Self-Sufficiency Standard: A New Tool for Evaluating Anti-Poverty Policy

Diana Pearce, known for having coined the phrase, "the feminization of poverty," is a sociologist on the faculty of the School of Social Work at the University of Washington. She created the Self-Sufficiency Standard when she was Director of the Women and Poverty Project at Wider Opportunities for Women in Washington DC. The author acknowledges the assistance of Nina Dunning, MSW, in the preparation of this article. A fuller version of this article appeared in Poverty & Race, March/April 2001.

Is welfare reform a success? Everyone, from presidents on down, thinks so. Certainly it has had a remarkable impact. Welfare rolls are less than half what they were four years ago, and many "welfare leavers" have gotten jobs. But is this "success"?

In evaluating welfare reform, most politicians choose easy criteria: Are the rolls down? Numbers of employed up? Are welfare leavers "better off" than they were on welfare? These criteria are "easy" because the answers, virtually everywhere and for every group (though not for every individual) are yes, yes, and yes.

Whether because of the booming economy or the change in rules, states have seen their rolls drop by from one-third to 90 percent. More of those leaving welfare are getting jobs than in the past. Finally, given the very low level of benefits, even a part-time minimum wage job in most states apparently leaves a family "better off," especially if one only compares cash welfare with wages, and does not factor in expenses associated with work or decreased benefits.

One criterion that does not virtually guarantee a "yes" answer to the success question is whether earned income exceeds poverty. Because this takes into account family size and composition, those with smaller families may have cash incomes above the poverty line, if only barely, especially with the Earned Income Tax Credit (EITC). A $7-per-hour job, full-time and year-round, yields wages just above the Year 2000 poverty line for a family of three ($14,150).

The problem is, the poverty line no longer accurately measures real poverty. If we mean that families with incomes above poverty level have sufficient resources to meet basic needs, then few would argue that this is what official poverty thresholds now measure. They are too low. Many states recognize this by using multiples of the poverty line to qualify persons for various benefit programs.

Worse, these poverty thresholds are the same no matter where one lives. If employed welfare leavers average wages of $6 an hour in South Dakota, but $8 in Washington State, where are they more successful? How much higher would their incomes need to be to be truly self-sufficient? How much help are available subsidies? To answer these questions, one would need to know how cost of living compares in each state, as well as information about subsidies and their usage.

The Self-Sufficiency Standard

We now have a measure that can help answer these questions, and many others - the Self-Sufficiency Standard. The Standard is a measure of income adequacy that calculates how much money working adults need to meet their family’s basic needs without subsidies. Unlike the federal poverty line, this approach is tailored to each family, varying with size and composition, as well as being geographically specific and including work expenses.

Since the inception of the federal poverty line nearly 40 years ago, there are more single-parent families and more families with two adults working. This has created new employment-related needs: transportation, taxes, and child care. The poverty measure is also based on a food budget using nutrition standards of the 1950s, and assuming that food accounts for one-third of all expenses.

In contrast, the Standard is based on costs for housing, childcare, food, transportation, health care and miscellaneous expenses, and takes into account taxes and tax credit. It adjusts for the age of children, and where families live, because all costs vary substantially by location. The Standard captures costs associated with working and living for each of 70 family types, for every county (or insome cases region) in each state. Since 1996, it has been calculated for 13 states as well as New York City and the Washington DC metro area. It is expected that by the time consideration of TANF reauthorization happens in 2002, about half the states will have been calculated.

The Self-Sufficiency Standard versus the Poverty Standard

How does the Self-Sufficiency Standard compare to the poverty measure? Clearly,the Standard will exceed the poverty line in most places for almost all families. It also differentiates more finely among families. A cross-state comparison reveals that typically, the Standard for a given family is between 50% and 80% of area median income. These two levels happen to be what HUD has set as "Very Low Income" and "Low Income" standards, used to determine eligibility for housing subsidies.

Though it ranges well above the poverty line (from 50% more to as much as three times), the Standard gives a very conservative estimate of the minimum income needed in a given place. Researchers Laura Russell and Jean Bacon have estimated that while about 14% of families in Massachusetts have incomes below the poverty line, 28% are below the Self-Sufficiency Standard.

More Than a Poverty Measure

While an accurate measure of the cost of living by place and family type is useful, the Self-Sufficiency Standard is more; it can also demonstrate the impact of public policies and programs. In each state where it has been calculated, the Standard has been used to model how certain subsidies, such as child care, can reduce the wages families require to meet their needs. A single mother in Milwaukee with one infant and one preschool child must earn $3,847 per month to be self-sufficient, but with Food Stamps, Medicaid and child care, she needs only $1,346.

