Meeting DC’s Challenges, Maintaining Fiscal Discipline: Strengthening Families and Neighborhoods by Increasing Incomes and Reducing Poverty


Persistent poverty in the midst of economic growth is one of the District’s most fundamental problems.  Despite strong improvement in the city’s overall economic well-being, the DC poverty rate increased from 17 percent to 19 percent in 2004-05, as 11,000 additional children and adults fell into poverty.  The federal poverty threshold is $16,600 for a family of three and 20,000 for a family of four.

This poverty rate is troubling because the Washington regional economy is one of the strongest in the nation; the unemployment rate in the region is lower than any other metro area, and regional job growth has been exceptional.  The number of jobs within the District itself grew a healthy 68,000 since 1998.  Unfortunately, those jobs do not appear to be going to DC residents. The number of working DC residents has grown only 7,000, or 2.5 percent, since 1998.

Even when residents can find work, many earn too little to lift their families out of poverty. This is troubling considering a majority of low-income District families have one or more working adults. 

  • Some 47,000 DC residents lived in a family that was below 200 percent of poverty despite working most of the year.
  • Many DC residents earn too little to escape poverty.  Some 14 percent of working DC residents earned less than needed to lift a family of four out of poverty ‘  $9.28 an hour ‘  even if they work full-time.  Half of all working DC residents earned too little to lift a family above twice the poverty line.

Numerous social problems ‘ such as poor health, low school performance, violence, and teen parenthood ‘ are tied to family poverty.  The impact of poverty reflects the fact that poor families and individuals often live in overcrowded or substandard housing, suffer from poor nutrition, and lack access to health care.  The stresses of poverty also are a major contributing factor behind child neglect and other negative behaviors. 

The adverse effects of family poverty are compounded when poor individuals and families live in neighborhoods with high-poverty rates.  Just as the socioeconomic status of a family matters for their well-being, the economic and social environments of neighborhoods have significant influence on the life course and outcomes of individual residents, even after taking into account their personal and family characteristics.

Just as high rates of family and neighborhood poverty contribute negatively to a number of social outcomes, steps to help lift families out of poverty, to reduce concentrations of poverty, and to target services on high-poverty neighborhoods can result in improvements in educational achievement, health, and other areas.  A notable body of research shows that improvements in family income and neighborhood resources lead to improved social outcomes.


Strengthening the Economic Security of District Families through Job Benefits and Income Supports

The District can take a number of steps that would quickly boost the incomes of residents who are preparing for work and those who working but at low wages.  These steps can complement long-term efforts to reduce poverty, such as improving the city’s workforce development system and expanding services that address work barriers.

  • Increase the District’s minimum wage and adopt an annual cost of living adjustment.  The District’s minimum wage ‘ $7.00 per hour ‘ has lost purchasing power over the past decade.  If it had been adjusted for inflation since 1997, the DC minimum wage would be almost $8 per hour today.
  • Expand the DC Earned Income Tax Credit and Outreach Efforts.  The EITC is a tax credit for low-income workers.  The District has adopted a large EITC, based on the federal credit, and this year DC appropriated funds to support EITC outreach efforts.  The DC EITC could be strengthened even further by expanding outreach, providing more support to free tax preparation clinics, and by expanding the EITC in targeted ways, such as for larger families.
  • Adopt Paid Sick and Safe Days legislation.  Most low-income workers have no paid sick leave to cover their own illness or that of a child.  Many workers lose pay and risk being fired when caring for themselves or their family, or they are forced to go to work sick or neglect the illness of a child. San Francisco recently adopted a law requiring businesses to provide a minimum amount of paid leave to their workers.  The District should consider a similar law.
  • Increase Temporary Assistance to Needy Families benefits.  DC’s cash assistance benefits for needy families with children leave families deep in poverty, which forces needy families with children to live in unstable situations and in neighborhoods with high crime, poor schools, and limited access to jobs.  An increase in DC’s TANF benefits could help stabilize the lives of its poorest families with children.  

