Low-Income Families in Georgia
Results from the Family Resource Simulator
Publication Date: May 2004
About 85 percent of low-income children have parents who work, and most have at least one parent working full-time, year-round. Nonetheless, many of these parents are unable to afford basic necessities for their families, such as food, housing, and stable child care. Even a full-time job is not always enough to make ends meet, and many parents cannot get ahead simply by working more. As earnings increase—particularly as they rise above the official poverty level—families begin to lose eligibility for work supports. At the same time, work-related expenses, such as child care and transportation, increase. This means that parents may earn more without a family experiencing more financial security. 1 In some cases, earning more actually leaves a family with fewer resources after the bills are paid.
The Family Resource Simulator, developed by the National Center for Children in Poverty, illustrates how this happens. This web-based tool calculates resources and expenses for a hypothetical family that the user “creates” by selecting city and state, family characteristics, income sources, and assets. The user also selects which public benefits the family receives when eligible and makes choices about what happens when the family loses benefits (e.g., does the family seek cheaper child care after losing a subsidy?).
The result is a series of charts that show the hypothetical family’s total income from various sources as earnings rise, as well as the cost of basic family expenses. Using the Simulator, this report describes the experiences of two hypothetical families in the workforce.
Low Income in Georgia: The Wilsons
The Wilsons live in central Atlanta (Fulton County) with two children, ages 4 and 6. The federal poverty level for such a family is $18,850 per year. 2 For simplicity, the Simulator assumes that the Wilsons begin with no income; then one parent enters the workforce and steadily increases hours to full-time employment. After that, the second parent begins part-time work and gradually moves into full-time employment. The Wilsons pay taxes on their earnings, and when they qualify, they receive the federal Earned Income Tax Credit (EITC) and the federal Child Tax Credit. In addition, the Wilsons receive food stamps and public health insurance.
When the Wilsons’ employment requires outside child care, both children go to child care centers (the 6-year-old goes after school). Although the care is expensive, the Wilsons do not qualify for assistance through Georgia’s Child Care and Development Fund (CCDF) subsidy program. By the time both parents are working enough hours to meet the program’s minimum work requirement (35 hours per week for each parent in a two-parent family), their earnings have exceeded the income eligibility limit of $29,500 for a family of four.
As the Wilsons’ earnings increase, their child care and transportation expenses increase, and they begin to lose eligibility for the benefits that support work (see Figure 1). The parents lose public health insurance coverage well before the family’s income reaches the federal poverty level, when one parent is working part-time and the other is not employed. This simulation assumes that the Wilsons have insurance through an employer (nationally, only 9 percent of part-time workers have employer-based health care benefits 3). Without this benefit, the Wilsons would have to pay substantially more or go without health insurance. By the time both parents are working full-time, together earning about $30,000 per year, the family is no longer eligible for food stamps, and the EITC has nearly phased out.
Figure 1: Wilson Family
The Wilsons’ resources, even with tax credits, food stamps, and public health insurance, don’t exceed expenses until their earnings rise to $36,000. As the parents’ earnings double from $15,000 to $30,000 per year, the family experiences only minimal progress toward the goal of making ends meet. At $37,000—double the federal poverty level—the family has less than $1,800 in resources available to them after basic expenses. That’s just $150 per month for a family raising two children.
Low Income in Georgia: The Harrises
For a single-parent family in Georgia, providing for a family’s basic needs is even more challenging. Ms. Harris is a single mother who also has two children, ages 4 and 6. She lives in the greater metropolitan Atlanta area, just outside Fulton County. The federal poverty level for this family is $15,670. 4
When Ms. Harris’ earnings are low, the family receives the same public benefits as the Wilsons—income tax credits, food stamps, and public health insurance. Ms. Harris also receives child support payments of $300 per month. 5 This income significantly increases the family’s resources, but, as a result, Ms. Harris loses public health insurance at an even lower earnings level—before her earnings reach $5,000 per year (see Figure 2).
Figure 2: Harris Family
As with the Wilsons, Ms. Harris’ work-related expenses increase as she moves from part-time to full-time employment. Her transportation costs are somewhat higher than the Wilsons’ since she lives outside of central Atlanta. This means she needs a reliable car to commute to work, while the Wilsons use public transportation. A car worth $5,700 would disqualify her from public health insurance; a car worth $6,700 or more would disqualify her family from food stamps as well.
