Saturday, July 6, 2019

Wisconsin Poverty Report shows many are still struggling in a time of "full employment"

I wanted to direct you to the recently updated Wisconsin Poverty Report from the UW-Madison Institute for Research on Poverty. It's now updated with statistics through 2017, and while the picture has improved in our state over the 9 years of economic recovery in America, it's still not where the country is as a whole.

The Wisconsin Poverty Report identifies 3 different ways to recognize if people are financially poor in the state.
We employed three different measures for estimating poverty in Wisconsin from 2008 to 2017 to provide a nuanced picture of economic hardship in the state (Figure 1). The three measures are: the market income poverty measure (MIP), which is based on market (private) income only; the Census Bureau’s official poverty measure (OPM), which adds in the value of public cash benefits; and the Wisconsin Poverty Measure (WPM), which takes into account not only cash benefits but also noncash benefits and taxes. Because it does not take into account government benefits, the MIP rate is several points higher than the OPM or WPM rates. Meanwhile, the OPM differs from the MIP and WPM in terms of its poverty threshold and other methods, as discussed below.

Two ways that Wisconsin continues to lag is through the lack of people counted as "employed" in the country. As mentioned before, Wisconsin's low unemployment rate isn't necessarily because that many more people are finding jobs, or that those jobs are paying well.
We examined recent employment trends in Wisconsin in Figure 2 to help understand these changes. During the Great Recession, employment fell sharply in the state and did not return to its March 2008 high until July 2015, more than seven years later. Wisconsin saw accelerating growth in the number of individuals employed during 2014 and 2015 as the economy recovered. There was a flatter trend into 2016 and 2017, as employment growth of 64,000 jobs led to a small decline in the [Market Income Poverty] rate for 2017 from 23.2 percent to 22.5 percent, shown in Figure 1. Despite the almost 10-year U.S. economic recovery, Wisconsin’s own WPM poverty rate remained at the same level in 2017 as in 2010 and 2012, and was higher than in 2015. The benefits of continued economic growth and an extended period of job growth have failed to produce a significant decline in Wisconsin poverty.

One of the important differences between the more-comprehensive WPM and the OPM is that the WPM takes into account changes in noncash benefits and tax credits. During the worst of the Great Recession, the American Recovery and Reinvestment Act (ARRA) increase in noncash benefits and refundable tax credits offset decreases in market income. Our reports focusing on 2009 and 2010 emphasized the success of policies intended to address the Great Recession in keeping poverty from increasing. However, the safety net expansions of the Great Recession have continued to contract as the economy recovered and the 2017 WPM is still 0.5 percentage points above its 2015 value, suggesting that policy impacts on poverty reduction are below what has been seen in past reports.

Earnings rise because of employment and wage growth. While both of these increased modestly in Wisconsin during the January 2016 to November 2017 period covered in this report, the lowest income earners only barely benefitted. Meanwhile, stubborn pockets of poverty, especially in Milwaukee County, remained unmoved by the recovery as we see below. In short, after more than eight years of strong national economic recovery from July 2009 to November 2017, we are just treading water in terms of employment, wages, and poverty reduction in Wisconsin.
And we’ve seen that 2018 and the first 5 months of 2019 are even worse, as the number of people “employed” has crested and then fallen from the end of 2017.

Another concern the Wisconsin Poverty Report brings up is that while children are being kept out of dire straits due to increasing government assistance and stabilization programs, older Wisconsinites have become more susceptible to tough situations as medical costs go up beyond the increases in benefits they receive.
This is the first year in which the WPM child poverty rate was the same as the overall WPM poverty rate, suggesting that higher earnings, refundable tax credits, and noncash benefits all helped reduce poverty for our most vulnerable population. In contrast, elderly poverty was higher under the WPM than the OPM, mainly because these individuals have out-of-pocket medical expenses that exceed the noncash benefits they receive….

Social Security benefits keep many elders, who have little or no market income, out of poverty as each new generation of elders had higher earnings during their working years and therefore receive higher Social Security benefits than the previous generation. Between 2016 and 2017, inflation adjustments for the expense-based poverty line for the WPM and the Consumer Price Index increased by more than the cost-of-living adjustments for Social Security. Because there is a fairly large number of elderly individuals and couples whose incomes are just slightly above or below the poverty line, small changes in inflation adjustments can move them from one side of the poverty line to the other, as happened in 2016 and 2017 in Wisconsin, and as seen in the OPM as well as the WPM. In addition, the 2016 and 2017 increases in medical out-of-pocket expenses were higher than the Social Security benefit increases in both years, taking up a larger portion of elder incomes for medical costs. These factors contribute to the WPM elder poverty rate increasing from 2015 to 2017 as shown in Figure 6. In all cases, the WPM rate for elders is higher than the OPM, but lower than child and overall poverty rates using either measure.

So what to do with these obvious gaps in standard of living and the lack of improvement? Here are some of the IRP’s proposed solutions.
Why is the economy not doing more for the poor? Flat or falling real wages in key low-skill service industries and occupations is one reason. While the safety net provided a buffer against poverty during the Great Recession and still makes a substantial difference in poverty—with the SNAP and EITC programs having particularly large impacts—the effects are shrinking. This lessening impact of the safety net occurred because of the recovery (fewer people applied for and received benefits) and because of benefit changes (such as work requirements for single people in SNAP). The net effect of these changes has left the longer-term WPM poverty rate for the total population and for families with children below the official measure, but at a plateau between 10 and 11 percent overall and 10 to 12 percent for children.

There is growing evidence that a variety of work supports can increase work among single parents. Since 2015, work among single parents has increased—especially for the non-college educated—in states with strong economic growth, increased minimum wages, and available child care and parental leave. Further, young single mothers’ work participation increased 4 percentage points more in states that expanded Medicaid in 2014 versus those that did not. This is most likely because single moms can afford to take a job with no or subpar health insurance because Medicaid is covering them, thus avoiding plans with high out-of-pocket expenses such as those mentioned earlier in the report. As a recent National Academy of Sciences report has found, reducing poverty for families with children will require a combination of work and income supports. In addition to an increase in the state minimum wage to $10.50, key income and work supports could include an increased federal and state EITC29, with a program for childless adults; expansions of work supports such as Medicaid (BadgerCare in Wisconsin); access to affordable high quality childcare (Wisconsin Shares) and other policies to reduce work-related expenses for families with children. We could also expand work opportunities for the underemployed and the hard to employ, such as the formerly incarcerated. Addressing the lack of affordable housing, especially for families with children, could help to alleviate the burden of high rents, particularly in Wisconsin’s cities.
Governor Evers’ proposed budget had some of the provisions IRP says is most effective in reducing real poverty, including Medicaid expansion, expanding the EITC and Homestead Credits, child care tax credits, and a higher minimum wage. But all of these provisions were removed by Republicans during budget deliberations, and were not part of the final document that Evers signed on Wednesday.

Which means we likely will see another year or two of this stagnation, or worse if there is a national recession in that time (a situation that is growing increasingly likely). So let's not fall for the absurd belief that things are currently as "good as they'll ever get" in Wisconsin, because the Wisconsin Poverty Report shows where we can still do much better.

And a big way we can get better is to boot out many of the Republicans that are standing in the way of policies that are more effective in reducing poverty. That's not spoken in the IRP report, but it's an obvious conclusion.

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