The Perils of the Working Poor. Poverty’s Vicious Cycle

The more popular cultural narrative that is pushed in America is the notion that in a capitalist democratic society like the U.S the only thing that separates the Haves and the Have nots is a willingness to work hard and apply oneself. Within that context poverty is often viewed as a moral failure, a consequence of a lack of initiative and industry, and it is considered an indicator of some integral deficiency in a person’s character. I contend that this view obfuscates the structural and historical context of American society and its role in maintaining exploitative class structure and by extension poverty. In this paper I intend to describe the difficulties that Poor and Working-Class people face and to juxtapose that against the advantages of Middle- and Upper-Class people in similar scenarios. This paper will also briefly discuss Class structure, poverty, and the minimum wage.

In trying to understand the difficulties of Poor and Working-class people, I feel it is necessary to conceptualize the idea of class itself and how it is viewed in American society. Historically and globally, classes can be thought of as groups of people divided hierarchically in a society with limited or no movement allowed between the groups. These divisions are usually based on power, status, or wealth. This definition of class is normally viewed as antithetical to the American idea up upward mobility and opportunity. However, a cursory observation of the U.S shows different lived experiences of people that effectively (if not legally), resembles a definition of class as it is viewed in the historical sense. In the U.S, a person’s class is largely a function of their occupation, income, and wealth. These factors also introduce a level of status that is directly proportional. The more prestigious a person’s occupation in combination with a high income means a higher status. This idea is summed up in an individual’s Social Economic Status (SES).

Using this reckoning we can broadly divide the U.S in to three major classes: Upper, Middle, and Lower class. The lived experiences for people in each of these groups are fundamentally different and many of the obstacles of the Lower Class are structural and self-perpetuating.

Three things to keep in mind regarding people of Lower SES are: Sources of income, The Federal Poverty Line, and the Minimum Wage. These three factors along with social inequalities work in tandem to create a self-perpetuating climate of poverty. It is worth briefly discussing the three.

Many Americans main source of wealth is in their primary residence (their house), and the primary source of income is their job. They are in effect exchanging time for money. Among the Upper Class, who generally enjoy wealth that was inherited, much of their income comes in the form of Capital Gains. Capital Gains is money that is earned through the sale of investment products like stocks and bonds.

This is an opportunity to visualize how structurally one group is advantaged versus another and how it can be self-propagating. The United States has a progressive tax system that aims to tax Low- and Middle-Class people at a proportionately lower rate than the Upper -Class. In theory the amount that one pays in taxes is indexed to rise with income. People that must work for income often pay their taxes through payroll deductions. “ The U.S. payroll tax is often considered a flat tax because it taxes all wage earners at the same percentage. However, as of 2016, this tax is not applied on earnings over $118,500, and as a result, it is only a flat tax for people earning less than that amount. Taxpayers earning more than that amount pay a lower percentage of their total income in the payroll tax, making the tax regressive.” (https://www.investopedia.com/terms/p/progressivetax.asp). Lower- and Working-class people spend a greater portion of their income on necessities like food, clothing, and shelter. Even though lower SES people pay a lower percentage of their income on taxes the burden is functionally harder. For example, let’s consider two hypothetical people. If person A makes $30,000 dollars a year and is taxed at 20%, their annual take home pay will be $24,000. If Person B makes $500,000 a year and is taxed at a higher rate of 30% their after-tax income would be $350,000. Given the costs associated with housing, healthcare, and food we can see how person B is in a much better position than person A even though person A is taxed a lower rate. The absolute, raw dollar amount of $350,000 can better meet a person’s needs annually than $24,000. This is further reinforced by the fact that Capital gains income is taxed differently and at a lower rate that regular wages. This strengthens the Upper SES’s ability to save and invest more than someone in the Middle to Lower SES.

When trying to understand the challenges of affordable living it’s important to delve into the minimum wage and the Federal Poverty line. “The Federal Poverty Level (FPL), or the “poverty line” is an economic measure that is used to decide whether the income level of an individual or family qualifies them for certain federal benefits and programs. The FPL is the set minimum amount of income that a family needs for food, clothing, transportation, shelter, and other necessities.” (https://www.investopedia.com/terms/f/fpl.asp). The Minimum wage is the lowest amount that an employer can legally pay a person for their labor. Certain types of workers are exempt such as waiters and bartenders and obviously doesn’t count the work done by undocumented immigrants. In states where the State Minimum wage is absent or lower than the Federal minimum wage, the worker is entitled to the higher federal salary. Conversely if the state minimum wage exceeds to federal level then the worker is entitled to the higher state salary.

How the two work together informs us how well a person can meet their financial needs. The Federal Poverty line is a measure of income and the number of people that composes a household. The U.S Department of Health & Human Services for 2019 sets the poverty level at $12,490 a year for a single member household. (https://aspe.hhs.gov/2019-poverty-guidelines). A person making the federal minimum wage of $7.25 an hour has a gross annual income of $13,920. This hypothetical person is above the poverty by $1,430 but has very little disposable income for emergencies, savings or educational investments. This precarious situation can be helped or hurt by increasing the number of people in the household that either can or can not work. So, if we add another member to the household that is also making minimum wage you have a combined income of $27,840. The Federal poverty line for a two-person household is $16,910. That is a difference $10,930 which is a significant increase from the $1,430 from the earlier example. If we however add non employed person instead, we have a household that is $2,990 below the Federal Poverty line.