For more information, see the following DC Fiscal Policy Institute reports:

Disparities in the District: Poverty Is Major Cause of Social Problems in the District of Columbia  November 2006 (

New Census Figures Show Poverty Is on the Rise in the District of Columbia, August 2006 (

Not Enough To Live On: DC’s TANF Benefits Are Among the Least Adequate in the Nation March 2006 (


Issue I:  Increase the Minimum Wage and Adopt an Annual Cost of Living Adjustment

The minimum wage is an important earnings floor for low-income workers.  The District’s minimum wage of $7.00 an hour is higher than the federal minimum wage, but it is lower in purchasing power than a decade ago.  A number of states have raised their minimum wage in recent years, and several are now higher than in DC.  In addition, 10 states now adjust their minimum wage annually for inflation.

For these reasons, the District should consider increasing its minimum wage and implementing an annual cost of living adjustment. Although Congress may raise the federal minimum wage this year, this is not a certainty, and it is unlikely to include an annual cost of living adjustment for future years.  A DC minimum wage of $8.00 an hour would restore the purchasing power lost over the past decade and would be in line with the minimum wages in states with similarly high costs of living.


The Declining Value of DC’s Minimum Wage

Since 1993, the District of Columbia has set its minimum wage at $1 above the federal level.  As a result, the DC minimum wage rose to $6.15 an hour in 1997 when the federal minimum wage was increased to $5.15.  It remained at $6.15 for nearly eight years because the federal minimum wage was not increased.  In response, the District raised its minimum wage to $6.60 in 2005 and to $7.00 an hour in 2006.

These recent increases fail, however, to make up fully for loss of purchasing power since 1997.  If the DC minimum wage had been adjusted for inflation since its increase in 1997, it would be $7.90 in 2007 and $8.07 in 2008. 

DC’s minimum wage contributes to wide wage disparities.  The top-earning DC residents ‘ those in the top 20 percent of workers ‘ earned $33 an hour in 2005, nearly five times what minimum-wage workers earn.  The gap between low-earning and high-earning DC residents is higher today than at any time over the past 25 years. 


How Does the Minimum Wage Differ from the Living Wage?

The minimum wage is a wage floor that applies to almost all workers.  There is a federal minimum wage, but each state has its own minimum wage laws as well.  The District of Columbia and 28 states have minimum wages that are higher than the federal wage. 

Living wages, by contrast, tend to apply far more narrowly.  Typically, living wage requirements apply to workers employed by government contractors and, in some cases, to workers in businesses getting economic development assistance. 

Living wage laws usually are adopted at the local level ‘ by cities or counties ‘ and they generally are significantly higher than the minimum wage.

In 2006, the District of Columbia adopted a living wage of $11.75 an hour for government employees and for workers hired by businesses that receive a government contract or subsidy. 


A Minimum Wage Increase Is Unlikely to Reduce Jobs

Opponents of raising the minimum wage often argue that it would result in job losses, as affected businesses reduced their workforce to absorb the cost increase.  Yet this claim is not borne out in reality.  Research shows, for example, no noticeable or systematic job losses stemming from the 1996-1997 federal minimum wage increases.  A report on state minimum wages showed that small businesses in states that raised their minimum wage above the federal level have outperformed small businesses in states that did not.[1]  Economic models suggest that employers may be able to absorb some of the costs of a wage increase through higher productivity, lower recruiting and training costs, decreased absenteeism, and increased worker morale.


The District Should Increase its Minimum Wage and Implement a COLA

DC and 28 states have a minimum wage higher than the federal minimum wage of $5.15.  Of those, 15 will have a higher minimum wage than the District this year.  In addition, 10 states adjust their minimum wage annually for inflation ‘ Arizona, Colorado, Florida, Missouri, Montana, Nevada, Ohio, Oregon, Vermont, and Washington.

State Minimum Wages Above DC’s, 2007

State Minimum Wage
Alaska $7.15
California 7.50*
Connecticut $7.65
Hawaii $7.25
Illinois $7.50*
Massachusetts $7.50*
Michigan $7.15*
New Jersey $7.15
New York $7.15
Oregon $7.80**
Pennsylvania $7.15
Rhode Island $7.40
Vermont $7.53**
Washington $7.93**
* will increase further in 2008
**  adjusted annually for inflation

The District should consider raising its minimum wage and then adjusting the new wage level annually for inflation.  While Congress may increase the federal minimum wage in 2007, it will not include an inflation adjustment and will take years to be implemented.  For two reasons, a minimum wage of $8.00 is an appropriate target for DC.

