Bridging the Gaps: Structuring Benefits to Promote Mobility for Low Wage Workers A collaboration of the Center for Social Policy, University of Massachusetts Boston Center for Economic and Policy Research, Washington, D.C.

Overview of the current project The Bridging the Gaps project has several important research objectives surrounding low-wage workers and work support programs intended to help them get and keep employment.  Which workers? For now we are looking at a single parent with two children whose annual earnings range from $13,000 to $35,000 annually (corresponding to a full-time, year-round hourly earnings of $6.25 to $17.00 an hour -- the minimum wage to median wage in Massachusetts).  Which benefits/work supports? TAFDC, MassHealth/SCHIP, Child Care vouchers (CCDF specifically), Food Stamps, Section 8 tenant vouchers and public housing, and the Earned Income Tax credit.

Specific Research Goals  A coordinated look at the ways low-to-moderate families and individuals with earnings are eligible for and how they get major public benefits in Massachusetts (from “paper to pocket”).  Examination of the eligibility gap across a range of earnings by measuring the actual utilization of work- support benefits among eligible benefits.  Assess the size of the hardships gap between resources (earnings plus benefits) and the costs low-income families face over a wide range of earnings and combination of public benefit receipt in 3 Massachusetts cities.  Measure the high “marginal tax rates” for low-income workers who do use work-support benefits.

Research strategy  Work within Massachusetts in conjunction with providers, policy advocates, policy makers, and low-income families to ensure accuracy, responsible research, and policy impact.  Work with state research partners in Texas and Illinois on the same set of research questions to compare across states to highlight similarities and differences in order to strengthen all our findings.  Work with Center for Economic and Policy Research to make a national case for improvement of the resource base for low-to- moderate earners in Massachusetts and across the country.

What’s done  Preliminary policy mapping.  Preliminary assessment of eligibility gaps and preliminary programming to estimate actual gaps.  Preliminary findings on the hardship gaps.

What’s to come  Incorporation of feedback on policy mapping and hardship gap presentation.  Compare the earnings range we examine to poverty and other reasonable measures of “low- income” and to types and numbers of jobs in Massachusetts.  Conducting focus groups with low-to-moderate earners, policy advocates, public benefit providers, and policy makers.  Completion of actual estimates of eligibility gaps.  Written state and national reports and state and federal legislative briefings.

Findings to Date  Benefits are administered in a fairly disparate way. Only by applying for TAFDC does anyone get access to information about a wide range of programs.  While this is useful for TAFDC recipients, the income cut- off for TAFDC is the lowest of the six programs (below 100% of the FPL), has the lowest participation rate, and requires an office visit to get an application.  The cost of MassHealth swamps the other programs, costing three times as much as the other five programs combined reflecting the high cost of health care generally and the large percentage of the population covered.

Coverage, Eligibility, and Access  The breadth of coverage of these programs among the population is narrow: ranging from about 14 percent of people in Massachusetts receive MassHealth to about 1.7 percent receive TAFDC.  Income eligibility thresholds differ considerably: from close to the official poverty line to over 2.5 times that amount. For a family of three that translates into an annual income of about $13,000 (TAFDC) to close to $36,000 (EITC and public housing in Boston).  There is considerable variability on documentation required in order to access benefits. On paper at least, EITC is the simplest to access, while TAFDC is the hardest.

Getting Benefits?  TAFDC’s eligibility requirements and the apparent stigma attached to it limit the use of it among low-income families with children and with earnings making it among the least likely program workers would access.  Housing and child care assistance needs far exceed their availability, despite relatively high income eligibility thresholds. Both have long waiting lists and serve priority clients, making these programs unlikely to be assessed by eligible families with earners (those leaving TAFDC for employment are the most likely to receive child care assistance).

Getting Benefits?  While the Food Stamps program is not capped and is paid for by the feds, usage is low in Massachusetts (ranking last among the states in 2002 with only 42% of the eligible population receiving them).  Massachusetts has been a leader among the states in extending health coverage to low-income families and MassHealth usage rates reflect that.  Everyone must file taxes, making the EITC the most accessible of these six benefits. Private firms and non-profit entities have done considerable outreach to help people claim their refund.  Federal and state budget deliberations point to changes in these program that are likely to reduce current usage.

Defining Low-income Families o In 2003, the federal poverty line (FPL) for a family of three was $14,680. For such a family 200 percent of poverty is $29,360.  Defining low-income as 200% of the FPL, who’s low-income in Massachusetts? 20 percent of families 25.2 percent of all the people 30.7 percent of all children Over half (58 percent) of all female- headed households.

Earnings and Income  It would take a worker in a 3-person family working year round and full-time $14.68 to be at 200 percent of the FPL.  It would take a year-round part-time (25 hours a week) worker $22.76 to get to 200 percent of the FPL.  The median wage in Massachusetts in 2003 was $16.67 while the wage of the worker at the 25th percentile was $11.04

Measuring Resources and Expenses  The “prototypical” family we examine is a single parent with two children ages 3 and 8 moving toward full employment. Expenses include food, housing (with utilities), child care, health insurance (if not received), transportation, and miscellaneous expenses for low-income families in Boston and Springfield as calculated by the National Center for Children in Poverty. Resources include net earnings (taxes deduced and credits added), cash assistance, cash value of food stamps, and the cash value of child care. Resources – Expenses = Net Resources.

A Policy Conundrum?  A smaller number of benefits provides a little more incentive for higher earnings, but leaves families in financial difficulties even as they earn more.  A high number of benefits helps families move to financial economic security, but at the same time provides no incentive for more earnings over a very large range of earnings.

Ways out  Individual solutions: Families can reduce expenses on their own; find cheaper child care at the risk of losing quality care, find cheaper housing by crowding in with others or living in less safe neighborhoods, or go without medical insurance or as much food.

Policy changes?  Increase earnings: boosting the state minimum wage will help lift wages and move families further along the earnings line.  Increase benefit levels generally and/or phase them out over a wider range of earnings.  Other countries have found a solution by providing universal coverage of certain benefits – such as health insurance and child care.

Feedback  Are policy rules properly summarized?  What is the most effective way to convey the hardship gap and the eligibility gap?  Strengths and weaknesses of this approach in illustrating the relationship between low/moderate earnings and public benefits?

Next Steps  Identifying focus group participants to talk about eligibility rules in practice and about coping strategies.  Other organizations/individuals to involve.  Who should see the report at release time? How do we best involve them?  How can we best work with you throughout the project?