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Mapping Strategies to Help Those Left Behind by Booming Economy

If there's good news in the picture, it's that the needs of these working poor are rising on the political radar in both parties.


As the nation's economy rolls through its unprecedented 110th month of growth, this extraordinary expansion increasingly is defined as much by its breadth as its length. With each month, the circle of prosperity is widening. Unemployment among African Americans and Latinos is at an all-time low; homeownership is at an all-time high for both groups. The Progressive Policy Institute recently calculated that families on the bottom fifth of the income ladder saw their income rise 14% from 1993 through 1998, after falling 17% over the previous 25 years.

For all that, it's also clear that even this rising tide is not lifting all boats, at least not enough to keep them safely above water. Millions of workers are still struggling to raise families in low-wage jobs. At a conference on the problem in Washington last week, economist Stephen J. Rose released data showing that about 20 million workers living in low-income families earn $15,000 a year or less. That's about one-seventh of the total labor force working hard without very much to show for it. And the vast majority of those workers are the principal breadwinners in their families, Rose found.

If there's good news in the picture, it's that the needs of these working poor are rising on the political radar in both parties. Policies to bolster them are emerging along two distinct tracks. The first looks to provide more resources--financial and otherwise--to low-income working families. The second looks to help workers advance into better-paying jobs.

Thinking on the first track is much more advanced. President Clinton and the two men vying for his desk--Vice President Al Gore and Texas Gov. George W. Bush--have all proposed significant new measures to support low-income working families.

Bush's agenda focuses on tax reductions: He wants to cut the lowest income-tax rate from 15% to 10% and provide low-income families a new tax credit to purchase health insurance. He's also unveiled a pair of innovative ideas to help working poor families buy their own homes.

Clinton and Gore envision a much broader role for government. Like Bush, both men start with tax cuts. Their proposal is actually more carefully targeted than the Texan's: Clinton and Gore each would expand the earned-income tax credit, which is specifically aimed at working poor families and can be received as a refund on federal taxes. They also want to expand the existing Children's Health Insurance Program, which provides insurance for children in working poor families, to cover adults. They have proposed that the government spend significantly more to help low-income families pay for day care. And they would raise the minimum wage, which Bush has said he would support only if states could opt out of the increase.

Any of these steps would be overdue. Yet they address only one part of the problem. Government should aim not only to bolster workers in low-wage jobs, but to help them advance into better-paying jobs where they are less likely to need public support at all. And that's proven much more difficult.

The economy itself still provides much of the answer. Rose, a senior economist at the Educational Testing Service, calculated that about half of the 20 million low-wage workers naturally advance into higher-paying jobs over the course of their working careers. But that means about 10 million workers are consistently stuck near the bottom. Not surprisingly, those with only a high school education (or less) and women heading single-parent households are at the greatest risk of remaining trapped in dead-end jobs.

That finding suggests the problem of persistent low wages may be the next big challenge in welfare reform. The 1996 welfare reform law has enjoyed historic success at moving millions of women from dependency into the work force. But early evidence has been much less encouraging about the ability of these women, many of whom have only limited education and skills, to get ahead in the job market. One study widely cited at last week's conference found that the median hourly wages of women who voluntarily left the welfare rolls in the mid-1990s increased only 4% during their first five years at work.

So far, states have focused mostly on rapidly moving welfare recipients into jobs, without worrying much about whether the jobs provide opportunities for advancement. That's an understandable recoil from an earlier generation of policies that circulated welfare recipients through endless job-training courses that rarely attached to actual jobs. Yet evidence is growing of the need for a third way: programs that provide ongoing training and support to welfare recipients, and other low-income workers, as they negotiate the first rungs on the job ladder.

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