The persistence of poverty throughout the nation's roaring economic recovery is "the great American paradox," Housing and Urban Development Secretary Andrew Cuomo said earlier this week. He was releasing a new HUD study that examines the Grand Canyon-sized gap between the stock-option rich and the urban poor.
Harvard anthropologist Katherine Newman studied that paradox up close in her new book, "No Shame in My Game," which draws a portrait of a group often hidden in our welfare-obsessed view of poverty: the working poor. Using poverty-strapped Harlem and the pseudonymous Burger Barn fast-food chain as her base, Newman and a team of Columbia University graduate student researchers studied the lives of minimum wage workers, who receive no benefits and often earn just enough money to disqualify themselves from government safety nets like food stamps and Medicaid.
Despite the common stereotype, Harlem's poor aren't all welfare cases -- 70 percent of the neighborhood's families have at least one worker. Newman and her researchers studied some of the neighborhood's "success stories" -- the people who beat the 14-1 odds of landing a job at Burger Barn. With the help of sympathetic restaurant managers, they also studied the dizzying number of applicants who didn't make the cut.
There are more working poor in America than welfare recipients, over 6 million nationwide. They are the people who work in the kinds of service jobs -- burger-flipping, housekeeping, childcare -- that most of us consider low-wage indignations. Most don't receive medical insurance of any kind, and something as simple as doctor visit can lead to financial catastrophe. Childcare is also a tremendous burden, with these families spending up to a third of their income on care. Safety nets are available to some, but they are seldom advertised and, in many cases, wrought with so many bureaucratic hurdles that only the most persistent are able to get access.
The benefits of one of the greatest periods of American prosperity ever -- with 18 million jobs created in the past six years and unemployment at a historic 40-year low -- are bypassing many urban neighborhoods, where demand for jobs often exceeds supply. Declining welfare rolls (caseloads have dropped 44 percent overall since 1993) will only exacerbate the problem. Indeed, a year-old HUD report on welfare caseloads and job-growth forecasts for 74 urban counties showed that during the next five years, as welfare recipients face time limits on their benefits, there will be a shortfall of 353,000 jobs. But HUD's latest report offers the kind of Cassandra-fueling detail conspicuously absent from the feel-good welfare-to-work success stories politicians are using to burnish their images these days.
While the national unemployment rate has fallen to 4.5 percent, it still hovers around 6 percent in the 50 largest urban centers. But rosier city-wide unemployment figures can often hide deeply impoverished neighborhoods, like New York's Harlem or San Francisco's Hunter's Point. New York City may have an overall unemployment rate of 7 percent, but that rate is often double in Harlem. A sixth of urban centers are strapped with unemployment rates 50 percent or more above the national rate. There has been a slight recovery in urban areas overall, but more than a third still had poverty rates of 20 percent or more (50 percent higher than the national average) in 1995.
Newman saw those statistics writ large in her Harlem study. A year after they applied, 75 percent of the 100 Burger Barn applicants Newman tracked were still unemployed -- not terribly surprising considering Harlem has a 15-percent unemployment rate. Just before the passage of the 1996 Welfare Reform Act, Newman's groundbreaking research was presented in Congress during hearings on the legislation. It was the first major evidence that illustrated the side effects that we could expect if welfare reform passed. President Clinton even cited Newman's work.
Rather than dwell on the hopeless statistics her research rendered and which other studies confirm, Newman offers some pragmatic solutions that could go a long way toward buoying the working poor. They include expanding existing tax credits and wage subsidies, providing government-subsidized childcare, improving health care access and creating Japanese-inspired public-private vocational education programs that would link students to jobs in the private sector and provide the skills needed for management-track employment.
Salon News recently spoke to Newman about the problems the working poor face and her policy prescriptions for them.
Why did you choose the fast-food industry and the pseudonymous Burger Barn as a window into the lives of the working poor?
The fast-food industry is the largest employer of first-time entry-level workers of any industry in the nation. It's really the canonical entry-level job. It may be even more important than the military as a gateway into the legitimate labor market. Also, I wanted to find an industry where it would be possible to find standardized work practices that are uniform from one shop to the next, so that that wouldn't be the explanation for why I found who I found on the work floor.
You state in your book that the largest group of Americans living below the poverty level is the working poor, not welfare recipients. Is there overlap?
There is overlap in the sense that most people who have been on welfare have had a work life at some point. It's actually a mistake for people to think of welfare recipients as people who have never been in the labor market. But my main interest was in people who had been consistently in the labor market. Some of these folks had experiences with welfare in the past, and many were living in households where someone else was receiving welfare.
I try to point out in this book that -- in comparison to other researchers who have argued that there are welfare recipients in one corner and "upstanding" workers in the other and they have nothing to do with each other -- they're intertwined in families and neighborhoods. And that's largely because you don't earn much more as a low-wage worker than you receive from AFDC if that's your first income. You can't make it on either one.
If you're in a household as a low-wage worker, you've got be attached either to other workers or to somebody who's getting state subsidies. Conversely, if you're a welfare recipient, you can't make it on that either. Chances are you're going to find either someone in your household who's working or someone related to you or a boyfriend or somebody who you can borrow money from.
