On Ramp - Poverty

Who are California’s working poor?

There is no single definition of the working poor. The simplest description is people who work but still live below the federal poverty line. In 2015, a family of three living on less than $20,090 a year is eligible for public assistance. About 354,800 full time workers in Californians were under the federal threshold in 2013.

Other ways to think about the working poor:

  • Workers who earn two-thirds of the median wage (In 2014, that was $12.43 in California).

  • The bottom 20th percentile wage earners, which is anyone who made $11.20 an hour or less in 2014.

More than a quarter of California’s low wage workers are in the restaurant and retail sectors.

Almost half of low-wage workers don’t work both full-time and year-round.

More than half of California’s low-wage workers today are Latino and 40 percent were born outside the United States. About 51 percent of low-wage workers are women.

California’s low-wage workers are older and more college educated than they were 35 years ago. About 44 percent of the working poor are older than 35 years old, and almost half of them have at least some college education. In comparison to California’s workforce as a whole, however, they are younger and less educated.

Why are the working poor getting poorer?

Wages for Californians at the bottom fifth of the pay scale have eroded since 1979. Their earnings are 11.3 percent less valuable than they were 35 years ago. Economists and experts from UC Berkeley, Stanford and the Center for Continuing Study of the California Economy provide various theories about this:

  • The decline of union-representation. Eight percent of low-wage workers in 2014 had union representation, whereas 16 percent of workers as a whole were unionized.

  • Use of technology in the workplace has decreased the demand for low-skilled workers.

  • Global trade agreements have provided easier access to foreign labor.

  • Immigration since the 1970s has introduced more low-skilled workers, which has brought down the earnings of all low-wage workers.

  • The working poor haven’t been getting poorer, they’re just a different population than they were 35 years ago.

  • The decline of “good-paying” manufacturing jobs. U.S. labor data show part of this trend.

The share of workers earning a low wage has also increased, according to the California Budget and Policy Center.  The percentage of California workers who earn two-thirds of the median wage has gone up to 26.8 percent, a few percentage points higher than it was in 1979. The rate of full time workers in poverty has almost doubled during that time, to 3.1 percent.

What are the challenges for the working poor?

Working poor people often have trouble paying for basic needs, such as food or health care or utilities.

Some low-income workers experience “wage theft,” especially in the Los Angeles area. This includes not being paid the minimum wage, not being compensated for the total number of hours worked, or not getting overtime pay.

Low-wage workers are more likely to have variable schedules. Advocates say they may get little advance notice of their schedules, or don’t get the number of hours needed. This, they say, impedes their ability to arrange childcare, or pursue education and training opportunities.

CALmatters traveled the state, talking to low-income workers in Stockton, Fresno, and Los Angeles. Some anecdotes they shared:

  • Some described living in unsafe neighborhoods.

  • Some reported having trouble paying for household bills, which resulted in them paying bills late and accruing late fees.

  • Others reported being able to “get by,” but not having much disposable income, such as enough savings to be able to go on a vacation.

Do minimum wage increases help the working poor?

Research and opinion varies on how or whether minimum wage increases help the working poor. Here’s a sample of some research:

  • Minimum wage increases help to reduce poverty rates among working families and raise the pay for adults, women, and people of color, according to a 2014 study from UC Berkeley. A 2013 report from the University of Massachusetts says the wage increases “moderately” reduce the share of people at or below poverty.

  • “Some families gain and others lose” after a minimum wage increase, according to research from a UC Irvine economist. It suggests some workers in poverty may get a pay increase, but other families may fall into poverty because of unemployment related to the increase. This finding was reinforced by a more recent assessment involving the same author.

  • A federal study about raising the federal minimum wage reinforces the idea that some workers gain and others lose. It said raising the federal minimum to either $9 or $10 would bring 300,000 to 900,000 above the poverty threshold, but reduce employment by 100,000 to 500,000 jobs.

  • Minimum wage increases don’t reduce poverty because many low-wage earners live in families where the household income is above the poverty line, says another recent analysis. The report from the Employment Policies Institute says wage increases reduce employment opportunities for low-skilled workers.

  • Minimum wage increases result in a slight decline of food stamp usage according to a UC Berkeley analysis.  

  • There was no job loss in the fast-food sector in New Jersey after a minimum wage increase, according to a 1994 study by a different UC Berkeley economist that is still referenced today. In fact, it says there was an increase in employment, and the cost of the new wage was passed onto consumers.  

Will California’s minimum wage increases replace people with machines?

Technology has advanced for two centuries without wiping out jobs, say more than one economist. Despite the use of machinery, there has been no steady uptick in unemployment, says MIT economist David Autor. He says automation does substitute labor, but also “complements” it. Technology can be used to increase demand for work, raise productivity and wages.

Autor says media “overstates” the threat that technology in the workplace poses to workers.

Another study said minimum wage increases does result in job losses for some workers, but it also creates other kinds jobs, so that overall job numbers remain balanced. The unpublished working paper from researchers at DePaul University and the Federal Reserve Bank of Chicago suggests that the declines only affect low-wage workers performing routine cognitive tasks, like cashiers, and they infer the job loss is due to technological substitution.

What has the State of California done for the working poor besides raising the minimum wage?  

Research suggests that $14.3 billion dollars a year of federal and state money is spent on public assistance for California’s working poor, including tax credits, food stamps, Medicaid and cash assistance.

Since 1979, California has raised the minimum wage more frequently and generously than the federal government, which currently has a minimum wage of $7.25 an hour. The California minimum wage will rise from $9 to $10 an hour on Jan. 1, 2016.

“California has a lot of good things going for working families, maybe relatively more than a lot of other states,” says Erica Williams, assistant director of State Fiscal Research for the Center on Budget and Policy Priorities, which produces research with the aim of reducing poverty.

Williams praised the state’s recently enacted paid sick leave benefit, cash assistance grants that are higher than the national average, and California’s choice to implement a state-based tax credit for people in deep poverty this year.

However, advocates for the poor have criticized Gov. Jerry Brown for not showing more leadership to help the working poor. The Western Center on Law and Poverty says the state tax credit should be expanded to benefit more people, for example.

Williams of the center on budget and priorities says the state’s food-assistance program, CalFresh, has one of the lowest enrollment rates in the nation.

What is the role of California cities in the national debate about minimum wage increases?

In the three years prior to November 2015, about half of the local ordinances to raise the minimum wage nationally have been in California.

Experts say California cities are leading the charge to raise minimum wages because of a mix of the state’s high cost of living and left-leaning politics.

California State Senator Mark Leno (D-San Francisco), who proposes to raise the statewide minimum wage, says the cities’ actions could be a boon to his efforts if local initiatives prove they aren’t a job killer. He says a state increase can level the playing field for businesses, which, in the context of local wage laws, compete with each other under varying wage thresholds.