where benefit receipt is self-reported, CPS data are known to  underreport program benefits, perhaps because a stigma is associated  with its use. In addition, we reported that the Urban Institute staff found  that CPS data captured about 61 percent of TANF cash assistance  benefits received and 57 percent of SNAP benefits received in 2012. In  the case of EITC and ACTC, Census imputes eligibility for the credits  from reported income and other information about the family. According to  researchers, in some cases the CPS will overstate usage of the EITC, by  imputing the credit to those that do not claim it. In other cases, they will  understate usage because they will fail to assign the credit to those that  do claim it. However, as noted earlier, we used these data because they  were the best available for the analysis we wished to conduct.

section_title: Analysis of Factors Affecting Program Participation Decisions of Families with a Low-Wage Worker
paragraphs: To examine what is known about the reasons eligible working families do  not participate in the five selected federal programs, we conducted a  literature review of academic, government, and think tank reports  published from 2006 to 2016. We excluded reports that we determined  did not have sufficient methodological rigor.

To gather examples and current information on factors influencing  families’ decisions in a variety of settings, we interviewed researchers and  industry groups as well as state and local officials at the selected social  safety net programs and community nonprofit organizations that work with  low-wage working families. We selected organizations from four  metropolitan areas: Atlanta, San Francisco, Santa Fe, and Washington,  D.C. The metropolitan areas represent a range of local minimum wage  levels relative to the federal minimum wage, costs of living, and  participation rates in the selected social safety net programs. We  interviewed one to two state or local government or nonprofit agencies in  each of these locations, but did not cover all five programs in each of the  four locations.

We conducted a content analysis of the reports identified during our  literature review and information gained in our interviews to identify  factors that applied specifically to families with a low-wage worker. The  information we gathered from the literature and interviews is not  generalizable, but is used to provide examples of factors affecting  working families who are eligible for, but not receiving, assistance from  social safety net programs.

section_title: Appendix II: Select Data on the Percentage of Working Families in Poverty
paragraphs: Margins of error for 95 percent  confidence interval (+/-)

Margins of error for 95 percent  confidence interval (+/-)

Margins of error for 95 percent  confidence interval (+/-)

Margins of error for 95 percent  confidence interval (+/-)

section_title: Appendix III: Select Data on the Number of Working Families in Poverty
paragraphs: The following table presents the estimated total number of families with a  worker ages 25 to 64 and the estimated number of these families in  poverty. The table provides estimates based on the type of the worker’s  family type and hourly wage. As discussed in appendix I, to develop these  estimates, we merged multiple months of Current Population Survey  (CPS) survey data with data from the Annual Social and Economic  Supplement (ASEC) survey to CPS to estimate poverty among families  with low-wage workers. When we performed this procedure, the match  rate between the datasets in each year was at least 90 percent, but  varied by year. As a result, the estimates of the populations included in  the table below may underestimate the actual number of families in  poverty by as much as 10 percent. Because the extent of underestimation  varied by year, conclusions based on comparisons of the estimates  across years should be avoided.

In addition, the margin of error was larger than the estimated number in  many cases, which limited what we could report. Specifically, we did not  report the number of families with incomes less than 50 percent of the  poverty threshold. We did report estimates of the percentage of families  with incomes less than 50 percent, by family type. Table 5 provides the  estimated numbers for this group, with the margins of error that were not  included in the body of the report.

section_title: Appendix IV: GAO Contacts and Staff Acknowledgment
subsections: section_title: GAO Contacts

section_title: Staff Acknowledgment
paragraphs: In addition to those named above, Kimberley Granger and Benjamin  Bolitzer, Assistant Directors; Andrea Dawson and Jonathan S. McMurray,  Analysts-in-Charge; Brittni Milam, Michael Naretta, Anna Maria Ortiz,  Rhiannon Patterson, and Amanda Pritchard made key contributions to  this report. Also contributing to this report were Susan Aschoff, Rachel  Frisk, Alexander Galuten, Grant Mallie, Joel Marus, Sheila McCoy, Jean  McSween, Mimi Nguyen, Jessica Nierenberg, Michelle Rosenberg, and  Almeta Spencer.


Question-summary annotations: questions: question: What did GAO determine about low-wage workers?
answer: According to GAO's analysis of data in the Census Bureau's Current Population Survey (CPS), on average, low-wage workers worked fewer hours per week, were more highly concentrated in a few industries and occupations, and had lower educational attainment than workers earning hourly wages above $16 in each year GAO reviewed—1995, 2000, 2005, 2010, 2015 and 2016.
child_questions: question: How has their percentage of the U.S. workforce developed?
answer: Their percentage of the U.S. workforce also stayed relatively constant over time.

question: What is the percentage of low-wage workers in the U.S.?
answer: About 40 percent of the U.S. workforce ages 25 to 64 earned hourly wages of $16 or less (in constant 2016 dollars) over the period 1995 through 2016.

question: What is the result of the combination of low wages and few hours?
answer: The combination of low wages and few hours worked compounded the income disadvantage of low-wage workers and likely contributed to their potential eligibility for federal social safety net programs.

questions: question: What characterized families with a low-wage worker?
answer: Families with a worker earning $16 or less per hour consistently used selected federally funded social safety net programs between 2005 and 2016, with varied factors affecting eligible families' participation.
child_questions: question: How has this phenomenon changed in the past two decades?
answer: GAO estimated that the percentage of these families enrolled in Medicaid rose significantly over the past 2 decades, almost tripling among families with a worker earning more than the federal minimum wage between 1995 and 2016.

question: What is the relationship between these families and TANF?
answer: In contrast, an estimated 5 percent or less of these families received cash assistance from the Temporary Assistance for Needy Families (TANF) program at least once in the prior calendar year from 1995 through 2016.

question: How did family type influence these outcomes?
answer: A low-wage worker's family type also influenced the extent that families used selected social safety net programs. For example, among families with minimum wage earners in 2016, GAO estimated that about half or more married families used none of the programs GAO examined—Medicaid, TANF, Supplemental Nutrition Assistance Program, Earned Income Tax Credit, and Additional Child Tax Credit—while more than half of single-parent families used three or more.
child_questions: question: Why may families choose not to participate in such programs?
answer: Program officials and others told GAO that eligible working families may not participate in programs for a variety of reasons, including time needed to apply for benefits, low benefit amounts, and assumed ineligibility.

questions: question: What did GAO analyze?
answer: GAO analyzed CPS data from 1995, 2000, 2005, 2010, 2015, and 2016 on worker characteristics, family poverty, and participation in social safety net programs.
child_questions: question: How does GAO define low-wage workers?
answer: GAO defined low-wage workers as those workers ages 25 to 64 earning $16 or less per hour.

question: How did GAO conduct their study?
answer: In addition, GAO interviewed officials with state and local social safety net programs and other experts in four metropolitan areas—Atlanta, San Francisco, Santa Fe, and Washington, D.C.—representing a range of local minimum wage levels relative to the federal minimum wage, costs of living, and participation rates in five selected federally funded social safety net programs.