Policy choices cut poverty nearly in half

Public policies like Social Security, refundable tax credits and the Supplemental Nutrition Assistance Program (SNAP) cut poverty in the U.S. nearly in half in 2013.

This finding comes from the Center on Budget and Policy Priorities, which took a look at Supplemental Poverty Measure (SPM) data released last week by the U.S. Census Bureau. The Center on Budget and Policy Priorities found that federal policies lifted 39 million people, including 8 million children, out of poverty last year.

The Supplemental Poverty Measure is a more comprehensive way to measure poverty that better takes into account the costs faced by today’s families, as well as support families may receive to meet their basic needs.

The official poverty measure was originally developed in the early 1960s. It is often criticized for being overly simplistic and outdated, because it is only based on cash income and the cost of food. The Supplemental Poverty Measure (SPM) takes a more sophisticated look at household economic well-being, taking into account expenses like child care, medical bills and taxes; as well as other resources, like housing subsidies, heating assistance and food support. The SPM gives a more complete picture of who is unable to meet basic needs.

State policy choices have a role to play as well. Minnesota policymakers took important steps in the 2014 Legislative Session so that people who work can support themselves and their families. Hundreds of thousands of Minnesotans will better be able to make ends meet because of policy decisions to strengthen the Working Family Tax Credit and increase the minimum wage.

Policymakers can make further progress this coming session by addressing the challenge of affordable child care. Increasing funding for Basic Sliding Fee Child Care – which today has a waiting list of about 6,600 families – and expanding the Dependent Care Tax Credit would be two important steps in this direction.

-Clark Biegler

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October Economic Update brings mixed news for the state budget

Minnesota’s most recent revenue collections are about 1 percent below projections, but the overall picture isn’t so bad, according to information in the Minnesota Management and Budget’s October Economic Update.

The economic update looks at state revenues for July to September 2014, which make up the first quarter of Fiscal Year 2015, and compares them to what was projected in the February Forecast, adjusted for actions taken in the 2014 Legislative Session. It finds that state revenues came in $46 million lower than earlier projections. This was mostly due to lower income tax and cigarette and tobacco tax collections and the timing of a health care surcharge. The health care surcharge accounted for a $31 million shortfall, which is expected to be reversed in the future. Corporate tax collections came in higher than projections.

While revenues for the first quarter of Fiscal Year 2015 are down, Minnesota finished the prior budget year even better than originally reported. State revenues for the 2014 fiscal year came in $186 million higher than previously projected. And that’s even an improvement from what was originally reported in the July Economic Update.

While there’s mixed news for state revenues, the national economy shows signs for “solid growth in the second half of 2014,” and this growth is expected to continue until at least next year. While this is good news, current projections for economic growth are lower than projected in the February forecast. The current outlook for the economy is dependent on several factors, including improving labor force growth and smooth policy changes by the Federal Reserve.

The economic forecasters are relatively confident in their projections, and they assign a 70 percent probability to their baseline economic forecast. They give a 15 percent chance for a more pessimistic scenario in which the national economy stalls and the U.S. barely avoids a recession, and a 15 percent chance that the economy will be stronger than the baseline prediction.

This update reminds us that the economy can take unexpected turns. It’s important for the state to prepare for the inevitable ups and downs, and the increase to the budget reserve made in the 2014 Legislative Session is an example of the kind of sound planning that policymakers can undertake so that Minnesota can best meet the needs of its residents in good times and in bad.

These quarterly economic updates are helpful in tracking our state’s revenues, but they give only part of the story. For the full picture, we’ll have to wait for the November Economic Forecast to be released on December 4, which will include estimates for both state revenues and spending. We will see then how the combination of higher than expected revenues in FY 2014 and slower economic growth projections may affect the state’s forecasted surplus for the coming biennium. Those November forecast figures will be the baseline against which the Governor will create his recommendations for the next two-year budget.

-Clark Biegler

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Some groups of Minnesotans struggle more to find jobs

As Minnesota’s job market continues to improve after the recession, not all Minnesotans are sharing in the state’s progress.

Our recent analysis shows that while overall unemployment is low in the state, those groups who faced the highest levels of unemployment in the rough economy are still having the most difficulty finding jobs. These include workers with less education, single parents, the young and people of color. For example, while the gap has narrowed, Minnesotans without a high school diploma were more than 3.5 times as likely to be unemployed than those with a college degree. One in nine of these Minnesotans were unemployed during the first quarter of 2014.

