By Jeremy Rhodes
One of the more intriguing indicators in the report appears on page 9. It is commonly referred to as the “working poor,” and it is the percentage of residents over the age of 16 who are employed, but whose income is still below the federal poverty level.
The federal poverty level is based on household size, and larger families have higher poverty thresholds. According to the 2021 federal guidelines, a family/household of three is under the poverty level if it makes less than $21,960 gross income per year, regardless of how many of those three members are employed. The three-person household could be two parents and a child; it could be a single parent and two children; it could be three adults. For each additional family/household member, the threshold is increased by $4,540. So, for a family of four, the threshold is $26,500.
To put those figures in the context of an hourly wage, one person making $10 per hour and working 40 hours per week for 52 weeks will have an annual gross income of $20,800.
Who decided on $21,960 as the poverty level for a family of three? How do we get that number? When the federal government began thinking about how to create a reliable poverty measure in the 1960s, they decided to base the threshold on the cost of food consumption. At the time, the average American household spent about one-third of their income on food. Therefore, the government decided to set the threshold for poverty at 3x the cost of food. The poverty threshold goes up as the cost of food increases.
Today, many believe the official poverty threshold is outdated. Due to the decreasing cost of food, and the increasing costs of medical care, housing, transportation, and childcare, Americans no longer spend about 1/3 of their income on food. We now spend about 1/6 of our income on food. For this reason, many argue that the poverty threshold should be raised, making more families eligible for various assistance programs.
Waco saw a declining rate of the “working poor” from 2015-2019, down from 7% to 5.5%. However, our rate of “working poor” is still higher than that of Texas (3.7%) and that of our peer cities (4.5%).
If you’ve read either of my previous two posts, the map that appears below will be no surprise to you. The areas of Waco with relatively lower incomes and higher poverty rates are also those with higher rates of the working poor. The highest rates are near the Brook Oaks and Sanger Heights neighborhoods of North Waco, where over 18% of the employed residents make an income below the poverty line. Other areas with high levels of the working poor include parts of East Waco, where the numbers are 11-12%, and South Waco. Areas with very low levels of the working poor include the Mountainview and Landon Branch areas of West Waco, Woodway, Robinson, and China Spring.
Jeremy Rhodes, Ph.D., is director of research & community impact with Prosper Waco.