The Working Poor: We Can Do Better
The boom and bust of the past 10 years left many Americans better off. Incomes and wealth are way up, and the unemployment rate is almost a percentage point lower than it was in 1994. But despite these gains, far too many American workers are still stuck in low-paying jobs, with few or no benefits. More than 28 million people -- about a quarter of the workforce age 18 to 64 -- earned less than $9.04 an hour in 2003. That translates into a full-time income of $18,800 a year or less, which is the weighted poverty line for a family of four.
What can be done to reduce the ranks of the working poor? The best remedy would be another boom like the one the U.S. had in the 1990s. But wages at the bottom aren't likely to rise until the unemployment rate, now at 5.6%, drops below 5% and stays there for a sustained period -- something that's not likely to happen for a while.
Raising the minimum wage is an option that would help many low-wage workers. It was hiked twice in the 1990s, from $4.25 an hour at the beginning of 1996 to $5.15 an hour by the end of 1997. Since then, inflation has pushed down the value of the minimum wage to its early 1996 level in real terms. So it needs to be boosted again, at least enough to keep up with inflation. Such an increase would clearly help the bottom rung of the workforce. True, many economists worry that a higher minimum wage would discourage hiring of less educated Americans. But the minimum-wage hikes of the 1990s appear to have had little impact on job prospects for low-end workers.
The government should also substantially increase aid for higher education. In an era when post-high-school education is almost essential to compete in the global economy, talented young people shouldn't be kept from college for financial reasons. In recent years tuition has gone up sharply, especially at financially stressed public universities, while Federal Pell Grants to low-income college students have not kept up. The working poor would also benefit from reforms of the U.S. health-care system, which in its current state makes it difficult for marginal workers to get medical coverage. A wholesale overhaul won't happen soon, but it may be feasible to help poor workers obtain catastrophic coverage.
Technology, globalization, and immigration provide enormous benefits for the economy, but the costs are often borne by the lowest-paid members of the workforce. If there are simple, straightforward ways to improve the lot of America's working poor without impeding growth, we as a nation have an obligation to try.