Philly needs higher wages, better hours and a broader and deeper safety net

Posted: October 26, 2018 - 5:00 AM
Mark Price, For the Inquirer

The Census Bureau's September release of data on incomes and poverty in 2017 was startling for many: Household incomes were up in nine of the 10 largest cities in the country, the exception being the city of Philadelphia. This begs the question: Is the city's newfound prosperity a mirage?

Consider the numbers. Philadelphia's August unemployment rate was 6 percent, the lowest August unemployment rate in the city since 2000, when it was 5.8 percent.

The city's employment growth has been stronger than the state's since the end of the Great Recession, growing at an average annual rate of just over 1 percent, compared to the statewide average of 0.85 percent. This growth has reduced unemployment by almost half from its post-recession peak of 10.9 percent.

The share of city residents with employment in 2017 at 53 percent is higher than before the recession began.  The city's good job growth numbers have reduced the poverty rate in Philadelphia, which has fallen from its 2011 peak of 28.4 percent to 25.7 percent in 2016.  Of course, as incomes fell in 2017, the poverty rate was unchanged while deep poverty climbed.

This is troubling news, but it is also important to remember that in 2007 — the best year for the U.S. and Philadelphia economy prior to the start of the Great Recession, when the city's unemployment rate was 6.2 percent — just under one in four (23.8 percent) of the city's residents had incomes below the poverty line.

Poverty will remain stubbornly high because economic growth on its own is not sufficient to lead to large reductions in the poverty rate or for broadly shared income growth. For example, we find that incomes for the top 20 percent of Philadelphia households are up over 2007 by 13 percent while incomes after adjusting for inflation for the bottom 60 percent of household remain at or below their levels in 2007. Internal Revenue Service data suggest that income growth among the top 20 percent has been concentrated among the top 1 percent of the city's families, who have seen their average income climb 32 percent since 2010.

Official poverty thresholds understate the degree to which Philadelphia families struggle to get by.  While the official poverty threshold in 2017 was $16,895 for a single adult with one child, data on the costs that families in the city face for rent, food, childcare, and health care reveal that a basic family budget for a single parent requires an annual income of $56,912.  Median earnings in the city of $32,011 suggest that for, many Philadelphia families, work doesn't pay enough to provide a decent standard of living.

What Philadelphia needs is higher wages, better hours, and a broader and deeper safety net.

The most direct route to raising wages is a minimum wage that's higher than $7.25 per hour, but the city is blocked by state law from setting a higher minimum wage and by reluctance by the leadership of the Republican majority in Harrisburg to move legislation to raise the state's minimum wage.

In addition to low wages, many residents in Pennsylvania continue to work part-time jobs when they would prefer full-time work,  a fact that has kept the state's underemployment rate at 9.4 percent, which is higher than following the aftermath of the dot-com recession in 2002. The challenge of insufficient hours is felt most acutely by Philadelphia's service-sector workers, just 17 percent of whom are employed full-time.  Just under three in four of Philadelphia's part-time service workers report needing additional hours to better make ends meet.

Philadelphia City Council this week takes up Fair Workweek Legislationthat, in addition to providing workers with more notice on scheduling of work hours — a key requirement for all working parents — it also requires employers, when expanding their schedule, to offer hours first to incumbent part-time employees, rather than hiring new ones. Expanding hours for the underemployed is an important step toward helping more working Philadelphians move out of poverty.

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Mark Price is a labor economist at the Keystone Research Center and author of the State of Working Philadelphia, which is available online.