The Standard can also be used to evaluate proposed policy changes, such as changing child care co-payments or adding/enlarging a state EITC. In Pennsylvania, a model based on the Standard revealed that an increase in child care co-pays would interact with other subsidy programs and taxes/tax credits to produce a substantial negative impact on families’ wage adequacy.

The Standard can be used to target scarce resources on programs that help families achieve self-sufficiency. Policy makers can determine which jobs and industries pay Self-Sufficiency-level wages and above, and engage in Targeted Jobs Strategy, assessing jobs and sectors on which to focus training and counseling.

The Self-Sufficiency Standard is also a tool for use at the individual level by caseworkers. A Standard-based budget worksheet has been developed, which helps determine the minimum wage necessary to cover costs, taking into account subsidies. In Pennsylvania, program participants fill in the worksheet, using their actual costs for basic necessities, and subsidies available, to determine the wage adequacy of each wage "tested." This process points both participants and counselors to finding the kinds of jobs, training, and education, including jobs nontraditional for women, that will lead to self-sufficiency.

A computerized version of the Worksheet has been used to evaluate policy changes, and in Connecticut, to reveal "cliffs" faced by parents moving from welfare to work. That is, many programs (such as Food Stamps and child care) cut off eligibility at a certain point, so a slight increase in income may trigger the loss of a needed subsidy, causing wage adequacy to suddenly drop 20% or 30%. This kind of analysis can help advocates and policy makers develop better policies to support the transition from welfare to work.

Implications for Race

The Standard does not vary by race, except to the extent that costs vary by where different racial groups reside. But its use can reveal important differences by race and gender. This is particularly true when it is used to evaluate outcomes of job training programs or welfare reform. If white graduates/welfare leavers in a given jurisdiction average higher wage adequacy than their minority counterparts, then clearly the program being evaluated does not address the discrimination behind the gap. And if the role of subsidies is considered, this can reveal the kinds of differential help provided by caseworkers on the basis of race.

It should be noted that the old federal job training program, JTPA, let local agencies lower their performance standards if they served more women and/or minorities. Though the goal was to encourage agencies to serve the disadvantaged, the price was accepting the lower wages imposed by labor market discrimination on women and/or people of color, and sending a message to local employers that such discrimination need not be addressed. Thus, the more women/minorities served, the lower the standards.

In the current welfare reform competition, and given the decentralized decision-making under devolution, there is a similar tendency for local or state governments to lower standards and declare "success." As the emerging trend becomes more pronounced of whites leaving the caseload at a higher rate, and having more employment success than the central-city, disproportionately minority, portion of the caseload, the temptation to lower the bar for some groups will increase. Using an objective standard will make clear that differential outcomes by race reflect programs that do not address labor market discrimination, and may contribute to it.

Reframing the Debate on Success

At the most detailed level, the Standard helps individuals realistically assess their resource needs, and helps policy makers and advocates understand how programs can help enhance efforts towards self-sufficiency. But at the most abstract level, it changes the question that is asked, and the answers given. As a 1998 Boston Globe editorial put it, the Standard does not ask "where poverty ends, but where economic independence begins."

Simply put, the Standard says that if your income is below your Standard, it is not enough to meet your basic needs. Since we know that many parents leaving welfare have incomes below—often far below—their Self-Sufficiency Standards, even with subsidies and supports, this means the hardships suffered by these families are not their fault.

Without enough money to meet basic needs, is it any wonder families report utility cut-offs and skipped meals? Is it a surprise that they end up using inadequate child care or doubling up in housing not meant for two families? Such hardships are not about "bad choices" or "bad budgeting," but show a simple and stark lack of needed resources.

With this perspective, the question is not whether or not a given program is a "success," but how we as a society, through our social programs, help families achieve self-sufficiency. Instead of a no-win coin toss—"heads I win" (politicians declare welfare reform a success), "tails you lose" (individuals blamed for not working /earning /budgeting enough)—success becomes a challenge. To paraphrase a bit, it takes all the [village’s] stakeholders—parents working and caring for children, noncustodial parents paying child support, employers paying decent wages, government providing subsidies and tax/tax credit structures that level the playing field, and communities providing schools and services—for families to achieve self-sufficiency. With the help of the Self-Sufficiency Standard, we will know when and where we have reached this goal, and have a tool to help blaze the trails for getting there.

For information on obtaining reports, future states, etc., contact Jennifer Brooks, Wider Opportunities for Women, 815 15th St NW, #916, Washington DC 20005, tel. 202/638-3143, <www.wowonline.org> For information on how the standard calculated and future applications and research using the Standard, contact Prof. Pearce, SSW/UW, 4101 15th Ave NE, Seattle WA 9810 <pearce@u.washington.edu>

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