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"The Self-Sufficiency Standard: A New Tool for Evaluation Anti-Poverty Policy,"

by Diana M. Pearce March/April 2001 issue of Poverty & Race

Is welfare reform a success? Everyone, from Presidents on down, thinks it is. There is no question that it has had a remarkable impact, overturning predictions of its supporters and critics alike. Welfare rolls have declined dramatically—they are now less than half what they were just four years ago; moreover, many of these “welfare leavers” have entered paid employment. But is this “success”?

In evaluating welfare reform, the criteria of success chosen by most politicians are the easy ones: Are the rolls down? Are the numbers of employed up? Are welfare leavers “better off” than they were on welfare? These criteria are characterized as “easy” because the answers virtually everywhere and for every group (although not for every single individual) are yes, yes and yes. That is, whether because of the booming economy or the change in rules (including the threat of lifetime limits and sanctions), states have experienced declines that range from one-third to 90% of their rolls. (Analysts are fiercely debating the relative importance of the economy versus welfare reform, but the size of the decline is real.) And, given the economy, larger numbers of those leaving welfare are employed than has been true in the past. Finally, given the extremely low level of benefits, even a part-time minimum wage job in most states apparently leaves the family “better off,” especially if one only compares cash welfare with cash income from wages, and one does not factor in increased expenses associated with work (such as child care, transportation, taxes) or decreased benefits (such as loss of Medicaid or Food Stamps).

The one criterion used that does not virtually guarantee a “yes” answer to the success question is whether earned income exceeds poverty. Because this takes into account family size and composition, those with smaller families may well have cash incomes that exceed the poverty line, if only barely, especially if one adds the cash value of the Earned Income Tax Credit (EITC). Thus a $7.00 per hour job, if it is full-time (40 hours per week or more) and year-round (52 weeks per year) yields wages just over the Year 2000 poverty line for a family of three ($14,150).

The problem with the poverty line, as has been discussed in Poverty & Race and elsewhere, is that it no longer accurately measures what we really mean by poverty. That is, if we mean that when family incomes rise above the poverty level, they then have sufficient resources to meet their basic needs, there are few who would argue that that is what the official poverty thresholds now measure. In short, the poverty thresholds are too low. (Indeed, many states recognize this by using multiples of the poverty line to qualify persons for various benefit programs, such as the Child Health Insurance Program — CHIP, in which incomes 185%, 200% or even 300% of poverty qualify for aid.) But even more problematically, these poverty thresholds are the same, no matter where one lives, whether it is Mississippi or Manhattan — or Manhattan, Kansas. If employed welfare leavers average wages of $6.00 an hour in South Dakota, but $8.00 per hour in Washington State, in which state are they more successful? How much above those levels would their incomes need to be to be truly self-sufficient (able to meet their basic needs adequately)? How much help are available subsidies? To answer these questions, one would need to know how the cost of living compares in each state, as well as information about subsidies and their usage.

The Self-Sufficiency Standard

We now have a measure that can be used to answer these questions, and many more — and that is the Self-Sufficiency Standard. The Standard is a measure of income adequacy that calculates the amount of money working adults need to meet their family’s basic needs without public or private subsidies. Unlike the federal poverty line, this approach is tailored to each family, with the Standard varying according to the family’s size and composition (including the age of children); as well as being graphically specific and including work expenses.

Since its inception nearly 40 years ago, the federal poverty line has not kept up with our society’s changing family structure and family roles: there are more single-parent families and more families with two adults working than in the 1960’s. These changes have created new needs associated with employment: transportation, taxes and child care for young children. The poverty measure is also based on a food budget that used nutrition standards of the 1950s, and assumes that food accounts for one-third of all expenses. In contrast, the Standard (as is true of expert recommendations for revising the poverty standard) is based on the costs for housing, childcare, food, transportation, health care and miscellaneous expenses, and takes into account taxes as well as tax credits. In addition, the Standard adjusts for the age of the children (because child care, and to a lesser extent, food and health care, vary by age), and where families live (because all costs, especially child care and housing, vary substantially by location). As a result, depending upon where one lives, food costs only about 12-15% of family’s basic expenses, while housing and child care for young children often total more than half of family expenses.

The Standard captures costs associated with working and living for each of 70 family types (ranging from a single adult with no children to two adults with three teenagers) for every county (in New England, region) in each state. Since 1996, the Self-Sufficiency Standard has been calculated for 13 states (CA, CT, IA, IL, IN, MA, NJ, NY, NC, PA, SD, TX, WI) as well as New York City and the Washington, DC metro area, with WA, CO, MT and a few others to be done in 2001 And it is expected that by the time consideration of TANF reauthorization happens in 2002, about half the states will have been completed.


