Tuesday, October 24, 2006

Ohio Parents Continue to Struggle with Poverty

By Wendy Patton

How do Ohio families with young kids survive at the poverty level? The short answer is: not easily. Research shows that it takes twice the poverty line in rural parts of the state and up to three times the poverty line in Ohio cities to secure a safe and decent but modest standard of living. However, more than one in five Ohio families with young kids cannot reach this basic level.

Last year, the Economic Policy Institute (EPI) looked at home economics in 439 communities across the nation. The bare-bones budgets for families with one or two parents and up to three small kids left no room for luxuries: housing was considered safe and sanitary but at HUD’s 40th percentile of local rents; the USDA low-cost food plan included no fast food or restaurant meals; and transportation mileage was solely for work, shopping and church. Health costs were based on the lowest insurance quotes, and tax calculations included any additional income provided by the Earned Income Tax Credit. They found that a one-parent, one-child family in rural Ohio needed $23,952 to make ends meet in 2004. By contrast, the poverty threshold for a family of this size was $13,020. A family with two small kids and two parents in Cleveland needed $45,972, which was 240 percent of the poverty line of $19,157.

Why is there such a wide difference between the poverty threshold and a bare-bones basic family budget? For one thing, they measure different things. Poverty thresholds are an absolute measure of income that does not reflect the varying prices faced by families across the nation. Family budgets measure the relative costs necessary to secure a safe and decent standard of living wherever a family may live.

The poverty threshold, developed in the 1960s, is based on the annual minimum cost of food for a person or family, multiplied times three. It reflects family size and is updated for inflation, but does not reflect additional costs borne by families in which two parents work. EPI found that for families with young children in Ohio, transportation and child care alone may take more than 40 percent of the family budget. A two-parent, two-child family in Steubenville, for example, needs a monthly income of $3,419 to make ends meet. About a third of this budget ($1,111) is needed for good child care. Another 11 percent ($375) is needed for transportation. Many low-wage jobs do not provide the income to cover these two basic budget items.

An Ohio parent earning $7.25 per hour brings home $1,257 per month, and if both parents earn that rate of pay, the monthly family income is $2,513. If they have two young children in child care, they are making less than they need for a safe and decent standard of living anywhere in the state. Like many working families, they are forced to make hard choices about where to save. They may not be living in poverty, but they face a kind of economic hardship that makes it hard to stabilize income in the face of common mishaps: the car that breaks down, the pink slip, or the child care arrangement that falls through, incurring the need for a steep down-payment to a new sitter or center.

Even in the best of times, many parents in low-wage jobs will not earn enough market-based income to meet their family's basic needs. When work income is not enough, publicly provided work supports such as child care subsidies are needed to assist families making hard choices. The basic family budget study highlights that such work supports are crucial to narrowing the gap between earnings and needs. It also demonstrates that the poverty threshold, which sets the bar for such subsidies, must be updated to better reflect the real costs faced by low income workers and their families.

Multiple other solutions could be implemented to assist hardworking families struggling to get by, from an increased minimum wage, to adoption of a state Earned Income Credit, to more public investments in early childhood education. We should consider any or all of these options to create an Ohio that works better for all.
Patton is a policy liaison for Policy Matters Ohio.

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