Making Work Pay Enough - Summary

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Abstract

One-third of America's families with children are low income, meaning their incomes fall below twice the federal poverty level. Although four in five of these families work, many don't bring home enough to cover the everyday costs of living. In this essay, Acs and Turner outline their proposals to enhance low-income families' purchasing power and reduce unusually high housing costs through a package of reforms and policy initiatives that tackle both the income side and expenditure side of family budgets.

Introduction

Work alone is not paying enough for many low-income families to cover basic expenses, weather emergencies, or secure a foothold on the path to long-term self sufficiency. “Making work pay” should mean that working families can consistently afford the basics—housing, health care, food, and child care—and see real benefits to continuing and stepping up their work effort. How can we make work pay enough for all lowincome families to get by? We propose a package of reforms and policy initiatives that tackle both the income side and expenditure side of family budgets. Our approach rewards families for working more, raises their purchasing power, and cuts the cost of big-ticket necessities like housing, where costs are rising higher than wages.

Public Programs Fall Short

Low-income working families are supported by a complex web of public assistance programs and tax credits, including the earned income tax credit (EITC), child care subsidies, and Temporary Assistance for Needy Families. But benefits from these programs are quickly scaled back as incomes rise, penalizing families for their extra effort. Once a family has at least one part-time worker, working more doesn't pay a great deal more. Also, many families don't know how or don't want to take full advantage of available benefits. Further, help for housing and child care (two of the largest expenses) only serves a fraction of those in need.

Federal housing assistance serves about one in five low-income families that rent and virtually no lowincome homeowners. Average rents nationwide have been growing faster than inflation over the past decade. Half of all working households with incomes roughly between 100 and 200 percent of the federal poverty level spend more than 30 percent of their monthly income for housing; close to one-sixth spend more than 50 percent of their income. The mismatch between wages and housing costs is the worst for families living in more prosperous metropolitan areas.

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The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.

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