Bridging the Gaps in DC: Strategies to Support Low-Income Working Familiesby Katie Kerstetter | November 14th, 2008 | PDF of this report
- Over one-third of DC working families are unable to make ends meet, even when government benefits are considered, because of low wages and DC’s high cost of living.
- Eligibility for many work supports ends before a family reaches self-sufficiency. A family of three earning more than $22,000, for example, is not eligible for food stamps.
- Other work supports are difficult to access due to limited funding or complicated application requirements. Some 25,000 DC households are on a waiting list for housing assistance, for example.
- The DC tax system pushes many families further below self-sufficiency. Low-income DC households pay a larger share of their income in taxes than higher-income households do.
- Improvements to DC’s wage laws, tax system, and government benefit policies are needed to support more low-income working families.
Most Americans believe that if you work hard, you should be able to make ends meet. This is not the reality, however, for over a third of working families in DC. Some 36 percent of DC residents who live in working families – 180,000 people – do not earn enough to meet their families’ basic needs, even when government supports are considered. This report examines why so many working families in DC are unable to make ends meet and offers policy recommendations to help bridge the gap between what families’ earn and the costs of basic necessities.
This work is the result of a partnership between the DC Fiscal Policy Institute and the Center for Economic Policy Research, under the “Bridging the Gaps” project covering DC and nine states. It examines participation among low-income working DC families in six key programs that support low-income families: child care assistance, the Earned Income Tax Credit (EITC), food stamps, health insurance (Medicaid/SCHIP), housing assistance, and Temporary Assistance for Needy Families (TANF). This project also included focus groups with low-income DC working families to better understand the challenges they face trying to access work supports.
The data analysis and focus groups reveal the following:
- The District’s lowest-wage workers earn less than a “self-sufficiency” level. Wider Opportunities for Women (WOW) has created a “Self-Sufficiency Standard” estimating the income a DC family needs to afford necessities such as housing, food, and health care; the Self-Sufficiency Income is $29,000 for a married couple with no children and $54,000 for a single parent with two children, measured in 2005 dollars. One-fifth of DC workers earn hourly wages that provide less than $22,500 a year for full-time work. This income barely places a family of four above the poverty line, and leaves it well below WOW’s self-sufficiency threshold. Even DC’s median-wage workers with children, earning $39,700 per year, earn too little to meet their basic needs.
- Many work supports phase out before families reach self-sufficiency. The Food Stamp Program, for example, limits eligibility to families with incomes below 130 percent of the poverty line, or just $22,000 for a family of three. Other programs, such as the EITC and public health insurance, serve a larger share of low-income working families. But even these programs tend to phase out around 200 percent of the poverty line – roughly $35,000 for a family of three – although families at this income level still need help to make ends meet. About one-fourth of DC families with less than a self-sufficiency income do not qualify for any of six work support programs reviewed in this report.
- Residents often don’t receive benefits even when they qualify, due to limited funding or challenging applications. Most notably, only 22 percent of DC households eligible for housing assistance receive it because of lack of funding. Limited funding also restricts access to subsidized child care.
- DC’s tax system places very high burdens on lower-income families. In fact, low-income households pay a higher percentage of their income in DC taxes than higher-income households do. This pushes many working families further below self-sufficiency.
The District can take a number of steps to help working families move closer to self-sufficiency. This report includes a menu of options that policymakers can choose from to help working families. Some can be implemented relatively quickly or with fewer resources, while others require a more significant investment of resources and time. These options include:
- Improving wages. The District can make work pay for more low-wage workers by indexing its minimum wage to inflation and by fully implementing the living wage law.
- Lowering the tax liability for low-income working families. The District can reduce taxes for low-income families and increase their take-home pay by allowing families to apply for both the DC EITC and the Low-Income Tax Credit, increasing the standard deduction and personal exemption, and providing property tax relief for low-income homeowners and renters.
- Helping people transitioning to work receive TANF and food stamp benefits. When low-income families who have been out of the labor force transition to full-time work, they often lose important benefits that would supplement their limited earnings. The District can make the shift to work easier by providing transitional benefits for TANF and food stamp recipients.
- Increasing the supply of child care and health care providers. By increasing reimbursement rates, the District can improve the quality and number of child care and health care providers.
- Improving access to affordable housing. The District can improve the supply of affordable housing by increasing funding for the Housing Production Trust Fund, which supports the production or rehabilitation of affordable housing, and the Local Rent Supplement Program, which helps cover low-income families’ rents.
- Improving access to substance abuse and mental health treatment. By adding coverage for mental health and substance abuse treatment to DC’s HealthCare Alliance program, the District could improve health care access for 48,000 low-income working residents who receive health coverage through this program. The Alliance serves uninsured residents with incomes below 200 percent of poverty who are not eligible for Medicaid or Medicare – generally non-elderly singles and couples without children.