The Self-Sufficiency Standard versus the Poverty Standard

How does the Self-Sufficiency Standard compare to the poverty measure? Clearly, with the methodology outlined above, the Standard will exceed the poverty line in most places for almost all families. In addition, it differentiates more finely between families. A comparison across states reveals that, typically, the Standard for a given family falls between 50% and 80% of area median income. These two amounts happen to be what HUD has determined to be their “Very Low Income” and “Low Income” standards, respectively, which are used to determine eligibility for housing subsidies. Thus, although it ranges well above the poverty line (from 50% more to as much as three times the poverty line), the Self-Sufficiency Standard plainly gives a very conservative estimate of the minimum income needed in a given place. Researchers Laura Russell and Jean Bacon have compared the number of people in Massachusetts deemed to have inadequate income by both the poverty standard and the Self-Sufficiency Standard. Using 1990 Census data for towns, they estimate that while about 14% of the state’s families have incomes below the poverty line, 28% have incomes below the Self-Sufficiency Standard.

More Than a Poverty Measure

While an accurate measure of the cost of living by place and family type is very useful, the Self-Sufficiency Standard is more than just an improved measure of poverty, for it is a tool that can demonstrate the impact of public policies and programs on low-income families. In each state in which it has been calculated, the Standard has been used to model how certain subsidies, such as child care, can reduce the wages needed for families to meet their needs. For example, a single mother in Milwaukee with one infant and one preschool child must earn $3847 per month to be self-sufficient, but with Food Stamps, Medicaid and child care, this parent needs only earnings of $1346. Thus, with the help of these supplements, she will achieve what we have termed “wage adequacy,” defined as resources from wages and benefits sufficient to meet basic needs. (Note that this is only a model; in reality, many families do not receive the subsidies for which they are eligible, including child care, Food Stamps and/or Medicaid.)

In addition to showing how current policies affect families, the Standard can be used as a tool to evaluate proposed changes in policy, such as the effect of changing child care co-payments or adding/enlarging a state EITC. Thus, the Standard has been used in Pennsylvania to assess the impact of policy proposals that would have increased child care co-payments. The model based on the Standard revealed how the increase in the child care co-pays would interact with other subsidy programs and taxes/tax credits to produce a substantial negative impact on families’ wage adequacy, and contributed to a positive revision of the proposed policy change.

The Standard can also be used to target scarce resources on programs that help families achieve self-sufficiency. By using the Standard, policymakers can determine which jobs and industries pay Self-Sufficiency-level wages and above, and engage in Targeted Jobs Strategy. This strategy uses the Standard to assess the ability of various jobs, occupations and sectors to provide self-sufficiency wages for workers. The Standard is used together with analysis of the current local labor market supply and demand (to determine jobs that have expanding but unfilled openings), an assessment of the available job training and education infrastructure, and an evaluation of the skills and location of current/potential workers. Through this analysis, it is possible to assess the jobs and sectors on which to target training and counseling. In Washington, DC, legislation has institutionalized this process by requiring the collection of labor market data that document job-seeker income requirements as well as employer needs/skill requirements. Without this law, data would focus only on jobs that are “in demand” by employers, leading to training in occupations that pay poverty-level wages.

The Self-Sufficiency Standard is also a tool for use at the individual level by caseworkers. A Budget Worksheet has been developed, based on the Standard, which helps counselors and individuals determine the minimum wage necessary to cover costs, taking into account available subsidies. In Pennsylvania, program participants fill in the Worksheet, using their actual costs for basic necessities, and actual subsidies available to them, to determine the wage adequacy of each wage “tested.” This process, in turn, points both participants and counselors to finding the kinds of jobs, training and education, including jobs that are nontraditional for women, that will lead to the wages that will result in wage adequacy in the short term and self-sufficiency in the long-term.

A computerized version of the Worksheet has also been used to evaluate policy changes, and, in particular, in Connecticut to reveal the “cliffs” faced by parents moving from welfare to work. That is, many programs (such as Food Stamps and child care) cut off eligibility at a certain point, so that a slight increase in income may result in the loss of a substantial and needed subsidy, resulting in wage adequacy suddenly dropping 20% or 30%. When this analysis is done for a range of family types over a range of possible incomes, it is possible for advocates and policymakers to develop more rational policies that smooth and support the transition of families from welfare to work.