So far, we looked at some metrics that indicates how a person’s SES correlates to their lifestyle and financial security without regard to societal influences like race, and gender. In her book Nickel and Dimed: On (Not) Getting by In America, author Barbara Ehrenreich explores the intersectionality of all these factors and some of the paradoxical effects of poverty incurring greater expenses. She accomplishes this my leaving her Upper-Class lifestyle to embark on a journey of low wage jobs in order to gain firsthand insights on the plight of the working poor. The book was first published in 2001, but the challenges outlined in the book is still applicable almost 20 years later in 2019. It is worth taking a similar look at a hypothetical single mother of two earning minimum wage, living in contemporary metropolitan Atlanta.

In Georgia the Minimum wage is $7.25 per hour (290.00 a week). One of the ways the minimum wage is calculated is by using the Consumer Price Index(CPI).”The Consumer Price Index (CPI) is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care.”( https://www.investopedia.com/terms/c/consumerpriceindex.asp). One the most essential expenses of a person is the cost of housing and that is not included in the CPI. For a minimum wage earner this presents the first and most challenging objective. As of 2019, in Atlanta the average price for a one-bedroom apartment is $ 1,460 per month (average square footage around 978 feet). (https://www.rentcafe.com/average-rent-market-trends/us/ga/atlanta/)

Here is how this one aspect (housing cost) can potentiate other problems. The first is by restricting where a person can live. The Buckhead Community of Atlanta is a coveted area that has access to plenty of amenities to include parks, good schools, hospitals, and stores that sell healthy foods. A low SES person making minimum wage can not afford to live there unless they either take on roommates, work an extreme amount of overtime, or sacrifice in other areas of essential spending like healthcare. The more likely and feasible solution is to simply move into a lower priced part of town. A manageable rent for this person is around $348 per month (that’s 30% of the monthly income). https://www.apartmenttherapy.com/how-much-rent-you-can-really-afford-renters-solutions-186462) Discounting the challenges of availability, a reasonable expectation is somewhere in the area of around $600-700 a month. An apartment at this price point is likely to be in a low-income neighborhood. Low-income neighborhoods are by nature unequal and there is a link between poor neglected areas and the likelihood of being a victim of and committing crime. In her paper Inequality And Crime, Morgan Kelly concludes” … the impact of inequality is large, even after controlling for the effects of poverty, race, and family composition.” Furthermore, low-income areas are usually in areas that are considered “food deserts”. The USDA defines Food deserts” …as parts of the country vapid of fresh fruit, vegetables, and other healthful whole foods, usually found in impoverished areas. This is largely due to a lack of grocery stores, farmers’ markets, and healthy food providers.” (http://americannutritionassociation.org/newsletter/usda-defines-food-deserts). Being in a designated food desert coupled with a lack of parks and open green spaces increases the risks of preventable diseases thereby raising the cost of healthcare on an already vulnerable population. This is a position that is less likely to happen to people of greater means.

To further add to the burden of affordable housing as it relates to healthcare costs, we must also consider other cascading factors. One way of coping with the stresses of low SES is by smoking. Smoking likewise raises the risks of preventable disease. Low SES people are less likely to having health insurance which means that a lot of times the primary healthcare provider is the emergency room. ER costs can run into the hundreds and thousands of dollars, placing further economic burdens on a person. Low income areas are also more likely to suffer from environmental toxin exposures than an upper income area would. Exposure to these environmental toxins also increases the risks of health problems and their associated costs. Finally, low SES individuals are less likely to participate in the political process which decreases their tendency to combat business and governments from placing polluting structures in their areas. Where a person lives determines a lot of ancillary effects that can have profound impact on a person’s health and wellbeing. All of this can be mitigated by more money and resources.

In the proceeding scenario we have not included the cost of public transportation, childcare, and utilities. These other costs only make the challenging goal of financial security more onerous. The biggest long-term affect is that outsized financial burdens inhibits a person’s ability to provide educational investments in their children thereby decreasing the likelihood of exceeding the parent’s SES. Additionally, White Cultural hegemony in the U.S propagates negative racial and gender stereotypes that can very often get internalized, creating a self-fulfilling prophecy of criminal behavior and educational underachievement. This is an example of structural problems creating individual behavioral problems. These individual behavioral problems can lead to low graduation rates, criminality, subsequent incarceration leading to an inability to earn wages, marry, and do the other things helpful in achieving financial security.

In conclusion I believe that the most concrete and practical solution is an increase in the federal minimum wage to $15.00 an hour. Income and financial security are directly proportional. Less money equals less security, so it follows that more money equals more security. Next I believe that we need a national return of the prominence of Unions and their abilities in collective bargaining. Collective bargaining would shift the power imbalance of employees and employers more towards the workers. This would further help eliminate the problem of income inequality. Finally, there has to be a continued effort at eliminating the system of advantage based on race that currently operates in the United States.

 

 

 

 

 

 

 

 

 

 

 

 

References

6.) https://www.apartmenttherapy.com/how-much-rent-you-can-really-afford-renters-solutions-186462)

7.) (http://americannutritionassociation.org/newsletter/usda-defines-food-deserts

 

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