Monday, November 18, 2013

American Poverty and Economic Decay Being Driven by Low Wage Jobs

You may notice the signs of economic decay all around in your community. Perhaps you have personally experienced (or are still experiencing) joblessness, the need for government assistance, or are somehow living on the edge economically.

One way or another, there are numerous signs that our economic security has deteriorated and that the American dream has faded away.

Nearly 50 million Americans (49.7 Million) are living below the poverty line. But the level of economic insecurity goes well beyond those officially recognized by the government as living in poverty.

According to The Associated Press, four out of five U.S. adults struggle with joblessness, live near poverty, or rely on welfare for at least parts of their lives. That amounts to roughly 80 percent of American adults, a figure that is simply mind-blowing.

However, poverty is not problem that plagues only racial and ethnic minorities. More than 19 million whites fall below the poverty line of $23,021 for a family of four, accounting for more than 41 percent of the nation’s destitute — nearly double the number of poor blacks.

Economic insecurity afflicts more than 76 percent of white adults by the time they turn 60, according to a new economic gauge to be published next year by the Oxford University Press. Measured across all races, the risk of economic insecurity rises to 79 percent.

“Economic insecurity” is defined as experiencing unemployment at some point in one's working life, or a year or more of reliance on government aid (such as food stamps), or income below 150 percent of the poverty line.

Millions of Americans cycle in and out of poverty at various points in their lives; four in 10 adults fall into poverty for at least a year.

The risk of falling into poverty has been rising in recent decades, particularly for those in their prime earning years (ages 35-55). For example, people ages 35-45 had a 17 percent risk of encountering poverty during the 1969-1989 time period. However, that risk increased to 23 percent during the 1989-2009 period.

The future projections are quite sobering. Based on the current trend of widening income inequality, close to 85 percent of all working-age adults in the U.S. will experience bouts of economic insecurity by 2030.

Yet, government safety net programs are the only thing keeping millions of additional Americans from falling into poverty.

The nation's poverty rate was 16 percent in 2012, according to new Census Bureau data that looks at how benefits and expenses affect family resources. Social Security, for example, kept 26.6 million Americans out of poverty last year. Food stamps provided by the Supplemental Assistance Nutrition Program, or SNAP, kept another 5 million people above the poverty level.

The main reason people fell into poverty last year was out-of-pocket health care expenses.

There are a near-record 47.6 million Americans, representing 23.1 million households, on the SNAP program. In other words, the program helps one in seven Americans put breakfast, lunch and dinner on the table.

Even as the stock market soars to new heights and income disparity widens to Great Depression-era levels, SNAP participation has doubled over the past 10 years and increased nearly 25 percent over the past four.

The cost of the program will reach $63.4 billion in 2013.

Poverty is becoming so widespread that it is creating a culture of government dependence. But safety net programs are becoming increasingly difficult to subsidize, given the portion of Americans who draw upon these various programs rather than fund them.

Tens of millions of Americans earn so little that they pay no federal income taxes. These folks do, however, pay payroll taxes, federal excise taxes (on things like gas, tobacco, alcohol and airfare), state taxes and local taxes.

A report from the Tax Policy Center (TPC) finds that 43 percent of Americans paid no federal income tax last year. About half of them earned too little to qualify, and many more were retired people who live on Social Security. In fact, two-thirds of this group are elderly. The remaining households likely qualified for tax breaks such as the Earned Income Tax Credit or the Child Tax Credit.

However, more than 70,000 households with income over $200,000 paid no federal income tax in 2013, according to the TPC.

The biggest culprit in all of this is low wages and incomes, which chokes off demand and consumption — the basic components of economic growth. Consumer spending comprises 70 percent of our GDP. Low wages and incomes are also starving the Treasury of much needed tax revenue.

Since seven out of the 10 fastest-growing U.S. occupations pay less than the national median wage, more and more Americans are forced to rely on the social safety net.

To illustrate this point, a whopping 52% of fast-food employees’ families are forced to rely on public assistance for food and medical due to low wages, which means American taxpayers are picking up the tab for corporations that pay poverty wages.

The average fast-food worker is now over 28 years old, meaning many support families with a combination of low fast-food wages and public assistance. That assistance is provided by American taxpayers.

A recent report from the University of California, Berkeley Labor Center estimated the cost of this at nearly $7 billion per year.

This puts a tremendous burden on American taxpayers, who have to fund these low-wage workers because their employes won't adequately do so.

Obviously, there are limits to the carrying capacity of the 57 percent of Americans who pay the federal income taxes that fund most safety net programs.

According to a recent in-depth study from the Heritage Foundation, "128,818,142 people are enrolled in at least one government program," based on U.S. Census Bureau information.

To be fair, the bulk of them are receiving Social Security (35,770,301) and Medicare (43,834,566) benefits, which all workers pay throughout the course of their working lives.

However, Heritage researchers note that 48,580,105 people are on Medicaid, the health insurance program for the poor, and 6,984,783 people are living in subsidized rental housing.

There has always been poverty and there will always be poverty. It's as old as society itself. Some people will always be more skilled, more educated and more industrious. So, they will typically earn more as a result.

But there are millions of Americans working two jobs to get by, putting in as many as 80 hours per week. These people are not poor due to a lack of will, effort or hard work. And, as I recently reported, most American households now have at least two adult workers.

Fifty-eight percent of the jobs created during the "recovery" have been low-wage positions, according to a 2012 report by the National Employment Law Project. These low-wage jobs paid a median hourly wage of $13.83 or less.

Even worse, 30 million Americans are scraping by on the federal minimum wage. That’s one in five people with a job.

Someone working full-time at the federal minimum wage of $7.25 makes $15,080 in a year, before taxes. The federal minimum wage has been stagnant for 45 years because it hasn't kept pace with inflation.

Back in 1968, the minimum wage in the United States was $1.60 an hour. After you account for inflation, that is equivalent to $10.74 today.

If you were to work a full-time job at $10.74 an hour for a full year, you would make about $22,339 for the year.

That's not a lot of money. Yet, according to the Social Security Administration, 40.28% of all American workers make less than $20,000 a year.

This means more than 40% of all U.S. workers actually make less than what a full-time minimum wage worker made back in 1968.

That's how far we have fallen.

Low-wage jobs have undermined our economy and our society. They have swelled the ranks of the working poor, created a surging dependence on taxpayer-funded welfare programs, robbed the federal tax base and driven down demand and consumption, making a genuine economic recovery an impossibility.

Economic security is merely a fantasy for millions of Americans who have watched their American dreams fade to black like the final frames of a sad movie.