Where Are The "Millions Of Full Time Workers Living In Poverty"?

The famous Bernie Sanders quote when he advocates for his socialist-model government programs and a greatly increased minimum wage is this one:  "It is a national disgrace that millions of full-time workers are living in poverty . . . ."     That phrase has been repeated by Bernie multiple times in multiple venues.

When you hear this line, what image comes to your mind?  Typically, the image would be of a hard-working twenty- to thirty-something, striving at a job all day every day and struggling single-handedly to support him/herself, one or more children, and maybe a spouse, and coming up with not enough to eat or pay the rent.  Oh, and receiving little or nothing from the government to alleviate the poverty.  What kind of cold-hearted person would be OK with allowing "millions" of people in this very affluent country to suffer such deprivation despite their hard work?

But is that image that I depicted really a fair characterization of any significant number of people in this country, let alone millions of people?  Remember, as I have pointed out many times on this site, "poverty," as defined by official federal criteria, is almost completely unrelated to your mental image of what it means to be poor.  You are thinking of a state of physical deprivation -- insufficient food, clothing, or shelter -- but the official definition is talking about a statistical artifact that considers only one piece of the resources available to low income people ("cash income"), while ignoring the bulk of their means of support in a cynical game to inflate the numbers.  Now, of course I am not saying that there are no people in the United States who work full time for the whole year and yet are in a bona fide state of physical-deprivation poverty.  But if we actually look at the statistics for the number of people in this country in full time minimum wage and other low-wage jobs, and we consider the benefits already provided to them by existing federal programs, how many people can we identify who are in poverty as defined by the federal government's own poverty line (FPL)?  Is it millions, or only hundreds of thousands, or maybe as few as tens of thousands?  

You will not be surprised to learn that in the reams of federal statistics that supposedly address this issue, it is remarkably difficult to get real information that goes to the answer to this question.  The best we can do is nibble around the edges.  So, let's start nibbling away:

  • First, how many people earn the federal minimum wage (currently $7.25 per hour) or less?  According to Department of Labor data here, there were just about 3 million people in the U.S. who were paid at or below the federal minimum in 2014 (latest data).  This was 3.9% of the approximately 77 million people in the U.S. paid by the hour, but barely over 2% of the approximately 144 million total jobs.
  • But at least all of those 3 million are in poverty -- right?  Wrong.  First of all, a single person working full time for the whole year at $7.25 per hour, and receiving no other government benefits of any kind, earns about $14,500 for the year -- against a federal poverty level threshold of $11,770 (2015 level).  Second, most of those minimum wage workers are second and third workers in larger families with other earners (e.g., dad and/or mom) and other income.  According to data at the Foundation for Economic Education here, fully half of all minimum wage workers are age 24 and less, aka "kids," most of them still attached to the families in which they have grown up.  The average income of a family with an under-25 minimum wage earner is $64,500.  And by the way, most of the 25-and-up minimum wage earners are also in families with other earners.  The average income of a family with a 25-and-up minimum wage earner in 2013 was $42,500.  
  • So how many minimum wage earners are the sole earner for a multi-person family?  The Washington Policy Center put out a report addressing that issue in October 2013.  They found that 15% of minimum wage earners were sole earners in families with children.  That would be about 450,000 people; but, of course, most of those were working part time, rather than full time, and so don't fit Bernie's description.  The percent of minimum wage earners who were full-time workers and also single parents of children was 4%.  That would be about 120,000 -- a far cry from Bernie's "millions."
  • The statistics for minimum wage earners typically include workers earning less than the minimum wage.  What, you say, how could anyone earn less than the minimum wage -- I thought it was the "minimum"?  You will be surprised to learn that about half of the workers earning "minimum wage or less" actually earn less.  The reason is that there is a patchwork of exemptions from the minimum wage that cover surprising numbers of people.  But when you start looking at the categories, you quickly realize that this again is not what you had in mind when you think of hard-working people in poverty.  One large category is disabled people who work in so-called "sheltered workshops."  The Washington Post reported in February that there are approximately 228,000 such people in the U.S.  In some cases they earn as little as $1 per hour or even less; but of course, these people rarely are supporting anyone else, and their needs are generally provided for from other resources.  Other large exemptions include things like camp counselors (but, of course, they get free room and board) and agricultural workers employed by their own families.  The largest category is "tipped workers," who, under federal rules can be paid well less than the $7.25 -- but, of course, they get the tips in addition.  The tips can take them well above the $7.25 -- in many cases, to a multiple.
  • And finally, how about the big one?  For that small number of multi-person families with only one earner making at or near the minimum wage, are there other resources already provided to such people that would take them above the FPL if only the additional resources were counted?  Let's consider just the two biggest such programs -- food stamps and the Earned Income Tax Credit.  Annual federal spending for food stamps ("SNAP") is around $75 billion; for the EITC it is around $70 billion.  As discussed on this blog many times, although these two programs are very much the same thing as cash (the EITC is actually paid in cash), and are often described as "anti-poverty" programs,  both food stamps and the EITC are arbitrarily excluded from the definition of "poverty" when poverty statistics are reported, in a cynical effort to keep the numbers up.  But how would these programs affect the numbers if we just count them?  Consider one of those 120,000 families that we identified earlier as having children and also a sole earner working full time at minimum wage.  The earnings from the minimum wage job are about $14,500.  The FPL for a family of three is $20,090.  So, at first blush, this family is in poverty.  But wait.  According to the EITC calculator here, they would be entitled to an EITC of $5548.  And according to a food stamp calculator here, they would be entitled to food stamps worth about $1800.  So those two items alone, if counted, would take them to an income of $21,848, which is above the poverty threshold.  And this is before getting to other handouts.  As just one example, such a family is likely to be entitled to another $2000 of the so-called "additional child tax credit."  And then there are other nutrition programs like WIC, energy assistance, clothing assistance, and public housing.  Many low-income families in my area get public housing benefits worth $50,000 per year and more.

As you think about the numbers here, you will quickly realize that there can be very few full time workers, even ones with substantial families with no other earners, who will fall below the federal poverty threshold once the already-available cash-like benefits are taken into account.  As far as I can work the numbers, I think it is almost impossible for any family to be in this position with three or fewer children.  (Over three children it becomes possible because the EITC stops growing after three children.)  

So where does that leave Bernie and his "millions of full-time workers living in poverty"?   I have no idea where he even comes up with such a number.  He can say it over and over again like it is true, and he gets away with it because nobody is willing to challenge him on it.  Who would be so cruel as to criticize those of the poor who are also so hard-working that they work full-time jobs?  But the fact is that this is a complete fraud.  

And here's why it matters.  It matters because the theme of the "millions of full-time workers living in poverty" is used to advocate for more and yet more government programs supposedly to address this scourge.  And then the government programs either make the problem of poverty worse (e.g., the minimum wage, by eliminating jobs) or are not counted in the statistics.  We get more and more programs, at greater and greater cost, and "poverty" never goes down.