Our service economy is creating lots of low-paying jobs, which seems to be spurring growth in the number of working poor.
Yes, they're increasing at a rapid rate because the service sector has almost-always paid lower than manufacturing. The service sector is very bifurcated, in fact it's probably a misnomer because it sometimes includes very high-wage computer programmers and it includes low-wage hospital attendants and everything in between. Part of the point of writing the book was not to condemn those jobs or even to condemn the economy for producing them, which is what some people would urge me to do. The problem isn't with the jobs; it's that for some people the jobs don't lead to a better job. That's what really differentiates the working poor from the rest of us.
Your book found some disturbing racial differences in what happens to job applicants.
My study encompassed both the almost-entirely black Central Harlem and the Latino section of Harlem that is largely Dominican and Puerto Rican. These are self-identifying racial categories. It turns out, when you look a little closer, that a fair proportion of the people in this area are black immigrants who in a relatively short period of time start to call themselves African Americans. A number are Caribbean immigrants, but the lion's share are native-born African Americans.
In this all-black neighborhood, the likelihood of being rejected [for jobs] was greater for African Americans than it was for the Latinos who didn't live in the area. And this was in a black neighborhood with black customers, management and owners. This wasn't a racial divide, but a preference. Employers have a favorable impression of immigrant labor. Even though they themselves are black, they often have a jaundiced view of the urban, or African-American labor force. They had very fine-grain preferences when it came to immigrant labor. I had managers say to me that what they really wanted were recent immigrants, people who grew up in really poor countries who would not think of this as a bad job, but instead as a king's ransom compared to what they might find in Haiti or the Dominican Republic. Latinos apply in smaller numbers than blacks but are much likelier to get hired.
In your study, you looked not only at what you describe as "success stories," but also at 100 people who don't make the 14:1 cut for jobs at Burger Barn. What did you find?
I realized midway through that I was looking at success stories. It shocked me to come to that realization -- we were working with struggling minimum wage workers who were living pretty rough. However, they were people who had jobs. There were many out there who were not successful at getting those jobs. What did we know about them? Nothing. Employers who I was friendly with gave me the applications of all the people who applied for jobs during the same period we were doing the study. We went out to find 100 of them. I tracked them down a year later and 73 percent were not working. But they had applied all over the place. In fact, some had applied so many places we had to attach additional sheets to their interview form to list all the places they had applied. These numbers were dismal.
The 14:1 job-to-applicant ratio evident in Harlem differs widely from city to city. In San Francisco, for example, there are two entry-level jobs for every seeker. Preliminary evidence also suggests that welfare reform has been successful in San Francisco. Why is it such a different story in Harlem?
New York City hasn't pulled out of the recession of the early '90s to the degree that other cities did. Unemployment is almost twice what it is nationwide. Cities do vary in their economic health, which is why it is important to look at this issue across urban areas. Then again, as the Cuomo report makes clear, Harlem isn't the only neighborhood left behind by economic expansion. It has plenty of company. It is also important to note that places like San Francisco have "exported" some of their poverty problems. It is just too expensive a city for many poor people to live in at all anymore. Look across the Bay to Oakland or pockets of Richmond and you see a less-glowing story.
Preliminary results from your research were presented on the floor of the House while the Welfare Reform Act of 1996 was debated. Did it have any influence?
Even President Clinton used some of the numbers from the study in one of his speeches. When it came to asking the question, "What will happen to welfare recipients when they look for work?" mine was one of the few studies that could answer that. Until this study became known in policy circles, the view was, without any evidence, "Anybody can get a job. The problem with welfare is that it's been too easy for people not to get a job. If we just make that more difficult, they'll just go out and get a job." My study helped hammer the point home that that wasn't going to be true for everyone, and that we were going to end up with a large number of people who weren't going to find work.
What kind of impact is welfare reform having on the working poor?
My fear, for which I think we do have evidence, is there will be a downward pressure on what are already low-wage jobs. If you look at the human capital characteristics of long-term welfare recipients, the group targeted by welfare reform, the only labor market they can expect to enter is the labor market of the working poor. There are already too many people searching for too few jobs in the low-wage sector.
If it were not for increases in minimum wage, we would see vast stagnation in the wage base of the working poor. The forecasts for wage depression have been pretty bleak. There is no pressure to raise wages in labor surplus environments, which is what you have in Harlem. If you add long-term welfare recipients to the mix, you just get that many more people applying for the same jobs.
In your book and in our interview, I get the impression you believe people are better off on welfare than working at low-paying jobs. But one could also argue that working at a fast food job provides access to the first rung on the ladder. Unlike people on welfare, at least the working poor have access to opportunity. Are they really better off on welfare?
I don't believe people are better off on welfare at all. Workers not only have more access to opportunity, they define themselves very differently: as mainstream workers. But it is hard to live with a minimum wage job, especially if you can't access the subsidies that welfare recipients have had (Medicaid, food stamps, subsidized housing). On the other hand, raising the EITC has opened up an income gap to the benefit of low-wage workers. The more we do that, the more working will really pay beyond welfare subsistence. But there will always be people who are going to need government assistance (and I describe their circumstances in my book), for whom illness, inadequate childcare, serious depression or drug problems, make it impossible to work. I do think they are in the minority, but we should take our obligations to help them seriously.
