Pay Gap Narrows to 93% for Millennial Women, But For How Long?

 

Women are finally earning almost as much as men. It’s been 40 years since the Equal Rights Amendment failed in Congress, but today, the Pew Research Center finds, Millennial women aged 25-34 are earning 93 cents to the male dollar. (If you’re counting everyone, the wage gap is still stuck at 84 cents to the dollar, however.)

This is great news, although there’s still a lot more work to do on parity. As Pew reports, the gap gets wider with age.  ”Recent cohorts of young women have fallen further behind their same-aged male counterparts as they have aged and dealt with the responsibilities of parenthood and family.” In other words, as women begin having children, they find themselves taking time off because it’s so hard to balance being a mother and having a career. And the time off puts a ding in the pay raises.

While women have made progress, another story about working this week caught my eye —- a public media series on the working poor. The third installment was about Bridget, a 30-year-old in Cleveland who is living in her parents’ basement. Bridget, who has a BA in English, is back in school after a stint in law school (and $25,000 in school loan debt), and is working part-time in a work-study position. She’s not eligible for financial aid, she says, and she was fired from a job in a call center and unable to collect unemployment. She applied for food stamps and was eligible for $15 a month. She’s living on $300 a month. “All my money goes to health insurance and my cell phone, so I have no money to give anyone for bills or rent, or anything.”

“It’s surprisingly hard to find part-time work or low-wage work when you have a degree,” she says. “I applied at McDonalds, I applied at Walgreens…I applied at all these different minimum wage jobs, and they would laugh at me.  `You have a bachelor’s degree, why are you here?  You’re just going to quit!’

Luckily, her parents had a basement. Not everyone is as lucky. The working poor in this country are increasingly young adults. According to number crunching by the Economic Policy Institute, the typical person working minimum wage, for example, is a woman in her early 30s, works full-time, with a family to support. Minimum wage is not enough to lift someone above the poverty line, even working full-time.

Perhaps Bridget should become a tutor to the rich. As a recent CNBC segment reported, the wealthy spare nothing to ensure their children get into the right schools. One tutor earns six figures making sure his clients’ children pass the tests. Another family paid a tutor $1250.00 per hour. The most recent job opening is in Singapore and comes with an apartment, a driver, and a personal assistant.

In other words, as people like Bridget and millions of others in the disappearing middle class struggle to pay their college loans and earn enough for their own one-bedroom, the 1% are paying six figures to ensure their kids get into Stanford. Yeah, that’s the American way. The arms race is a live and well.

 

Minimum Wage and Apprenticeships Can Help Young Adults Earn a Living Wage

Working for $8 an hour is Dickensian– as a screen shot, which quickly went viral, of McDonald’s advice for workers on how to make minimum wage stretch, reveals. It includes such nuggets as break up your meals into smaller pieces, which “results in eating less and still not feeling full.” Please, sir, may I have some more?

Many young adults, if they’re working today, are working for wages that can’t support a family, let alone themselves. The median age of a low-wage worker is 34. One-fourth of these workers have children. Even the fast food industry admits that the minimum wage they pay was never meant to be a living wage.

Recognizing the struggle of many workers, some cities are attempting to raise the minimum wage. New York City is raising its minimum wage over three years, to $9 by 2015. Sea-Tac, the suburb of Seattle that houses the airport, just raised its minimum wage to $15 an hour. Washington, DC, is also working to raise the wage. California recently approved a rise in the minimum wage to $10 an hour, to phase in over two years.

However, as important as it is to raise the wage, it’s better to do it on a grander scale than SeaTac did. Raising it at the federal level or state level avoids unnecessary competition (or a race to the bottom as some might call it) between neighboring communities with lower wages.

While raising the minimum wage is a must — and contrary to arguments does not reduce the number of jobs — another hopeful sign was reported in the New York Times last Sunday: the growth of apprenticeships that lead to middle tier jobs that do pay living wages. BMW in South Carolina is importing the German model and finding success.

