More struggle to attain economic security

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Buffalo News
By: Emma Sapong
May 30, 2011

New report challenges poverty guidelines as dated, inadequate

When Joyce Peach started working at Southeast Works in Depew, her welfare benefits ceased. With her new $24,000-a-year position, she was no longer eligible for public subsidies.

In fact, her salary surpassed the federal poverty level by almost $10,000. But nevertheless, Peach found that her paychecks failed to cover basic needs for her and her teenage daughter.

"I was stealing from Peter to pay Paul," the 52-year-old Buffalo resident said. "I would take money from one bill to pay the bill that was most urgent -- the one with the shut-off notice."

So she left that job after a year, landing a $26,800-a-year job at the Western New York Independent Living Center on Main Street. But the extra $2,800 didn't forestall her financial unraveling.

"I was still behind in my bills and couldn't save any money," she said. "It was a struggle."

Peach said she enjoyed being part of the work force, preferring to earn a living over collecting welfare because work "gives life meaning and value."

But she realized she was better off financially when she was on welfare. "I didn't have to worry about how I would pay rent, the bills or buy food. I had economic security."

The baffling reality of Peach's situation is borne out in "The Basic Economic Security Tables for the United States," a report prepared by Wider Opportunities for Women, a national organization that works to achieve economic independence for women and their families; the Center for Social Development at Washington University in St. Louis; and the University at Buffalo's School of Social Work. The study was conducted to determine how much income is actually needed to attain economic security without government assistance.

For Peach's family size, $24,000 a year can't buy economic security; neither can $26,800. She and her daughter would need $42,504 to be secure, according to the BEST Index report. The federal poverty guideline for a household of two, meanwhile, is currently $14,710.

"I expected a huge difference but not this much," said Yunju Nam, an assistant professor at UB and one of the authors of the report. "It shows how grossly inadequate the federal measures are; families who really need public assistance can't get it because the measures are too low."

The study does not suggest the government should raise official poverty levels to the study's economic security levels, Nam said. Rather, it seeks to provide more accurate figures for what people need.

With 220,000, or 34 percent, of Western New York's 650,000 workers earning $26,000 or less, the report suggests even more residents, not just workers categorized as poor by the federal standard, are grappling with financial instability.

In fact, a majority of municipalities in the region had median incomes in 2009 that fell below the BEST Index's numbers. Buffalo, Niagara Falls and Lackawanna's median incomes miss the "economic security" targets by wide margins.

"It was already grim when you looked at the federal guidelines," said Lou Jean Fleron, an emeritus professor at Cornell University's Industrial Labor Relations School in Buffalo.

With much of the region's job growth occurring in the retail and service sectors, which offer lower wages, economic security could remain elusive for many Western New Yorkers who earn too much to receive government assistance but aren't employed gainfully enough to attain financial stability.

"Western New York's job market is a good place to employ people for wages, but it contributes to the problem of low family incomes," Fleron said.

According to the report, in order to be financially secure, single workers would need $30,012 a year; single parents with two children would need $57,756; and two-parent households with two children would need $67,920.

The current poverty level is $10,890 for a one-person family and $18,530 for a family of three.

The BEST Index aims to point out that those poverty levels are inadequate and outdated.

The government's thresholds were developed in the early 1960s and are calculated by multiplying by three the cost of food for families of three or more. The poverty level is used to determine eligibility for government aid programs.

Nam said the government's calculation method is not up-to-date because the cost of food has been relatively stable compared to other necessities, like housing and health care.

She said the BEST Index aims to gauge what is needed for economic security, not just survival, so it includes expenses like housing, utilities, food, health care, transportation and child care. They even include savings for retirement and emergencies.

"The federal government is focused just on consumption, but families need long-term economic security," Nam said. "We calculated families' needs based on the costs of living expenses. It's a reflection of the changing economy and how families spend money today."

Michael Tanner, a senior fellow with Cato Institute, a conservative Washington, D.C., think tank, said the problem isn't with the poverty guidelines, and the solution is not to extend taxpayer-funded programs to more workers.

"It would be nice if that money could materialize in thin air, but it has to come from someplace," he said, adding that improving the standard of living of the poor would mean hitting businesses and individuals with more taxes that would cripple their economic security.

"You'll create more poverty," he said. The answer, Tanner said, is a market-based economy to produce more goods; lower taxes; and fewer government-sponsored programs.

Nam said the BEST Index does not advocate dependency on welfare, but rather urges education and financial literacy for current welfare recipients to help them break the cycle of poverty.

By the BEST Index's standards, Linsey Graff appears to be on the cusp of self-sufficiency. The 26-year-old architect is single and earns about $30,000. But she works two jobs, and says she is often exhausted and broke.

Graff puts in 40 hours a week at an architecture firm and spends at least 15 hours teaching gymnastics.

"I break even every month," the Buffalo resident said. "I can cover all of my bills, but then there's nothing left."

She said she has no money for emergencies or contributing to retirement savings.

"I'm working just to pay bills, and that's my life right now," she said.

Graff has no credit card debt, but she makes hefty monthly student loan payments for her college education, which includes a master's degree from UB.

Money worries plague her, along with fears of unexpected expenses, such as car repairs.

"If I lost one of my jobs, I don't know what I would do," she said. "I'm living paycheck-to-paycheck, month-to-month and hope for the best."

For people like Peach and Graff, financial security can appear to be an elusive goal. The BEST study points out that improved wages, stronger economic development and financial education are all needed to improve the lives of working people. By helping people understand the true costs of living, the study seeks to influence long-term economic policy.

"We need to identify areas of potential growth for this region," said Cornell's Fleron. "We are like other Rust Belt cities and need to create public policy that will give us better jobs and keep them here," she said.

A better job is just what Peach is looking for. She got laid off in April and said she is not applying for welfare. She's looking for another job and is considering going back to school to pick up skills to increase her income.

"Even though it is a struggle when you're not making enough money, I'd still rather earn my own money," she said.

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This page contains a single entry by CFED published on June 1, 2011 4:09 PM.

House Prices Are Set to Hit Another Low was the previous entry in this blog.

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