Implications for Race

The Standard does not vary by race, except to the extent that costs vary by where different racial groups reside. But the uses to which the Standard is being put have the potential to reveal important differences by race and gender. This is particularly true when the Standard is used to evaluate outcomes of job training programs or welfare reform. If white graduates/welfare leavers in a given jurisdiction average higher wage adequacy (are closer to reaching their individual Self-Sufficiency Standards) than minority graduates/leavers, then clearly the program being evaluated is not addressing the racial discrimination that lies behind the gap. And if the role of subsidies is included in the evaluation, that can reveal the kinds of differential help provided by caseworkers on the basis by race (such as car repair), as documented by Susan Gooden in Virginia.

It should be noted that, historically, the old federal job training program, JTPA, allowed local agencies to lower their performance standards—by which their level of success was determined—if they served more women and/or minorities. Although the goal was to encourage local agencies to serve the more disadvantaged, the irony was that the price for doing so was to accept the lower wages imposed by labor market discrimination on women and/or people of color, sending a message to local entities that such discrimination need not be addressed. Thus, the more women/minorities who were served, the lower the standards fell. In the current welfare reform competition, and given the decentralized nature decision-making under devolution, there is a similar tendency for local or state governments to lower standards in order to be able to declare “success” (as was done in the most recent report on outcomes for welfare leavers in Washington State). As the emerging trend becomes more pronounced of whites leaving the caseload at a higher rate, and with more employment success than the central city, disproportionately minority, portion of the caseload, the temptation to lower the bar for some groups will increase, leading to false declarations of victory/success. Using an objective standard across the board will make clear that differential outcomes by race reflect programs (such as job training, placement and retention) that do not address labor market discrimination, and may even contribute to it through local variation in services provided/withheld.

Reframing the Debate on Success

At the most detailed level, as we have seen above, the Standard helps individuals to make a realistic assessment of their resource needs (wages and subsidies/supports). And it helps policymakers and advocates understand how various programs can help enhance families’ efforts to move towards self-sufficiency. But at the most abstract level, it changes the question that is asked, and the answers given. As a September 25, 1998 Boston Globe editorial put it, the Standard does not ask “where poverty ends, but where economic independence begins.” Because it is a standardized measure—using the same methods across time and place—it results in different numbers measuring the same concept no matter where one lives, unaffected by local or particularistic biases.

Most simply put, the Standard says that if your income is below your Standard for your family type and place, your income is not enough to meet your basic needs at an adequate level. Since we know that many parents leaving welfare have incomes that fall below, often far below, their Self-Sufficiency Standards, even when subsidies/supports are taken into account, this means that the material hardships suffered by these families are not their fault. Without enough money to meet the basic needs of housing, food, child care and so forth, is it any wonder that families report that they experience utility cut-offs and days when they skip meals? With income and resources that are less than what they need (as measured by the Self-Sufficiency Standard), is it really a surprise that they end up using less than adequate child care or doubling up in housing not meant for two families? What the Standard tells us is that such material hardships are not about “bad choices” or “bad budgeting,” but a simple and stark lack of the needed resources.

With this perspective, the question is not whether or not a given program is a “success,” but how do we as a society, through our social programs, support and enable families to achieve self-sufficiency? Instead of success being a no-win coin toss — “heads I win” (politicians declare welfare reform a success), “tails you lose” (individuals blamed for not working enough/earning enough/budgeting enough)—success becomes a challenge. With the Standard, moreover, this challenge becomes one that must be met using all available resources, public and private, individualized to meet each family’s needs and situation. To paraphrase a bit, it takes all the [the village’s] stakeholders—parents working and caring for their children, noncustodial parents paying child support, employers paying decent wages and benefits, government providing subsidies and tax/tax credit structures that level the playing field, and communities providing schools and services—for families to be able to achieve self-sufficiency. With the help of the Self-Sufficiency Standard, we will know when and where we have reached this goal, and most important, have a tool to help blaze the trails for getting there.

Diana M. Pearce known for having coined the phrase, “the feminization of poverty,” is a sociologist on the faculty of the School of Social Work at the University of Washington. She created the Self-Sufficiency Standard when she was Director of the Women and Poverty Project at Wider Opportunities for Women in Washington, DC. pearce@u.washington.edu
 

Notes:

The author wishes to acknowledge the assistance of Nina Dunning, MSW, in the preparation of this article.

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