Study Finds Half Of Poverty-Level Families Rise Above Official Line in Post-Welfare Reform Years

3/20/2002

From: Mike Burita of the Employment Policies Institute, 202-463-7650

WASHINGTON, March 20 -- Poverty-level families showed significant upward mobility in post-welfare reform years, with nearly half of them crossing the poverty line toward self-sufficiency during a 12-month period in late 1990s, according to a new Employment Policies Institute (EPI) study released today.

"The number of low-income and poverty-level families seeing income gains is impressive," Dr. Richard Toikka, chief economist for the Employment Policies Institute said. "A full 47 percent of poor families moved above the official poverty line from 1997 to 1998. In addition to this striking figure, 30 percent of all low-income families were no longer in the low-income population for the same period. These findings contradict Senator Kennedy and others who argue that the only way low-wage workers will get out of poverty is through a mandated wage increase."

Economists Dr. John Formby and Dr. Hoseong Kim of the University of Alabama and Dr. John Bishop, East Carolina University conducted the study "The Economic Well-Being of Low-Income Working Families," which was commissioned by the Employment Policies Institute.

From 1997 to 1998, low-income families who left welfare for work saw their earnings increase by $3,780 (or 67 percent) per year on average. The families who started out in the lowest 10 percent of the low-income range saw their earnings rise by more than $6,000 per year on average. The poorest 10 percent of low-income families saw their comprehensive incomes (including in-kind benefits of food stamps, taxes, housing and energy subsidies) more than double over one year.

The researchers conclude that in addition to increased employment triggered by welfare reform, increases in the EITC between 1993 and 1994 substantially increased the well being of low-income families.

"Of 9.8 million families tracked in 1997, nearly 3 million escaped the low-income classification in 1998. At a time when welfare reform and wage increases are topics of much discussion, policymakers should pay attention to the fact that many motivated workers and their families are improving their economic well-being," Toikka concluded.

Executive summaries and complete text of the study are available at www.EPIonline.org. The Employment Policies Institute is a non-profit research organization dedicated to studying public policy issues surrounding entry-level employment. For additional information or to schedule an interview with a spokesperson contact Mike Burita at 202-463-7650.