Do any safety nets exist for the working poor? Is any kind of partial aid, like Medicaid or food stamps, available to them?
The good news on the healthcare front is that we've made significant strides in insuring the children in working poor households. But that doesn't apply to the parents. These parents are subject to chronic illness at a higher degree than the general population. They're also subject to accident and injury on the job at a higher rate. The fact that the parents aren't covered because they earn too much to qualify for Medicaid, but they don't work in places that offer health insurance benefits, [means] they're really stuck. And they are chief consumers of emergency room medicine, which means their health problems are attended to too late, when they are in more acute conditions than would be optimal.
In those families where children have no health insurance, the childrens' health problems are more likely to destabilize the work lives of their poor parents. If your kid has asthma, whose rates have skyrocketed among the urban poor, and has to be hospitalized for attacks, your own performance on the job will suffer. The Family Medical Leave Act provides nothing in the way of wage replacement for anybody. You wind up with kids who aren't getting treated and people who are losing their jobs when the problems become too acute.
The failed health-care initiative in 1994, whatever you may think of it, it is one of the things that would have made the biggest single difference in the quality of life and in the productivity of the working poor, if we had something like universal health insurance.
What policy prescriptions do you recommend?
The history of poverty policy has emphasized what the federal government can do. But I tried to take a more searching look at what the private sector can do. That's where we have the best shot at creating better jobs. I focused attention on programs that would have little government involvement, like the National Youth Apprenticeship Program. It was hatched by three firms well known for offering this type of program. It would be an American version of the Japanese [vocational education] model, where teachers are an important node. Employers turn to teachers for evaluations.
In Chicago, they took a very poor, very segregated school where dropout rates were catastrophic. Teachers were distressed by what they found in classroom. They rewrote the curriculum with examples relevant to the work they would do. The kids in the program would be offered part-time jobs at 16 and full-time managerial-track jobs at 18. They were also expected to attend the program in school, which included an extra hour a day for foreign language instruction. They could be kicked out if they weren't performing well. The promotion rate jumped 50 percent. Employers who hired these kids said that they were better prepared and that they are more likely to get on managerial track. This also means they are going to complete high school and are much likelier to go on to higher education. I believe the program will also cause many more of students to avoid the pitfalls that would lead to lifelong poverty, like out-of-wedlock childbirth.
You also suggest broader use of tax credits in your book.
The least-expensive method of delivering more money to the working poor lies in the Earned Income Tax Credit. Such tax forgiveness allows families below a certain level to pay lower taxes, allowing them to keep more of their earnings. This is inexpensive because it involves less administration. It's made a huge difference in lifting poor people above the poverty line.
Do increases in the minimum wage make a noticeable difference?
It has had a very noticeable difference in the United States. After years of wage stagnation across the board, the lowest levels in our income profile have started to show increases, even as the middle stagnates. Increasing the minimum wage is a blunt instrument for addressing poverty. It's a more expensive way, but it's not trivial. It doesn't go nearly as far in cities with a high cost of living.
How does the need for quality childcare effect the working poor?
Childcare is an enormous problem because if you're poor you can't afford to buy high-quality childcare. People are going to worry about whether their children are well taken care of. I worry that with welfare reform this will become such a crucial issue that we will see an attempt to loosen the licensing requirements to increase supply. If the quality is low, it could create inequities.
Most of the working-poor families that I was studying were giving up somewhere between a quarter and a third of their income for childcare. It leads to all kinds of subterfuge in these households, with people trying to hide their earnings so as not to face an additional tax. But at least the childcare is available. I'm not vouching for quality. I think we could do better with a much more concerted investment in childcare as a nation. A lot of these kids are safe, they're fed, they're not out in the streets. But if you ask me if they're going to be well prepared to enter kindergarten, the answer is probably not.
I would like to see a system that would look more like what they have in France or Italy -- a national obligation paid for by everyone. It's seen as the first stage of early childhood education. These programs were created in wake of World War II, and are universal daycare programs that become progressively more like schools. It would improve the preparation of poor children for the school system.
In some respects, your proposals for improving the quality of life of the working poor seem similar to Professor David Elwood's "make work pay" prescriptions from the early '90s -- a proposal that if you have a full-time job in America, you won't have to be poor, thanks to a combination of tax credits and health and childcare subsidies. What became of his ideas after he entered the Clinton administration?
I have been influenced by David's work (he is a close colleague in the Kennedy School), but I try to go beyond the economists' interests in wage subsidies and tax breaks to talk about employer consortia, school-to-work programs and the like. Because we need to do more than make work pay. We have to make work available and figure out better ways to capitalize on the experience that low wage workers have so that they have more job mobility.
If you want to know what happened to Ellwood's ideas, read the piece he wrote for the American Prospect in 1996. His progressive ideas were tossed out when the Republicans took control of Congress -- all his proposals about job training and public employment if needed, etc. What remained was his insistence on collection of child support and the time-limits proposal. The rest of the safety net he had in mind died an early death.