  • A minimum wage of $8 an hour would allow workers earning minimum wage to regain roughly all of the purchasing power lost since 1997. As noted, DC’s minimum wage would be just above $8.00 an hour in 2008 if it had been adjusted for inflation over the past decade.
  • Several other states ‘ typically with high costs of living ‘ will have a minimum wage of $8.00 or higher over the next two years. They are California, Illinois, Massachusetts, Oregon, and Washington.


Issue II:  Build on the Successful DC Earned Income Tax Credit Increasing Incomes and Reducing Poverty

The Earned Income Tax Credit plays a critical role in boosting the incomes of individuals and families that work but have low-incomes.  The District of Columbia is one of 16 states with a state-level EITC to build on the strengths of the federal EITC.  This year, the District also is devoting funds for EITC outreach and free tax preparation services to ensure low-income residents receive the tax benefits for which they qualify.

These efforts show that the District has actively supported the Earned Income Tax Credit.  The District’s EITC efforts could be enhanced even more, however, through expanding outreach — including a more prominent role for the Mayor — and by increasing EITC benefits in targeted ways.


Background on the EITC

The Earned Income Tax Credit is a tax credit for low-wage workers, particularly those with children.  Nationally, the EITC lifts five million children out of poverty each year, more than any other federal program.  By making work pay better, studies show that the EITC also encourages parents to leave welfare for work. 

The DC EITC was established in 2000 and has been expanded twice since then.  It is now equal to 35 percent of the federal EITC, making it the largest refundable state-level EITC in the nation.  A parent trying to support two children on a full-time minimum wage job now qualifies for a federal EITC of $4,400 and a DC EITC of $1,540. 

Some 52,000 DC residents claim the federal EITC, infusing more than $85 million in federal funds into the local community. Additionally, more than 44,000 taxpayers claim $30 million in DC EITC dollars.  About 40 percent of EITC recipients live east of the Anacostia River.

Yet many eligible families do not know about the EITC or how to claim it.  As many as 25 percent of eligible households do not claim the federal EITC each year, and many DC residents who claim the federal credit fail to claim the DC EITC. 


The Need to Expand Outreach and Support Free Tax Preparation

Many DC residents learn about tax benefits through outreach on the DC Earned Income Tax Credit, and many depend on free tax preparation services such as those provided by members of the DC EITC Campaign.[2]  Without such services, residents often miss out on critical benefits or spend hundreds of dollars at commercial tax preparers simply to get their refunds. 

A number of non-profit organizations provide free tax preparation services in the District of Columbia, but they are able to serve only a fraction of eligible households.  During the 2006 filing season, more than 4,000 taxpayers filed at DC’s free tax preparation sites, claiming $1.7 million in EITC benefits and nearly $5 million in total refunds. 

In 2007, the District appropriated $150,000 to support outreach and free tax preparation services.  While significant, DC can enhance these efforts in several ways:

  • Use the media influence of the Mayor’s office to increase awareness of the DC EITC and free tax preparation options.  Consistent radio and television advertising has been shown to be effective for EITC outreach. The Mayor’s office could develop and promote EITC-related public service announcements.
  • Enhance public funding of non-profit free tax preparation clinics.  A regular, stable and more adequate level of public funding would help ensure that free high-quality tax preparation clinics can serve more low-income DC residents.
  • Support targeted outreach strategies for populations that under-claim the EITC.  This includes families with more than two children, elderly taxpayers, and taxpayers with limited English proficiency.


Targeted Expansion of the Earned Income Tax Credit

The District also can take steps to improve the design of the DC EITC and to ensure that all eligible families get the DC EITC.

  • Increase DC EITC benefits for families with more than two children.  Currently, families may claim only two children in calculating their federal and DC EITC benefits.  The District’s EITC could be modified to model other tax benefits that increase with the number of children, which would better reflect the heightened economic pressure faced by larger families.  Wisconsin’s state-level EITC offers a model.  It provides a higher benefit for families with three or more children.
  • Use the DC Tax Office to issue DC EITC refunds to DC residents claiming the federal credit.  Nearly all District families eligible for the federal EITC are also eligible for the DC EITC, but many do not claim it.  The DC tax office could use IRS data to identify DC residents who claim the federal EITC but not the DC credit and then determine whether they are eligible for the DC EITC.  The District could send an EITC benefit payment to all eligible families that had not claimed the DC EITC.

