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Scary Halloween for Minnesota Working Poor

October 30, 2013 By Lee Egerstrom, Economic Development Fellow

The challenge of keeping a roof over their heads and food on the table will become far more difficult for about 300,000 Minnesota households starting Friday.

Almost lost in the constant national banter about budget cliffs, debt ceilings, the expired federal farm bill, and whether poor people should have access to affordable healthcare is a scheduled $5 billion cut in the Supplemental Nutrition Assistance Program (SNAP), formerly known as food stamps.

Congress could step in, provide funds to keep existing programs going, but the Center on Budget and Policy Priorities in Washington said no such legislation is pending.

The cuts will affect 10 percent of all Minnesota households, and 239,674 Minnesota children currently enrolled in the SNAP program, said Stephanie Hogenson of the Children’s Defense Fund-Minnesota. The current enrollment affects 18.8 percent of all Minnesota children, she said.

Here are the converging pressures ripping at poor and lower-income Minnesota families:

The pending reduction will drop food assistance for a family of four by $36 a month and for single households by $11 a month from existing SNAP benefits. Current benefits amount to about $1.40 per meal for the 47 million Americans enrolled in the program, according to Michael Hiltzik of the Los Angeles Times.

These cuts come as affected families are already struggling to find housing.

The Minnesota Housing Partnership, in its Second Quarter 2013 2x4 Report, found rents in the Twin Cities rising faster than at any time since the early 2000s, increasing by 8.5 percent in the past three years. Of metro apartments renting for less than $1,000 a month, 98 percent are already occupied, MHP said. The tight market conditions are likely to push rents even higher.

“We are entering a critical period in Minnesota, and the risk is that lower income Minnesotans will fall further behind,” said Chip Halbach, MHP’s executive director, in releasing the quarterly study.

This isn’t just a Twin Cities problem. Minnesota Compass analyzed 2012 U.S. Census Bureau data and found 29.7 percent of all Minnesota households are “cost-burdened” by paying more than 30 percent of income on housing. Among renters, 48.2 percent of Minnesota households were cost-burdened.

With rental and food costs increases, household incomes for lower paid workers do not keep pace with inflation. Background materials assembled by the Raise the Wage Coalition cite federal Housing and Urban Development (HUD) calculations showing a Fair Market Rent level for a two-bedroom apartment in Minnesota is $836 per month. To pay this, a household would need at least $33,438 a year, which isn’t possible with two workers earning minimum wages for full-time work in the state.

Raise the Wage Coalition projects that raising the statewide minimum wage to $9.50 an hour would impact 357,000 Minnesotans, including 200,000 women.

By doing this, Minnesota would add an extra $470 million to the purchasing power of the working poor, thus stimulating local and state economies. Citing U.S. Bureau of Labor Statistics data and Jobs Now Coalition analysis, the minimum wage advocacy group said the minimum wage would be more than $10.70 per hour if it had been adjusted for inflation since 1968, and it would be about $22 an hour if the wage had kept pace with productivity gains over that time period.

Inaction by Congress on food stamps and inaction by lawmakers in both Washington and St. Paul have ripple effects through the state’s economy while piling more hardship on the working poor and their children.

University of Illinois and University of California at Berkeley researchers released a report in mid-October, “Fast Food, Poverty Wages,” that looked at how one large sector of our low-pay economy perpetuates poverty and adds to public costs.

Sylvia Allegretto, Marc Doussard and colleagues found that nearly three-fourths (73 percent) of enrollments in America’s public benefits programs are from working-poor families. For fast-food workers, the combination of low wages and absences of benefits (87 percent do not have health benefits) means the workers and their families must rely on government safety net programs for basic needs.

The researchers tallied public assistance for these families of workers at $7 billion annually, including $1.04 billion in food stamp benefits and $1.91 billion in Earned Income Tax Credit payments.

The report shows clearly why humane actions are needed in Congress, and also here at home with raising the minimum wage.

Gumption, work ethics, and Americans’ will to improve livelihoods aren’t lacking. Our public policies are. That does make a scary Halloween.

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