Minnesotans with Less Education Have Higher UnemploymentWhen too many Minnesotans cannot find work, it impedes the state’s economic growth. Fortunately, policymakers took several steps in the 2014 Legislative Session to help more Minnesotans get good jobs to support themselves and their families, including:

  • Increasing the minimum wage, which will boost wages for around 325,000 Minnesota workers and could reduce turnover in low-wage jobs.
  • Provisions in the Women’s Economic Security Act to help female workers get into high-wage fields and meet their family obligations without threatening their jobs.
  • Improving education and training opportunities for Minnesotans through the Minnesota Family Investment Program (MFIP) and Adult Basic Education.

These policies can contribute to narrowing the gaps in unemployment we see in Minnesota, and expand opportunity to more of those Minnesotans who currently are being left out of the state’s economic recovery.

-Clark Biegler

Posted in Economy, Racial Disparities | Tagged , | 3 Comments

Minnesota beats national figures, but prosperity still out of reach for many

Minnesota is among the top ten states in terms of incomes, but that above average performance is not reaching all communities. That’s according to new data from the U.S. Census Bureau. Today’s Census data confirms that incomes are substantially lower and poverty more prevalent in Minnesota’s communities of color. While the economic gap between white Minnesotans and communities of color is wide, there has been some improvement in poverty among black and American Indian Minnesotans.

We mentioned on Tuesday that while the nation’s economic recovery has been slow, the national poverty rate finally started to decline in 2013. Minnesota continues to do better than the rest of the nation. In 2013, our median household income increased to $60,702 and our poverty rate was 11.2 percent, both substantially better than the U.S. figures of $52,250 and 15.8 percent.

Minnesota’s continued economic strength depends on all Minnesotans having the opportunity to support themselves and their families. However, some communities have not shared in the state’s success. Black, American Indian and Latino Minnesotans earned significantly less than white Minnesotans in 2013.

Communities of color also experienced much higher poverty rates than white Minnesotans. In 2013, one in twelve white Minnesotans lived in poverty, while one in three black and American Indian Minnesotans, one in four Hispanic Minnesotans and about one in six Asian Minnesotans lived in poverty. To put that into perspective: a family of four was considered living in poverty in 2013 if their income was below $23,834.

This picture is grim, but the new numbers show that Minnesota’s reality can change. While still very high, the poverty rate for black Minnesotans decreased by five percentage points from 2012 to 2013. Analysis from our State Demographer shows that poverty also decreased for American Indian Minnesotans since 2011.

2014 acs blog table

Today’s data is helpful in understanding the different experiences of racial and ethnic groups broadly defined. But when substantial numbers of people are grouped together, the variety of individual experiences can be lost. For example, Asian Minnesotans as a whole have a median income that’s about the same as white Minnesotans, but they also have a higher poverty rate. Some Asian Americans are doing extremely well, but many aren’t earning enough to make ends meet.

To build the strongest economic future, we’ll need all Minnesotans to be able to reach their fullest potential in the workplace. Wise policy choices can make a difference in moving towards this future.

In the 2014 Legislative Session, policymakers improved the Working Family Credit, providing an important boost for people working at lower wages, as we mentioned on Tuesday. Policymakers also responded to years of stagnant wages by increasing the minimum wage, which will reach $9.50 by 2016. As a result, 325,000 Minnesotans will see a boost in their earnings. The minimum wage increase can make a dent in the wide income gap between white Minnesotans and people of color. The JOBS NOW Coalition found that almost one in three Hispanic workers in Minnesota and about one in five black workers would see higher wages when they studied a minimum wage increase similar to what passed this year.

Today’s new information tells a familiar story. Minnesota continues to exceed the national averages, but too many Minnesotans are still falling behind. As Minnesota enjoys greater diversity, it is even more important for our state’s future to take the steps needed to close our racial economic gaps. By expanding opportunity and building ladders into the middle class, our state will truly beat the averages.

-Clark Biegler

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Poverty down nationally, Minnesota takes steps for further progress

New Census information released today gives a snapshot into the economic recovery’s reach in 2013. The good news is that the national poverty rate fell in 2013 for the first time since 2006, although there was no significant change in the number of people living in poverty.

The data also show how policy choices at the national level made a difference in lifting millions of Americans out of poverty. Today’s data also underscore that Minnesota’s recent policy choices are on the right track towards greater economic security.

