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102 IRET Byline 1 (1992)

handle is hein.taxfoundation/iretbyln0102 and id is 1 raw text is: June 12, 1992 No. 102 Counting Workers With Low Earnings The Census Bureau recently released a confusing report, Workers With Low Earnings: 1964 to 1990, describing a sharp increase in the fraction of full-time workers whose wages were too low to support a family of four above the poverty level. This fraction rose from 12.1% in 1979 to 18% in 1990. That is, in 1990, about 180 out of every 1,000 full-time, year- round workers could not support a family of four on their wages alone. The report was highly sensational. Many in the media and their readers may have jumped to the conclusion that all of these workers and their families were poor. This is not the case. Many of the 18% were not trying to support a family of four on their wages alone, and they were not in fact in poverty. For example, some were single, or in a family with more than one worker. Indeed, of the roughly 180 in every 1,000 workers defined as low earners in 1990 by the Census, only about 13%, or about 23 workers, had incomes below the poverty line for their actual family situation. Of all full-time, year-round workers in 1990, including those trying to support even larger families, only about 2.6%, or 26 per 1000, were in poverty. Low earners as defined by the Census in this report. Low pay was defined as annual earnings (cash only, excluding fringe benefits) less than the poverty level of a family of four. In 1989, this meant an income of $12,675, or roughly $6.10 an hour. This choice of benchmark led to frightening language in the press, such as the statement in the May 5th Wall Street Institute for Research on the Economics of Taxation IRE1 T Byline Journal that The Census Bureau study showed that the proportion of full-time, year-round workers making too little to lift a family of four above the poverty line swelled to 18% in 1990 from 12.1% in 1979. (See Table 1, below.) Table 1: Percent of all full-time, year-round workers earning less than poverty level for a family of four (labeled low earner by Census) 1964 1969 1974 1979 1984 1989 1990 24.1% 14.4% 12.0% 12.1% 14.6% 16.3% 18.0% It is foolish to compare the income generated by all full- time, year-round jobs to the poverty level for a family of four. Most workers are not trying to support a family of four, at least not singlehandedly. Many are single. The official poverty threshold for a single individual is only half that of a family of four. Many are married without children, or with grown children who are self-supporting. Many are married with two or more dependent children, but their spouses also work, and the family has two incomes. Others have income from savings to supplement their wages. Family size has been declining (e.g., from 2.87 persons in 1973 to 2.4 persons in 1989), and the number of workers per family has been increasing. Families of four supported by only one wage earner are increasingly rare. Real status of those workers the Census called low earner. Much further back in the Census report, there is a discussion of poverty rates. We learn (at the bottom of page 6 and in Table H, p.7, of the report) Most year-round, full-time workers with low annual earnings are not in poverty. A worker with low earnings will not be in poverty if the worker's total family income exceeds the poverty threshold. One example of this situation is a worker who earns less than the low earnings threshold but who also falls above the poverty threshold because the earnings of another family member are enough to bring the total family income above the poverty threshold. Another example is an unrelated individual whose earnings are below the low earnings threshold but above the poverty threshold. IRET is a non-profit, tax exempt 501(c)(3) economic policy research and educational organization devoted to informing the public about policies that will promote economic growth and efficient operation of the free market economy. 1331 Pennsylvania Ave., N.W., Suite 515, Washington, D.C. 20004 Phone: (202) 347-9570

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