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

Letter

Background

Federal Minimum Wage

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.

Poverty Measurement

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.

Federally Funded Social Safety Net Programs

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.

Characteristics of the Low-Wage Workforce Changed Little from 1995 through 2016

Low-Wage Workers Comprised About 40 Percent of the U.S. Workforce Ages 25 to 64

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.

Limited Hours Compounded Low-Wage Workers’ Income Disadvantage

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.

Low-Wage Workers Remained Highly Concentrated in Five Industries and Six Occupations

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.

Increases in Educational Attainment Have Not Led to Higher Wages

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.

Poverty Persisted among Working Families, Affecting Those with Minimum Wage Earners and Children the Most

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.

Percentage of Working Families in Poverty Has Remained Relatively Constant

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.)

Poverty Was Most Prevalent among Families with Minimum Wage Earners and Children

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).

Families of Low- Wage Workers Consistently Use Certain Federal Social Safety Net Programs, but Several Factors May Limit Eligible Families’ Use

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).

Several Factors May Affect Eligible Families’ Participation in Social Safety Net Programs

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.

Agency Comments and Our Evaluation

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.

Appendix I: Objectives, Scope, and Methodology

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.

Analysis of Current Population Survey Data

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.

Analysis of Low-Wage Workers

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.

Analysis of Families with a Low-Wage Worker

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.

Analysis of Factors Affecting Program Participation Decisions of Families with a Low-Wage Worker

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.

Appendix II: Select Data on the Percentage of Working Families in Poverty

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 (+/-)

Appendix III: Select Data on the Number of Working Families in Poverty

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.

Appendix IV: GAO Contacts and Staff Acknowledgment

GAO Contacts

Staff Acknowledgment

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.