Poverty rates often are slow to decline after an economic downturn, so it is good news it finally started to fall in 2013. However, the U.S. economy needs to grow at a faster rate in order to replace the millions of jobs lost in the Great Recession and respond to new people joining the job market. In 2012-2013, 14.7 percent of Americans and 11.0 percent of Minnesotans lived in poverty. In 2013, this meant that a family of four had an income below $23,834.

The number of Minnesotans without health coverage was around 440,000 in 2013, or 8.2 percent, about the same as in 2012. We can expect the number of Minnesotans without health insurance to fall in 2014 because of policy decisions that went into effect this year, such as covering more Minnesotans under Medicaid, continuing affordable health care for working families through MinnesotaCare, and creating our own state-based health insurance exchange, MNsure.

While the data show that still too many people in Minnesota and across the country are unable to afford the basics, the new information demonstrates the success of policies to lift families out of poverty. For example, the federal Earned Income Tax Credit lifted 5.5 million Americans – including 2.9 million children – out of poverty in 2012.

Minnesota is building on this success story. In the 2014 Legislative Session, policymakers increased Minnesota’s version of the Earned Income Tax Credit, called the Working Family Credit, by about 25 percent. The Working Family Credit helps more than 330,000 working families to get by on low wages.

The data released today show other policy measures were effective at lifting Americans out of poverty in 2013, including:

  • 3.7 million Americans who received basic food assistance through SNAP.
  • 14.7 million American seniors through Social Security.
  • 1.2 million Americans through Unemployment Insurance.

The Census Bureau will release more Minnesota-specific information on incomes and poverty on Thursday, so be sure to stay tuned for our analysis.

-Clark Biegler

Posted in Health Care, Poverty, Taxes | 1 Comment

Minnesota takes steps to make work pay

Minnesota passed two high-impact strategies for making work pay this year: increasing the Working Family Credit (our state’s Earned Income Tax Credit) and raising the minimum wage.

A new report from the Center on Budget and Policy Priorities commends Minnesota as one of three states (plus the District of Columbia) that advanced both of these policies this year.

According to the report, “EITCs and the minimum wage are twin pillars of making work pay for families that earn low wages. They boost income, widen the path out of poverty, and reduce income inequality. They also help to build a stronger future economy by putting children on a better path.”

These two improvements have the greatest success when used together. This is for several reasons:

  • The minimum wage and Working Family Credit reach overlapping but different groups of low-wage workers.
  • Increasing both at the same time creates a stronger income boost to those who need it most.
  • The benefits of these policies are timed differently. A minimum wage increase is seen in each paycheck, and helps families afford everyday expenses. The Working Family Credit comes once a year, and can be used for larger one-time expenses.

We’ve written before about how important the minimum wage and the Working Family Credit are so that working Minnesotans can make ends meet. The improvements made this session were long overdue. Stagnant wages mean low-wage workers earned about the same as 40 years ago, after adjusting for inflation. Minnesota’s minimum wage had lost much of its buying power and was below the federal minimum wage. Increasing the minimum wage and the Working Family Credit bring low-wage workers much closer to making ends meet.

The legislation passed this session will raise the minimum wage to $9.50 for large employers and $7.75 for small employers by 2016, and will then increase with the rising costs of basic expenses. As a result, 325,000 Minnesotans will have higher wages. More than 330,000 Minnesota families receive the Working Family Credit, which policymakers improved by conforming to federal improvements addressing marriage penalties and increasing the maximum credit.

Policymakers made important strides toward improving economic security for Minnesotans in the 2014 Legislative Session. The higher minimum wage and improved Working Family Credit will work together to boost our local economies and build ladders for low-wage workers to climb into the middle class.

-Clark Biegler

Posted in Economy, Taxes | 2 Comments

Join the Minnesota Budget Project team as our Senior Policy Advocate

The Minnesota Budget Project seeks a Senior Policy Advocate to advance effective strategies to address poverty. This key member of our team will provide analysis, explore policy solutions and engage with state and national partners to advance public policies that reduce poverty and improve the economic well-being of low- and moderate-income Minnesotans. The ideal candidate will have a combination of analysis and advocacy skills.

The Minnesota Budget Project is an initiative of the Minnesota Council of Nonprofits that combines sound research and analysis with advocacy, engagement and communications strategies in support of policies that expand opportunity and economic security to all Minnesotans.

