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The Equity Factor

Wage Stagnation, and a Few Ways Cities Can Break Out of It

It involves raise minimum wage and extend more earned income tax credits to working families.

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The Census Bureau’s annual poverty report this week showcased the country’s stark wage stagnation for low- and middle-income families. Today’s American Community Survey, which provides all the regional data from states to large metro areas, paints the same picture: Wages are stagnant and have been for some time.

To be fair, four states (Hawaii, Illinois, Massachusetts and Oregon) saw marginal increases in median income between 2011 and 2012. And since 2000, Washington, D.C.’s median income has jumped from $53,995 to $66,583. That’s a 23.3 percent hike.

But how does stagnant income growth affect cities?

“Even years into an economic recovery, we’ve yet to see it really translate into any real progress for those millions of Americans who have been struggling with stagnant or falling wages,” said Elizabeth Kneebone, a fellow at the Brookings Institution’s Metropolitan Policy Program and co-author of Confronting Suburban Poverty in America. “You still have millions of people who are having trouble making ends meet. They may be looking to the safety net for help just for meeting basic needs.”

Politicians will point to the slow crawl back from the recession and improving unemployment numbers, but the jobs added so far aren’t enough. “Part of the problem is a lot of the fast-growing occupations in jobs that we’re adding don’t pay a lot,” Kneebone said. “Minimum wage doesn’t have the same purchasing power it did 10 or 20 years ago. So it has implications for the kinds of services and needs we see in cities.”

There’s no silver bullet, as usual. But Kneebone pointed out some policies that might help buoy the working poor in the short term and prepare them for the long term.

Cities can follow in the footsteps of San Francisco, which has a city-mandated minimum wage higher than the federal rate of $7.25. It’s a quick fix to bolster the incomes of working families, and it hasn’t scared off employers or caused an exodus of jobs like some feared.

Earned Income Tax Credit (EITC) is another way to increase the amount of money the working power and lower-income workers take home. It’s essentially a subsidy for working families, dependent on the number of children you have.

“That’s a federal program but many states have their own version, some cities have an additional credit that works in the same way — boosting the take-home pay of working residents,” Kneebone said. “We’ve seen a lot of positive effects from that program in particular. It’s anti-poverty, but also encourages work.”

Stagnant income growth has wrecked the platonic ideal of the middle class. More Americans than ever before identify as lower class. The working class? Gone. The middle class? A pipe dream. The deck is stacked for 10 percent of the country — the only workers who have seen consistent income increases since 1967.

There is no quick fix to vault every person into the middle class, whatever that actually means these days. But if policymakers put an emphasis on raising minimum wage and extending more EITC to working families, it will lift some of the burden.

The Equity Factor is made possible with the support of the Surdna Foundation.

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Bill Bradley is a writer and reporter living in Brooklyn. His work has appeared in Deadspin, GQ, and Vanity Fair, among others.

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Tags: povertyequity factortaxesminimum wage

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