To learn more about EITC outreach efforts and free tax preparation services in DC, go to


Issue III:  Give All DC Workers the Right to Paid Sick Days

Many workers take for granted the ability to take time off from their job when they are sick or need to care for a sick child.  Yet the vast majority of low-income workers have no paid sick day benefits.[3]  Even those who do often are not allowed to use their sick days to care for a child or other family member.  As a result, many workers lose pay and risk being fired when caring for themselves or their family ‘ or they are forced to go to work sick or neglect the illness of a child.

The District should consider requiring employers to provide a minimum number of paid sick days to their workers.  While this would create new costs for businesses, research shows that it also would have substantial benefits ‘ reducing turnover, limiting the spread of illnesses at workplaces, and creating more committed and productive employees.  The benefits could largely outweigh the costs.


Who Doesn’t Have Paid Sick Days?

Nationally, nearly half of all private sector employees have no paid sick days.  While figures for the District are not available, the national information suggests that as many as 209,000 workers in DC do not get paid sick days from their jobs.  Low-wage workers are the least likely to have paid sick and personal days ‘ 76 percent lack this benefit.[4]   


Having No Paid Sick Days Forces Workers to Make Difficult Choices

When workers do not have paid sick days, they often are faced with a series of bad choices when they or a child gets sick, such as:

  • Missing work: This means losing pay and risking the loss of their job — possibly resulting in the need for public assistance.
  • Reporting to work sick:  Workers who go to work sick risk spreading their illness to coworkers and customers.  Going to work sick also can lengthen the duration of an illness and limit a worker’s productivity.
  • Neglecting the health needs of a child: Children often suffer when parents cannot afford to stay home.  One study found that children recover more quickly when a parent stays home with them.  Another study found that 41 percent of parents without paid sick days were forced to miss a doctor’s appointment or otherwise failed to get adequate care for the illness.[5]


Paid Sick Days Has Both Costs and Benefits for Businesses

Providing paid sick days would create new costs for some DC employers, as they start paying workers when they take leave.  But research shows that paid sick days also create benefits for businesses.  Allowing workers to take time off when sick helps ensure they are fully productive while at work and reduces the risk that other employees will get sick.  Businesses providing paid sick days enjoy higher productivity and morale, lower turnover and training costs, and reduced absenteeism. Research suggests that these savings can offset the costs of providing paid sick days. [6] 

Paid sick days also can help increase profits.  Studies show that a company’s ability to retain employees and keep morale high has a direct impact on retaining customers.  Customers in a range of industries were shown to be happier and more likely to continue patronizing a business when served by healthy, knowledgeable and satisfied employees.


Family and Medical Leave Act Does Not Address Need for Paid Sick Days

Paid sick days are needed even though many workers are covered by the Family and Medical Leave Act.  FMLA gives workers the right to take up to 12 weeks of unpaid leave following the birth or adoption of a child or to address a serious health condition of the worker or a relative.  But FMLA does not give workers the right to time off to address short-term illnesses and does not require that time off to be paid.


Options for a DC Paid Sick Days Requirement

The city of San Francisco approved a ballot measure in 2006 requiring businesses to provide up to nine paid sick days per year.  The plan, which covers part-time and full-time workers and businesses of all sizes, was not fought vigorously by the business community.  One business owner stated, “Obviously, if someone is ill, they should not be at work.”[7]

A paid sick day bill being developed by DC employment advocates resembles the San Francisco model in structure, providing a minimum standard of up to 10 days of paid time off per year for companies with at least 6 employees, and up to 5 paid sick days for companies with fewer than six employees.  These paid sick and safe days could be used for:

  • Physical or mental illness, injury, or medical condition of the employee;
  • Routine and preventative medical care;
  • Care for a family member for these needs;
  • School-related functions of an employee’s child; and
  • Domestic violence-related court appearances and abuse-related services for survivors of domestic violence.


Issue IV:  Increase TANF Cash Assistance Benefits and Provide an Annual Cost of Living Adjustment

Temporary Assistance for Needy Families (TANF) is a key part of the safety net for low- income families with children.  DC’s TANF program provides cash assistance to low-income families, and in return, adults in TANF families are expected to participate in work activities and to look for work.

While the District has taken a number of steps to help parents move from welfare to work, DC’s TANF cash assistance benefit levels leave families with children well below poverty.  When compared with the area’s high cost of living, DC’s low TANF benefits make it difficult for low-income families to get ahead. 


