People Of Color Are More Likely To Be Paid Poverty Wage

Far too many people in this country (of all colors and ethnicities) are being paid a wage that forces them to live in poverty. It's estimated that by 2025 (just seven years from now) about 25% of workers will be making at or near the minimum wage (which in most states means they would be living in poverty). That's bad enough, but it's even worse for people of color.

From the Economic Policy Institute:

Today, one in nine U.S. workers are paid wages that would leave them in poverty for their family size if they are the sole earner in their family—even with a full-time, year-round schedule. . . .

As shown in the first figure above, workers of color are far more likely to be paid poverty-level wages than white workers. In 2017, 8.6 percent of white workers were paid poverty wages—i.e., hourly wages that would leave them below the federal poverty guideline for their family size if they are the sole earner in the family, even if they work full-time, year-round. In contrast, 19.2 percent—nearly one in five—Hispanic workers were paid poverty wages, and 14.3 percent—roughly one in seven—black workers were paid poverty wages. Asian or Pacific Islander workers also had higher poverty-wage rates than white workers, at 10.9 percent.

Among workers of all races and ethnicities, the shares being paid poverty wages have declined from highs reached in either the mid-1980s or the mid-1990s. However, the share of black workers earning poverty wages in 2017 (14.3 percent) was still slightly above where it was in 2006 (14.1 percent.) Black workers are the only group for whom the share receiving poverty wages is not at its lowest level on record.

Notably, racial gaps have been remarkably consistent—if not gotten worse—over time. The share of black workers earning poverty-level wages has consistently been 1.5 times that of white workers for the entirety of the series. The ratio of the Hispanic poverty-wage rate to the white poverty-wage rate has actually grown since the 1980s. In 1986, the share of Hispanic workers earning poverty-level wages was 1.8 times that of white workers; in 2017, it was 2.2 times the share of white workers.

Because a person’s applicable poverty guideline is determined by their family size, groups with larger average families will have higher average poverty guidelines—meaning that the share earning poverty-level wages could be higher simply from larger average family sizes. It is true that Hispanic workers tend to have larger families, on average, than workers of other races or ethnicities; however, the differences are not large enough to be driving Hispanic workers’ significantly larger poverty-wage rates. The second figure shows that Hispanic workers have an average family size of 3.2 people, while white workers’ average family size is 2.8 people. (Single childless adult workers have a family size of one.) In other words, the average family size of Hispanic workers is 14.5 percent larger than the average white worker, yet they are 123 percent more likely than white workers to be paid a poverty-level wage. Moreover, the growth in the ratio of the Hispanic poverty-wage rate to the white poverty-wage rate also cannot be attributed to changes in average family sizes, as the average Hispanic worker family size has shrunk more since 1986 than the average white worker family size has.

We can also calculate what the Hispanic poverty-wage rate would be if Hispanic workers had similar family sizes to white workers. Reweighting the 2017 data shows that if Hispanic workers had the same family structure as white workers, their poverty-wage rate would fall to 14.3 percent—still 5.7 percentage points higher than white workers.

Finally, it is worth noting that in 1986, the average black worker had a slightly larger family than the average white worker; yet by the mid-1990s, that was no longer true. As of 2017, black workers had the smallest average family size at 2.7 people—meaning that the significantly higher rates at which black workers are paid poverty-level wages relative to white or Asian workers is entirely the result of low wages, not larger average families. Indeed, reweighting the 2017 data shows that if black workers had the same average family size as white workers, their poverty-wage rate would actually rise to 14.8 percent.