The model works with local community colleges and high schools on a curriculum that teaches the skills BMW — and other companies’ — needs. The state gives businesses a tax credit for instituting apprenticeships or other direct pipelines from school to work. Other companies have signed on as well. Apprenticeship Carolina, an umbrella organizations that links South Carolina’s technical colleges with private companies, has grown from 777 students in 2007 to 4,500 today and more than 600 companies, according to the Times.

Washington’s State’s direct-connect training programs are another example, as is Chicago’s Austin Polytech High Schools. Austin, on the distressed West Side, offers high school students a pathway to a machinist certificate, as well as internships at local manufacturers and job placement options with those same companies. The companies in turn agree to cover the costs of further education for the new worker. A recent newsletter shows where the graduating class of 2012 is one year later: employed and moving up a career ladder.

The Obama administration is on board as well. The White House announced $100 million in Youth CareerConnect grants for advancing technical training in high schools. The Secretary of Labor, Thomas Perez, told the New York Times that “As a nation, … we have regrettably and mistakenly devalued apprenticeships and training. We need to change that.” However, to date, there’s more rhetoric than action.

Apprenticeships are still a hard sell in the U.S. There’s a legacy of funneling minority children into vocational programs instead of college-track programs, and African American parents are often concerned that it may happen again. The Times reports that in South Carolina, school officials were at first wary of private companies dictating curriculum. Employers in turn equate apprenticeships with unions.

However, as more young people, and particularly vulnerable populations of young men, find jobs that can support a family in a company with upward mobility, the uphill battle to get apprenticeships up and running may get easier.

 

‘Paycheck Plus’ Tests Whether Giving Low-Income Single Men an Annual Stipend Boosts Stability

Young men are a worrisome lot for many. Kay Hymowitz writes of this latest generation of twenty-something men as stunted, man-children who refuse to grow up (and she’s not alone). Others worry about boys falling behind in a school system designed for kids who can sit still and follow along. Indeed, we seem to spend an inordinate amount of time debating whether these are even legitimate worries.

What we don’t spend much time doing, however, is paying attention to the group of young men that deserves our worry: the young men who are barely scraping by in low-wage jobs, if they’re working at all; those who are filling up our prisons, or starting precarious relationships with their baby momma– the men on the edge of society looking for a way in but finding few doors.

That might change with a new experiment in New York City called Paycheck Plus. The program builds on the success of the Earned Income Tax Credit and offers young, single men a wage supplement of up to $2,000 a year, depending on their earnings. It’s unique because the vast majority of social welfare programs target families, not singles. That means that a man and woman working at Target earning $11,000 a year are treated very differently. The young mother of two, for example, gets an EITC of $6,000 on top of her earnings, while the single person gets nothing.

Yet as the panelists pointed out, single men are struggling mightily, and their inability to provide financially for a family is one important reason for the rise of single motherhood.

“This is pretty unique and pretty exciting,” Isabel Sawhill told a gathering at Brookings in unveiling the program.

Gordon Berlin, the president of MDRC,  the “intellectual godfather” of the idea according to Sawhill, first broached this idea in a 2007 issue of the Future of Children. Now that it has come to fruition, MDRC–our partner in this Network–will be evaluating the pilot’s success.

How it works. The program targets single men and women without children who earn less than $30,000 a year. The stipend varies by annual earnings, and begins phasing out after $20,000 a year.  A young man earning $10.40 an hour, or $18,000 a year, would be eligible for extra $2,000 a year, for example. A person earning $20,000 would get $1600, eventually phasing out to zero as earnings increased.

Paycheck Plus is modeled after the EITC, which has been called the most effective antipoverty program in decades. The EITC has been shown to increase employment, earnings, and income. It also has positive effects on kids. Yet the EITC is designed for families with children. (It does offer a stipend for singles but it is very small.)  PayCheck Plus is aiming to remedy that.

The program is only being tested at this time. Over the next several years, MDRC will monitor whether the program encourages more single individuals (especially the most vulnerable men) to join the workforce, and whether it increases their income enough to encourage marriage and family formation. If it’s successful, and cost-effective, it may then be expanded nationwide.