More information, including how to apply, is available at our website. The application deadline is September 11.

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Minnesota Budget Project seeks a Communications Manager

I am excited to announce that we are looking for a Communications Manager to join the Minnesota Budget Project team.

The Communications Manager will be responsible for developing and implementing a comprehensive communications plan to enhance the effectiveness of the Minnesota Budget Project in meeting its mission. The ideal candidate will have skills in strategic communications, media relations, new media, and writing and editing.

Applications will be accepted through August 25. A full job description and information on how to apply is available online.

-Nan Madden

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Minnesota ends budget year on a high note

Minnesota ended the recent budget year stronger than expected, according to preliminary analysis from Minnesota Management & Budget.

Their July Economic Update finds that state revenues have come in above expectations. The state’s 2014 fiscal year ended on June 30. State revenues came in $168 million, or 0.9 percent, higher than projected in the February Forecast. This is mostly due to higher income tax and sales tax collections. The Update cautions that timing issues could be at play with these preliminary figures, and these numbers could change as they are finalized in August.

While the news for state revenue was welcome, the national economy is a different story. The July Update’s outlook for U.S. 2014 GDP growth is a full percentage point lower than in the February Forecast. This is due to a much weaker start to 2014 than expected, with factors including the harsh winter taking their toll. But the economy is already rebounding from this temporary setback. Higher consumer confidence, faster employment growth, and improved factory production are all expected to contribute to strong growth for the rest of 2014 and into 2015.

The economic forecasters are fairly confident in their projections, and assign a 70 percent probability to their baseline economic forecast. They give a 15 percent chance for a more pessimistic scenario in which economic growth stalls and the U.S. barely avoids a recession; and a 15 percent chance that the economy will be even stronger than the baseline predictions, due to better than anticipated foreign growth and related depreciation of the U.S. dollar.

This update brings the state good news. It also reminds us that the economy can take unexpected turns. It’s important for the state to prepare for the unexpected, and the increase to the budget reserve made in the 2014 Legislative Session is an example of the kind of sound planning that policymakers can undertake so that Minnesota can best meet the needs of its residents in good times and in bad.

-Caitlin Biegler

Posted in Economy | 1 Comment

Too many Minnesotans find affordable housing is “out of reach”

Minnesota’s new minimum wage will increase the incomes of 325,000 Minnesotans, but there’s still more to do for all Minnesota workers to achieve economic security. A recent report finds that minimum wage workers in Minnesota and throughout the country don’t earn enough to afford market rate rental housing.

When there is a wide gap between incomes and housing costs, families can’t afford other basic needs, families may have to live in substandard housing, or workers can’t move to where the jobs are.

Out of Reach 2014: Twenty-Five Years Later, The Affordable Housing Crisis Continues from the National Low-Income Housing Coalition calculates the “Housing Wage” for various parts of the country. The Housing Wage is the income needed to rent a two-bedroom unit while not spending more than 30 percent of a household’s income on housing. Minnesota’s Housing Wage is $16.46 an hour.

That means that a household needs 2.3 jobs at the federal minimum wage of $7.25 to afford a two-bedroom apartment. If Minnesota’s new minimum wage of $9.50 was in effect today, a family with two minimum wage workers could afford an apartment. But housing would still eat up too big a share of the income of a family with one worker at minimum wage. For a county by county look at the report’s results, the Washington Post has put together an infographic.

In some parts of Minnesota, the Housing Wage is even higher. In Minneapolis-St. Paul, a worker needs to earn $18.19 an hour, or 2.5 jobs at the federal minimum wage, to afford a two-bedroom apartment.

There is not a single state in the nation where a full-time minimum wage worker can afford a Fair Market Rent for a one- or two-bedroom rental unit.

The report calls on policymakers to close the growing gap between wages and housing costs by raising the minimum wage and increasing affordable housing opportunities.

In the recent legislative session, Minnesota policymakers did both.

  • The minimum wage increase means more low-wage workers will be able to afford housing.
  • The capital investment bills allocated $100 million for affordable housing, including provisions to preserve public housing in House File 2490 and projects to create more affordable rental housing in House File 1068.

These policy changes will help more workers achieve the financial stability that affordable housing can provide, and helps Minnesota’s growing communities to attract the workforce they need.

-Caitlin Biegler

Posted in Economy | Tagged , | 3 Comments