LSNJ Press Releases - New Report Examines Characteristics of Households below the Real Cost of Living in New Jersey

June 17, 2008 - New Report Examines Characteristics of Households below the Real Cost of Living in New Jersey And Their Implications

TRENTON—Nearly half a million households (494,000) with working-age, non-disabled adults are not able to earn enough income to cover basic costs in New Jersey, according to a report released today by the Poverty Research Institute (PRI) of Legal Services of New Jersey (LSNJ). The report, entitled “Not Enough to Live On: Characteristics of Households Below the Real Cost of Living in New Jersey,” analyzes Census data on income and household traits to explore common socio-economic and demographic patterns among those with inadequate incomes.

Melville D. Miller, Jr., LSNJ president, explained that “Prior studies have established that New Jersey, with its very high cost of living, has a similarly high point – termed the ‘real cost of living’ or the Self-Sufficiency Standard (the Standard) – below which people do not have enough income to live adequately. In this study, we set out to learn who those people are, how many of them there are, where they live, and what kind of assistance they need. Our principal findings,” he continued, “were that the large majority of these households include workers, although income inadequacy and poverty are especially high among families without working adults; there is a direct correlation of education with income adequacy across demographic groups; and income inadequacy rates are disproportionately high among families with children, as well as among families maintained by women alone, people of color and those with limited English proficiency.”

The report, authored by Dr. Diana Pearce of the University of Washington, with contributions by PRI staff, uses an alternative poverty measure — the Standard — to examine households with adequate and inadequate incomes. “By comparing the socio-economic and demographic characteristics of households above and below the Standard, we can identify those populations that have higher rates of income inadequacy,” explained Dr. Pearce. “The study also explores how factors like employment and education interact with income inadequacy. One of the most significant findings is that the large majority of households with insufficient incomes, 85 percent, include at least one working adult. It is wages, not hours worked, that account for 95 percent of the earnings gap between householders with inadequate incomes and those in the higher income group.”

“The study’s findings also reinforce the importance of education as a critical part of a strategy to help people escape the trap of low-wage employment,” added Miller. “For all demographic groups, the percentage of households below the real cost of living decreases as education levels rise. Clearly, access to education and training are essential for assisting vulnerable households to reach self-sufficiency.”

Serena Rice, managing director of the PRI, expressed LSNJ’s call for state action in response to the study’s findings. “Such a pervasive problem requires coordinated, multi-pronged public policy to directly address the challenges faced by so many households,” she said. Specific policy recommendations include expansion of direct wage subsidies such as the Earned Income Tax Credit, further adjustment of the state minimum wage, and making education and training more affordable and accessible to low-wage workers. “The reality of jobs that don’t pay adequate wages and limited access to education makes it urgent to have support programs for those households that, for the short or long term, cannot earn sufficient incomes to cover their most basic needs,” Rice continued. “Greater investment in subsidized child care assistance is one example of a vital program to help bridge the gap between income and expenses for families with children, a group that experiences disproportionately high levels of income inadequacy.”

Legal Services of New Jersey, located in Edison, coordinates the statewide system of Legal Services programs in New Jersey, which provide free legal assistance to low-income people in civil matters. LSNJ’s Poverty Research Institute carries out research on the incidence, effects and other aspects of poverty in the state, and the relationships among poverty, work and public policy. “Not Enough to Live On,” as well as the “Real Cost of Living” report series and other PRI reports and LSNJ publications, are available on LSNJ's Poverty Research Institute Web site. The report was made possible, in part, through a grant from the Fund for New Jersey.

Dr. Pearce conceived and developed the methodology for the Self-Sufficiency Standard when serving as the Director of the Women and Poverty Project at Wider Opportunities for Women, and continues to lead Self-Sufficiency studies from her position on the faculty of the University of Washington School of Social Work, where she also directs the Center for Women’s Welfare, which is devoted to furthering the goal of economic justice for women and their families.