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The Cage of Poverty

September 1, 2000 / By Daniel Flaming, Mark Drayse and Peter Force
Underwriter: Economic Roundtable
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Cage_of_Poverty_Cover_img_01In his 1963 letter from the Birmingham jail Martin Luther King, Jr. described the despair of people “smothering in an airtight cage of poverty in the midst of an affluent society.” It is important to understand the extent to which this image of entrapment still describes the wage-earning lives of the working poor as they try to support their families.

Welfare reform has increased labor force participation among welfare parents. But is work leading to self-sufficiency or another cycle of defeat for these workers? The answer is that most welfare workers remain trapped in the cage of poverty.

The basic premise of the work-first model that continuing participation in the labor force will lead to economic self-sufficiency has proven to be mistaken. Most welfare workers have been unable to move beyond jobs that are either part-time or short-term, or both. Less than one-fifth of these workers are able to gain entry into industries paying sustaining wages and work for at least three quarters a year over a multi-year period, which are the prerequisites for rising above the poverty threshold.

Full-time pay for workers in the lowest-paid 5 percent of jobs in the county economy, which includes 71 percent of all welfare workers who were reported to have found jobs and who have been back in the labor market for three years or more, is only one-fifteenth as much as for their highest-paid counterparts at the top of the county’s job ladder. These workers have no opportunity for asset development or for investing in their own communities. Their uphill struggle in trying to meet daily survival needs virtually debars them from building equity in the regional economy.

Assets such as education, vocational skills, livable neighborhoods, and financial capital empower individuals and communities to be self-sustaining and capable of adapting to economic change. These assets, however, are not equally accessible to everyone. For some they are virtually inaccessible. Resources and opportunities that increase productivity, earnings and asset accumulation include:

  • Good public education.
  • Access to higher education.
  • Safe and decent housing.
  • Reliable and timely transportation.
  • Employer-provided training.
  • Knowledge-based work experience.
  • Employment in industries characterized by high levels of innovation.
  • Employment in industries with sustained capital investment and upgrading.
  • Interconnection through communication, transportation, and financial links.
  • Access to capital through savings, credit or other means.

Many low-wage workers do not have access to even one of these resources that enable individuals to achieve sustained economic well-being. A fundamental requirement for enabling low-wage workers to rise out of poverty is to give them access to resources that will enable them to invest in themselves.

In the short-term, most welfare parents who have complied with welfare-to-work requirements have seen their incomes rise. Their earnings combined with partial welfare benefits have provided more income than they would have received through welfare alone. This outcome is beneficial but also temporary and precarious. There is no strategy or body of resources for providing income to welfare parents in the event of:

  1. A recession that brings rising levels of unemployment back to the region, or
  2. Administrative requirements to impose the five-year, life-time limit on public assistance that is part of federal law.

There is every reason to believe that many families will suffer acute deprivation and hardship when either of these events occurs. If both occur at the same time, the impacts may be disastrous.

 

In the latter half of the 1980s and early 1990s, conservatives, moderates, and liberals coalesced around the goal of ensuring that families in which a parent worked full-time, year-round would not be poor.[1] The growing number of working poor in Los Angeles County is at variance with this principle of economic justice.

An abundance of low-skilled workers attracts low-wage industries that can use them. To the extent that these industries grow and are the primary employers available, welfare workers will remain trapped in an insecure, low-wage labor market. The underlying problem of poverty is “more and more a problem of gainfully employed persons.”[2]

The long-term growth of poverty in Los Angeles County shows that exits from poverty are occurring less rapidly than entries into poverty. Despite overall growth in earnings in the county labor market over the past decade, 22 percent of county residents were in poverty in 1998. This is a very serious problem. A regional growth path in which low-paying industries become increasingly predominant and workers with marginal earnings are increasingly numerous will lead to increasing polarization of income between the affluent and the poor, declining per capita public revenues, and growing social problems that diminish the quality of life for everyone. The civil unrest of 1992 can be understood as a manifestation of rage over economic deprivation and blighted hopes.[3] Residents of the county share an essential interest in building a labor market that does not leave families in poverty. The entire regional economy benefits when workers break out of low-wage jobs.

The purpose of this report is to use the work histories of welfare-to-work participants during the decade of the 1990’s to map their job connections and understand the growth path being created in the county’s economy by this expanding sector of the labor force. These outcomes are important because Los Angeles County has more people below the poverty level than any other county in the nation, and more than all but four states.

Key Findings

We analyzed the employment records of nearly 100,000 welfare-to-work participants. This included everyone who was reported to have found a job from 1990 through 1997, and represents about half of the county’s welfare-to-work participants during this period. The half that was not studied faces even bleaker prospects than th