DC is One of the Costliest Cities, but its TANF Benefits Are Low

The District’s TANF benefits lag behind most states in adequacy to meet a family’s basic needs.  The maximum TANF grant for a family of three in DC is just $407 a month, or less than $14 a day.  That’s just 29 percent of the poverty line.  TANF benefits are especially inadequate given DC’s high cost of living. 

  • DC is the one of the costliest cities in the country, just behind Boston and ahead of New York,  yet its TANF benefits are lower than in places like Salt Lake City or Fargo, North Dakota.
  • DC stands near the bottom among the largest city in each state ‘ 44th out of 51 ‘ when its TANF benefits are compared with the local cost of living.  DC is at about the same level as Birmingham, Alabama, and Jackson, Mississippi.
  • Even with food stamps, families live well below poverty.  Monthly TANF and food stamp benefits are about $800 for a family of three or 58 percent of poverty.


How Did the District’s TANF Benefits Get This Low?

Until the early 1990s, DC’s benefits were adjusted annually for inflation, reaching $428 per month for a family of three in 1991.  Benefits were then cut twice in the 1990s ‘ to $379 in 1997 ‘ and the inflation adjustment was eliminated. The maximum benefit remained at this level for nearly a decade, until it was increased to $407 per month in July 2006.

Even with the recent increase, DC’s TANF benefits have lost much of their value since the early 1990s.  In 1991, DC TANF benefits equaled 47 percent of the federal poverty line for a family of three.  Today, TANF benefits equal just 29 percent of the poverty line.

The inflation-adjusted value of DC’s TANF benefits fell 36 percent between 1990 and 2004.  This decline was greater than in 48 states.


How Much Should DC’s TANF Benefits be?

DC’s TANF benefits would need to be increased substantially to address the long-term decline in value and to become more adequate relative to the cost of living. 

If DC’s TANF benefits had kept pace with inflation since 1990, the maximum benefit for a family of three would be $632 this year.

In the typical state, TANF benefits equal about half of the Fair Market Rent for a two-bedroom apartment.  To match this modest standard, DC’s TANF benefits would need to be $640 per month for a family of three.

It is worth noting that several states with a high cost of living have higher TANF benefits than in the District.  The maximum TANF benefit for a family of three is $618 in Boston, $691 in New York City, and $704 in Los Angeles.

While it may not be feasible to increase DC’s TANF benefit to match these levels in the near term, the District could undertake a process to raise benefits over a period of several years.  One option is to increase benefits to match Maryland’s TANF benefits. The maximum benefit for a family of three in Maryland was $490 in 2006.  Adjusting for inflation, the benefit would be $522 in FY 2009. 

Equally important, a cost of living adjustment could be adopted to ensure that benefits do not erode in value over time.  As noted, elimination of DC’s cost of living requirement in the 1990s contributed to its substantial loss of value in welfare benefits

For more information, see the following DC Fiscal Policy Institute report:

Not Enough To Live On: DC’s TANF Benefits Are Among the Least Adequate in the Nation,  March 2006 (

End Notes:

[1] For a summary of findings on employment effects of the minimum wage, see the Economic Policy Institute’s “Minimum Wage Facts at a Glance” (

[2] The DC EITC Campaign is a citywide initiative that educates DC taxpayers, particularly those with low incomes, about issues related to income taxes and economic security.  The Campaign recruits and trains tax volunteers and supports 21 free tax assistance sites each year.

[3] Paid leave benefits cover critical medical and non-medical needs not covered by the Family and Medical Leave Act, including routine well-being health care, short-term illnesses such as the flu, court appearances for domestic violence survivors seeking protection orders, and time needed to care for extended family.

[4] The national statistics cited here come from "Get Well Soon: Americas Can’t Afford to be Sick," a 2004 report by the National Partnership for Women & Families.

[5] “Get Well Soon: Americans Can’t Afford to Be Sick,” National Partnership for Women & Families, June 2004.

[6] Marilyn P. Watkins, “The Case for Minimum Paid Lave for American Workers,” Economic Opportunity Institute, January 2004.

[7] Amy Joyce, “Caught the Flu, but No Sick Leave,” Washington Post, Sunday December 3, 2006, F01.

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