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Abstract
Michigan has undergone enormous labor market changes since the 1990s affecting employment, income, and poverty. This paper examines changes in poverty among working families and their policy-related and socio-demographic determinants between 1998/1999 and 2007/2008 in Michigan. Findings suggest the rates of ‘poverty’ and ‘near poverty’ to be between 5 and 19% among working families, with slightly higher rates for the latter period. Public transfers combining taxes and means-tested supports, albeit making some impact among poor families with children, were unable to lower these rates. While the major socio-demographic characteristics of poverty and near poverty including large families with children and young, never married, single mother, and immigrant householders apply to working families, the roles of gender, race, marital status, and education manifest through many policy-related variables such as work hours, wages, and transfer incomes. These findings have important implications for understanding working poverty in Michigan and beyond.
Notes
The author acknowledges a grant from the W.E. Upjohn Institute for Employment Research, Kalamazoo, MI, which, in part, made this research possible.
1 Families make up the households in single-family households whereas they represent subunits of households in case of multifamily households (CitationUS Census Bureau, 2004).
2 Other bases, that are widely used internationally, include consumption, capability, and social exclusion (CitationBlank, 2008; CitationWagle, 2008a, Citationb, 2009Citation).
3 While Michigan introduced a refundable state EITC of its own in 2006, the figures included here do not include state EITC refunds.
4 Taxes represent the figures imputed in the CPS files extracted from the US Census Bureau website. For data unavailability reasons, the 2008 data excluded the state income taxes with potential implications for the identification of the near poor who are likely to pay them. Sales and property taxes were not incorporated given their unavailability and complex relationships with housing and mortgage costs.
5 Defining full-time work one way or the other has important implications for findings. Using a less stringent number, for example, would broaden the sample and bring the analysis closer to that for all families. At the same time, it is important to be consistent with the notion that working full time implies being at work at least an equivalent of 7 h (eight standard hours minus one lunch hour) for five days a week. Many working poverty analyses have also used this definition (CitationIceland & Kim, 2001; CitationJoassart-Marcelli, 2005).
6 Similar to hours of work, this definition also has further implications. Poverty estimates from this analysis, for example, may be smaller since families with combined hours of work that are equivalent to one full-time worker are excluded. At the same time, the role of transfer in reducing poverty may be underestimated given that families working less are likely to receive greater amounts of transfer in Food Stamps and other supports.
7 It must be noted that identifying ‘family householders’ as householders (household reference people as identified in the CPS data) is straightforward when households comprise single families. In case of multifamily households, however, family householders need to be identified separately. I select as the family householder the oldest adult working the most hours, with an older person in case of two adults working the same number of hours. Albeit somewhat arbitrary, I expect this process combining age and work hours to yield reasonably accurate results.
8 This process yields sample sizes that are smaller by 51 families in 1998/1999 and 76 families in 2007/2008. The resulting subsamples include about 2,400 families and close to 6,500 people. Although relatively small in number, exclusion of these families can have important effects if they include nonelderly working members. The goal, however, is to create a ‘conservative’ sample of working families.
9 These statistics are also slightly higher than the comparable statistics reported by the CitationUS Census Bureau (2008) for the entire US population. While the samples are more restrictive here focusing on families headed by those between 18 and 64, these differences partly highlight the increasingly worsening working poverty situation in Michigan.
10 During 1998/1999, for example, two or three member families without children under six had poverty rates of between 2 and 13%. While the higher end near poverty incidence for 200% official and after transfer income increased to 15%, these rates for 2007/2008 were still much lower than the poverty rates for all working families.
11 At the typical minimum wage of $6/h in 2007, for example, a full time year round worker would earn about $12,000, an amount barely exceeding the official poverty line income of $11,000 for individuals. Greater skills and experience that older people are likely to have may make additional earnings possible. While those at the 10th percentile in 2007 earned $8/h (CitationUS Department of Labor, 2008), even this level of earning would be grossly inadequate for families and families with children.
12 Given that transfer incomes are used in their natural logs, taxes paid taking negative values in measurement are all converted into zero and thus are excluded from the analysis. While these figures are still useful in determining the poverty status with taxes paid making families more likely to be poor, the intent here is to examine the roles of transfer receipts that, mathematically, can decrease the likelihood of poverty.
13 Many variables such as age, marital status, single mothers, and race may jointly affect the log of the odds of being poor. But incorporation of these possible interaction effects did not produce desired results due to small sample size.
14 Theoretically, there can be a strong interaction between work hours, wages, and transfer income with lower hours and wages leading to greater transfer receipts as families are likely to seek greater public supports (CitationDuncan, 2000; CitationMoffitt, 1992, Citation2002). But this potential interaction is difficult to operationalize since poverty is a censored version of the total family income.
15 Interestingly, an exception is the category with graduate degrees that appears to be more likely to be poor when after transfer incomes are used.