Ms. Harris’ child care expenses, on the other hand, are substantially lower than the Wilsons, because her children are in license-exempt family care while she is at work (the 6-year-old goes after school). This care costs about 40 percent less than care in a licensed child care center or home. Still, with child support payments, tax credits, and a full-time, year-round job paying roughly $8 per hour 6—$3 per hour above the federal minimum wage—Ms. Harris does not have enough money to provide for her family (see Figure 3). And as her earnings increase to $17,000, the loss of food stamps pushes her even further from this goal.
Figure 3: Harris Family
The Harris’ resources do not exceed the cost of basic expenses until Ms. Harris’ earnings increase to $24,000. This means that Ms. Harris is not able to make ends meet until she earns $13 per hour. Even at this wage, she is unable to afford anything beyond her family’s basic necessities.
The Harrises would be better able to cover their expenses if they received child care assistance through Georgia’s CCDF subsidy program. However, the program serves only a small percentage of eligible children; in June 2003, about 30,000 children were on a waiting list for subsidies in Georgia. 7 Moreover, as a result of the program’s work and income eligibility criteria, Ms. Harris would not qualify for assistance until her earnings reached about $10,500 per year (a single parent must work 25 hours per week to qualify), and the family would lose assistance when Ms. Harris’ earnings reached $25,000.
There are other public supports that can help working families cover their basic expenses, such as Section 8 housing vouchers and Temporary Assistance for Needy Families (TANF) cash assistance. However, Georgia’s TANF program provides assistance only to families with very low earnings—it is not available to low-income families with earnings above the poverty level. And while Section 8 housing vouchers can provide substantial assistance to low-income families, only a small percentage of eligible families receive them. The supply of vouchers is limited, and recent decisions by the U.S. Department of Housing and Urban Development, along with proposed funding cuts for fiscal year 2005, mean that soon even fewer vouchers will be available.
Challenges for Policymakers
Federal and state budget woes threaten existing work supports for low-income families. Nearly half the states have waiting lists for child care subsidies, and more than one-third—including Georgia—have lowered income eligibility limits and/or increased family co-payments. More than 30 states have approved or proposed cuts to their public health insurance programs that affect low-income children and/or parents’ access to coverage. Many of these changes hit families just above the poverty level the hardest. At the same time, unemployment has increased and job creation has been slow. As policymakers respond to the difficult choices they face, understanding the impact of public policies on the resources and work incentives of low-income working families is critical.
1. Cauthen, N. K. & Lu, H. (2003). Employment alone is not enough for America’s low-income children and families (Living at the Edge Research Brief 1). New York, NY: National Center for Children in Poverty, Columbia University Mailman School of Public Health.
2. The analysis in this report is based on tax and benefit policies in effect in December 2003; the 2003 poverty level for a family of four was $18,400. See the U.S. Department of Health and Human Services for more information about federal poverty measures.
3. The percentage of employees that receive health benefits at work has steadily declined in recent years. According to the March 2003 National Compensation Survey, among employees in the private sector, only about half receive medical care benefits through their employers, and the rate is lower among employees with wages of less than $15 per hour. See: U.S. Bureau of Labor Statistics. (2003). Employee benefits in private industry, Table 1: Percent of workers participating in health care and retirement benefits, by selected characteristics, private industry.
5. According to 2001 National Survey of America’s Families (NSAF) data, among families in which children are living with their mothers and have noncustodial fathers, just under half receive child support payments. For poor families, the likelihood of receiving child support is much lower—only about 36 percent receive payments. For those who receive child support, the average received is $2,550 per year, or $213 per month. For families with income between 100 and 200 percent of the poverty level, about 50 percent receive payments, and the average received is $3,980 per year, or $332 per month. See: Sorensen, E. (2003). Child support gains some ground (Snapshots of America’s Families III, No. 11) . Washington, DC: Urban Institute.
6. Given research indicating that persons leaving TANF cash assistance for employment typically earn more than the minimum wage, the Simulator assumes that parents earn the 20th percentile wage for their state when they enter the workforce. In Georgia, the 20th percentile wage is $8.21 per hour. See: Mishel, L.; Bernstein, J.; & Boushey, H. (2003). The state of working America, 2002/2003 (An Economic Policy Institute Book). Ithaca, NY: Cornell University Press.