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Employment is important from an income perspective, but it also serves a critical social and emotional role. Yet, too many poor Americans of working age do not work at all for pay. Various reasons are behind this lack of work, but perhaps surprisingly the inability to find a job only explains a small fraction of poor adults who do not work. Public policy must focus on the main reasons people in poverty do not work, which has less to do with the types of jobs available and the skills of poor people, and more to do with the health status and family responsibilities of people in poverty.
Using data from the Current Population Survey, Annual Social and Economic Supplement (ASEC), this paper examines this issue by focusing on the population of Americans who are poor, meaning they have income below a certain threshold established by the federal government. For the most part, it focuses on those determined poor using the official definition of poverty. While some argue that the official measure is meaningless because it does not count all resources available to households (for example, food assistance benefits and tax-based transfers such as the earned income tax credit), the focus here is intended to offer a better understanding of who is poor before factoring in these government benefits.
But it is true that the supplemental poverty measure, which factors in all government benefits and uses a different threshold, gives us a better sense of who remains poor even after government assistance is considered. For this reason, where appropriate, people who are poor according to the supplemental poverty measure were also explored. Ultimately, the results related to work and nonwork for people in poverty according to both measures were similar, and the conclusions were the same.
The results suggest that efforts to increase employment among America’s poor could be a larger component of antipoverty efforts, but that this must involve addressing health issues and family responsibilities more broadly. The results also raise concerns about the potential work disincentives built into existing public benefit programs, such as disability assistance. Notably, fewer than 10 percent of nonworkers in poverty reported inability to find work as their reason for not working. This suggests that current economic and workforce development policies, which primarily focus on people already working or looking for work, have limitations. With over 60 percent of poor working-age people not working at all, public policies aimed at increasing work may have stronger effects than these other policies.
Unmistakably, a pillar of our society is work. Not only does it supply income that enables families to thrive, but also it fosters a sense of pride and belonging that few other institutions can provide. For these reasons, it is no surprise that the vast majority of prime-age Americans work for pay. Even so, it is no secret that labor force participation rates among prime-age workers have declined over the past two decades, suggesting that America is facing a work problem.
If not working is a choice, then it may be of little concern to public policy. But when a lack of employment leads to poverty, it raises important questions about the role for government. In many ways, government can make poverty less painful through income transfers, but the important question is whether government can encourage those who are not employed to work and provide for themselves. This paper explores work among America’s poor with a particular focus on the reasons people give for not working and what public policy can do to address it.
An often overlooked fact is that the majority of working-age people in poverty do not work at all for pay, and this pattern has become more entrenched over time. When describing poverty, low wages are often highlighted, but according to the US Census Bureau, more than 60 percent of poor working-age Americans in official poverty did not work at all in 2014. Even accounting for all government benefits via the supplemental poverty measure, 58.3 percent of poor working-age people did not work at all in 2014.
Efforts to boost wages at the low end may have some effect on poverty, but if we are to reduce it in any meaningful way, changes in policy will need to address the reality that too few poor Americans work. Failing to acknowledge this fact presents other, less than ideal, options. We can either accept the status quo, which would mean leaving millions of Americans in poverty, or continue funding large government programs that transfer income from working taxpayers to the nonworking poor.
Article cross-posted from AEI.org.