Why it’s needed. As any economist will tell you, men with the least education are sucking wind in this economy. Wages for this group have fallen steadily since the 1970s, even as GDP has shot upward. A male high school dropout today earns 25% less than he would in 1973, even after adjusting for inflation. As the wages have fallen, many men have simply opted out of the workforce, taking on odd jobs off the books, or selling drugs, which too often leads to prison– or as Jamie Foxx put it, “mandatory college.”

Also, like it or not, low-wage work is here to stay. Going forward, these jobs will remain a big part of the range of available jobs. Five of the top six jobs by 2020 are those that will pay less than $24,000 a year.

Together, these problems describe an alarming landscape for disadvantage young  men with limited education. Raise the minimum wage is one answer to the problem–even though the political will is not yet there. The PayCheck Plus is another way. It’d be great if we could do both of course. In fact, this pilot may be a good test case for the combination approach, given that New York City is raising the minimum wage during the period of the study.

The program reminds me of another effort to raise family income, the New Hope program. There, too, working families were given a stipend that they could use for a variety of purposes as well as other supports that encouraged work. The results were very, very promising. Among all participants, including single men, work increased and poverty rates fell. For families with children, the extra income also boosted children’s performance and behavior in school.

The program’s impact will be closely watched by policymakers and others concerned about declining workforce participation. However, as Georgetown economist Harry Holzer told the Brookings panel, we should maybe lower our expectations. “I think [the program's effects] will be positive, but modest,” he told the audience. “The demand side of the market is problematic. Recovery is sluggish and will remain so through duration of the pilot. But even in strong job market, the folks we’re talking about are the last hired (black males, e.g).” Employers are ambivalent about hiring this group, and actually the ambivalence goes both ways. Men don’t want to work in these sectors. They’d much rather be in construction or some other industry that doesn’t require them to say “have a nice day” at the end of it all.

These and other questions will no doubt abound about the program, including its potential unintended consequences. The pilot study will examine many of these questions, and we’ll know the answers in about three years.

 

 

Poverty Rates for Young Adults

 

The Census Bureau released poverty data last month, and we’ve put together some charts on poverty rates among young adults, both at age 18-24 and 25-34.

The poverty rate for young adults aged 18-24 in 2012 was 20.4%. For those aged 25-34 it was 15.9%. That’s basically unchanged from three years ago. Then (in 2009), 20.7% of those 18-24 were poor and 15% of those 25-34 were struggling in poverty.

Some 2012 highlights:

  • Women are more often in poverty than men–a truth for all ages.
  • Those with the least education at age 25-34 have 7 times higher poverty rates than those with four-year degrees. The risk is more than double at age 18-24.
  • Blacks have the highest poverty rates, followed by Hispanics.
  • By age 25-34, Asians are the least likely to be in poverty among all racial-ethnic groups including whites.
  • The risk of poverty falls with age, except for black and Hispanic women and for those with less than a high school degree.

Will Health Insurance Costs Rise for Young Adults?

It started last month. Blue Cross started sending me notices that I will have to choose a new health care plan. The nudging shifted to shoving some time mid-week, with regular calls to my mobile. And now I see why. It turns out I’m one of the 3% who will have to pay more for health care under the Affordable Care Act (which I fully endorse).

Me and twenty-somethings, apparently, at least if you’re listening to the steady drumbeat of headlines proclaiming that young adults are going to suffer under ACA.

ACA is intended to cover more Americans and make insurance market more competitive in an effort to slow skyrocketing health care costs. But for us 3%, at least initially, the costs will rise, mainly because the new policies now must cover services such as maternity care and others not covered before without paying a premium premium.

Young adults are not likely in that category, but you wouldn’t know it from the fear-mongering campaign of the Right, which as is typical, starts from a grain of truth, but ignores a lot of other truths.

Indeed, at first blush it looks like many young adults will see their costs rise, depending on the state where they live. (If you’re working and your employer covers you, this is all a moot point). The right-leaning Manhattan Institute created a map with state-by-state comparisons.

