By Lorena Roque

This is the third in a series of commentaries from CLASP experts that explore dimensions of poverty ahead of the U.S. Census Bureau’s annual release of poverty, income, and health insurance coverage statistics from the previous year. On September 10, we’ll get a snapshot of the economic hardship that children, youth and young adults, and families experienced in 2023. Ahead of the release, CLASP experts are offering key insights on the impending 2025 tax debate, Medicaid unwinding, and a fully funded child care system’s role in ending poverty. And, in honor of the 60th anniversary of the War on Poverty, we’ll examine what has and has not changed in the past six decades. The complete series is available here. 

As the U.S. Census Bureau prepares to release its official poverty measure numbers for 2023, millions of full-time workers live in poverty. In 2021, 6.4 million workers were among the “working poor” in the United States, a population that is defined as those who have spent at least 27 weeks working or looking for work during a year but have incomes below the national poverty line ($14,580 for individuals and $19,720 for a family of two). In order to combat poverty for workers, labor standards must be improved and enforced for all workers.

The Federal Minimum Wage is a Poverty Wage

Among those 6.4 million workers, almost three million worked full time, yet were still considered the working poor. This was due, in large part, to low wages and earnings. While the federal minimum wage hasn’t been raised since 2009, individual purchasing power has decreased significantly. After adjusting for inflation, today’s minimum wage of $7.25/hour is 40 percent lower than the minimum wage in 1970, which would be $13.05/hour in today’s dollars. While the majority of states, territories, and districts have adopted higher minimum wage laws than the federal government, others have not. These discrepancies in wage laws create racial disparities in both wages and poverty.

In 2021, 7.3 percent of the working poor identified as Hispanic and 6.4 percent identified as Black, compared to 3.6 of white workers and 2.7 percent of Asian workers. Black and Hispanic women are more likely to be part of the working poor than their male counterparts, with 7.7 percent and 7.6 percent for Black and Hispanic women, respectively.

These statistics are not a coincidence. The Fair Labor Standards Act, which was implemented in 1938, left out minimum wage protections for all workers in the farmwork, agriculture, and domestic industries. Almost seventy years later, Black and Hispanic workers continue to be overrepresented in these low-wage fields: in 2022, 78 percent of U.S. agriculture workers identified as Hispanic, 34 percent of whom were women. In the domestic industries, Black women are still disproportionately represented in domestic and care jobs, such as home health aides, personal care aides, and child care workers. In fact, Black women represent 1 in 5 people employed in these jobs.

Without proper protections, farmworkers continue to earn 40 percent less than non-agriculture jobs, while domestic workers are three times more likely to fall into poverty than other workers. The Raise the Wage Act has proposed increasing the federal minimum wage to $17/hour by 2028. But unless the act passes, the number of working poor will at best remain stagnant and at worst continue to grow.

All Labor, No Benefits

Individuals who work part-time, whether involuntarily or voluntarily, are much more likely to be part of the working poor. Involuntary part-time work is defined as workers who work part-time due to being unable to find full-time work. The gig economy, which historically has a low barrier to entry, has led to a significant increase in the number of people working through an app-based platform. The number of workers reporting earnings from this form of gig work to the IRS increased from 1 million to 5 million workers in 2021. Twenty-four percent of gig workers report that it is their full time job, while 49 percent consider it their part-time job.

However, due to the misclassification of gig workers as independent contractors instead of employees, these workers do not have access to minimum wage protections, employer-sponsored health care, Social Security benefits, and unemployment insurance. Many gig workers work multiple jobs to make ends meet; a joint survey by CLASP and Data for Progress released in 2023 detailed that 50 percent of gig workers reported feeling overworked and said their job is exhausting. In addition, in 2021, 30 percent of Hispanic and 20 percent of Black adults earned money through an app-based platform, more than any other racial group.

Without implementing labor standards for gig companies and appropriately classifying app-based gig workers as employees, these workers will continue to be close to, or fall below, the poverty line. Through the Department of Labor (DOL) and the National Labor Relations Board, administrators have attempted to regulate the gig and franchise industries via the independent contractor rule and the joint employer rule. However, allies of big business, such as the U.S. Chamber of Commerce, have challenged these rules in court to prevent their implementation.

Enacted Regulations

Despite court challenges to multiple progressive labor regulations, the Biden-Harris Administration has issued various labor regulations that have gone into effect in 2024. The administration issued a new overtime rule that would make 3.6 million more U.S. workers eligible for overtime pay by increasing the current threshold of $35,568/year to less than $58,646/year. Additionally, the DOL has finalized a farmworker protection rule for workers under the H-2A program. This program allows employers in the farm and agriculture industry to hire temporary foreign workers when they cannot find qualified U.S. workers to perform the same labor. However, these workers often face similar abusive working conditions as other farmworkers. This rule will help workers have a voice in the workplace and establish timely wages and better job safety.

The 2023 Census poverty data will likely reflect minimal changes in wages at the low end of the income spectrum. Workers across the country need comprehensive minimum wage reform as well as strong labor law and enforcements. Without this reform, as well as targeted poverty relief such as the Child Tax Credit and the Earned Income Tax Credit, policymakers cannot establish an equitable economy or expect racial gaps in wages and wealth to narrow.