MIT economist Jonathan Gruber–an architect of the Massachusetts universal plan and a highly involved consultant on ACA– told CNN that premiums will likely rise in certain circumstances:

“In some states, insurance markets were already regulated to not allow insurers to discriminate against the sick. In those states, premiums will fall, like in New York, where premiums will fall by as much as 50%, … In other states insurers were freely allowed to discriminate against the sick. In those states, by ending the discrimination, we’re going to raise premiums in states like Wisconsin, or some of the Southern states.”

Likewise, the right-leaning Cato Institute reports that overall, premiums will likely rise for the young and healthy, and fall for older people and people who are sick. The reasons, according to economist Aaron Yelowitz,  are the “community rating,” and the “guaranteed issue.” The former means that older people will not pay proportionately more for health insurance than a young person, and the latter means that insurers can no longer turn down sick people with pre-existing conditions. The two combined, according to Yelowitz, means that a healthy 25-year-old will pay the same amount as a smoker who is 65.

Or as Chris Conover told Forbes:  ”That means a 22-year-old waitress paying $2,068 for her health insurance will have to fork over $3,000 when Obamacare takes effect.” Quite the overstatement, but more on that below.

In addition, the individual mandate–requiring everyone to have insurance or pay a fine–is flawed, and some argue will lead to higher premiums because of adverse selection, meaning the young and healthy have the least incentive to join in. The size of the mandate’s penalty for not buying insurance is puny compared with the cost of health insurance– about 10% of a typical plan, according to Avik Roy, a former Romney campaign adviser. Not having everyone in the pool undermines the very foundation of universal care– and the reason insurance companies jumped on board in the first place. Said Roy, “Because the mandate is weakly enforced, small in size, and gradually put into place, whereas the pre-existing condition mandate takes effect immediately, Obamacare creates the recipe for an adverse selection death spiral.”

This is not a minor point. The individual mandate could conceivably affect a sizable share of young adults given that this group is the most likely to be currently uninsured.  The Census Bureau in 2012 estimated that 23% of 18-24-year-olds and 27.3% of 25-34-year-olds were uninsured in the prior year.

All this spells trouble for young adults and health care. Or so it seems.

But the critics overlook some important caveats.

The first is that young adults can stay on their parents plan until age 26 under ACA. This has been a wildly popular feature since it was introduced pre-ACA.

The second is that in states that are expanding Medicaid, young adults who are living on limited incomes will now be covered. The expansions will raise the income thresholds for eligibility to 138% of the federal poverty line and cover single individuals, not just parents.  That includes quite a few young people. In 2012, according to the U.S. Census, roughly 28% of young people aged 18-24, and 23% aged 25-34 had incomes that fell into that range.

The third caveat is that many other young adults will be eligible for subsidies that will lower their premiums. According to the left-leaning Urban Institute, only 11% of young adults under 27 who are currently buying individual insurance (non-group) will face full costs of health care, and only 14% of the currently uninsured will.

That waitress that Chris Conover uses as an example likely falls into one of the above scenarios. If she pulls in $20,000 a year waiting tables, she is probably now opting for no insurance, taking the gamble that she’s young and healthy enough to risk it. Under ACA, she will be required to be insured or face a penalty, but she will also be eligible for a subsidy, given her income. The subsidy will bring her premiums down to $85 a month, or a little over $1,000 a year, not the $3,000 a year Conover claims. The Kaiser Family Foundation has a helpful calculator to calculate subsidies and premiums. The above rate is based on a 23-year-old nonsmoker without children applying for health insurance for herself only.

There are other benefits to young adults as well. The plans must cover, for example, mental health services and substance abuse disorders. Symptoms for nearly three-quarters of the lifetime diagnosable disorders occur before age 24. As the recent tragedies at the LA airport and too many others of late remind us, mental health coverage is a growing concern.

In addition, preventive health services are also a key reform. Insurers can no longer demand a co-pay or impose any cost-sharing for preventive services. Several of these services apply directly to young adults, including contraception, domestic abuse screening, alcohol misuse screening and counseling, smoking cessation programs, and HIV and STD screenings.

The debate over ACA will rage on no doubt. But for most young adults, it seems that ACA will be a true benefit.