Costs Outpace Wages in NJ, More Households Can’t Afford Basic Necessities

Many New Jerseyans don’t have enough income to cover housing, food, transportation, healthcare, and taxes

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New Jersey’s poverty rate may have inched down slightly, but the number of households unable to afford basic necessities rose to nearly four in 10 between 2014 and 2016 as costs outpaced wage gains, according to the latest United Way ALICE Report.

More than 1.2 million New Jersey households, or 38.5 percent of all, either lived in poverty or fit the definition of working poor in 2016 as they did not have enough income to cover such simple needs as housing, food, transportation, healthcare and taxes. The United Way of Northern New Jersey, which has been comparing the cost of living to income in New Jersey and other states for several years, calls the latter group of people ALICE — Asset Limited, Income Constrained, Employed.

Released today, the report shows that while the number of households below the federal poverty threshold of $24,300 for a family of four dropped slightly between 2014 and 2016, the number of ALICE households grew. Combined, the households in poverty and ALICE households grew by 5.6 percent over the two-year period.

Between 2010, when the post-recession economic recovery began and 2016, the number of households in poverty and ALICE rose by 15 percent, according to the report. The cost of basic needs outpaced the rate of inflation and wage growth, with expenses up by 16 percent, while median earnings rose by just 12 percent.

“The increase in the number of ALICE households in New Jersey shows that the economic benefits of low unemployment, increased productivity, and a booming stock market are not reaching all residents,” said Stephanie Hoopes, author of the report.

Trying to make ends meet in high-cost NJ

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The ALICE report grew out of the notion that the federal poverty level does not fully capture the size of the population unable to make ends meet in a high-cost state like New Jersey and the latest report bears that out. It states that a family of four that includes two young children in childcare needed an annual income of $74,748 in 2016 to cover basic expenses, including the cost of a smartphone, which is considered essential in today’s technologically advanced world. That works out to an hourly wage of $37.37.

This report adds to the already contentious discussion over Gov. Phil Murphy’s proposal to raise the state’s minimum wage, currently $8.60 an hour, to $15 an hour, as a family in which two parents each earned even the significantly higher minimum would still be unable to pay all their bills and would fall into the ALICE category. The measure, one of Murphy’s signature campaign promises, has stalled as some lawmakers are looking for exceptions to a $15 wage for employees of small businesses, those who also receive tips, and agricultural workers.

But such carveouts could affect a large portion of the workforce, as the report indicates that 51 percent of private-sector employees work for small businesses that already tend to pay lower average salaries than larger firms do.

Healthcare: a major driver of cost increases

The major drivers of cost increases for families since the end of the recession are healthcare, which almost doubled to an estimated $787 a month, transportation and childcare, the report states.

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The report calculates household survival budgets by county, acknowledging that housing, childcare and other costs vary by county. In 2016, the basic essentials were least expensive for a family in Essex County at $63,252 per year and most expensive for a family in Hunterdon County at $89,796. Similarly, the percentage of households unable to afford these basics varied, from a low of 27 percent in Hunterdon, typically the wealthiest county in the state, to 61 percent in Cumberland, which usually ranks as the poorest. In four counties, Morris, Union, Salem and Camden, the number of households struggling to afford the basics rose by at least 25 percent in the six years from 2010 to 2016.

Most likely to have trouble

ALICE households span all age ranges and all categories of race and ethnicity. The report noted some specific traits that make an individual or a family more prone to have trouble affording the basics.

“These include being a household headed by a recent immigrant, especially one who is undocumented or unskilled; by someone with low proficiency in English; by an LGBT individual (though gay men, particularly those in married couples, are less likely to be low-income than other LGBT groups); by someone with a low-level of education; or by someone living with a disability,” the report states. “Groups with more than one of these factors — younger combat veterans, for example, who may have both a disability and a low level of education, or ex-offenders, many of whom are Black and may have a low level of education — are even more likely to fall below the ALICE Threshold.”

The report notes four obstacles that prevent ALICE families from moving into financial security, problems that policymakers could influence:

  • Most jobs, especially those that pay a higher wage, will require digital skills that ALICE households may not have;
  • A lack of stable employment that includes health and other benefits;
  • Little or no savings or assets and no access to credit;
  • Bias against householders based on race, ethnicity, age, sex, gender identity, sexual orientation and disability.
  • Action plan

    Since the United Way’s first statewide report in 2007, just before the onset of the recession, it has tracked a 35-percent increase in the number of households living in poverty or ALICE. Still, some businesses have used the data from the reports to implement changes to help those with low and middle incomes.

    “We started a movement 10 years ago to raise awareness about ALICE and today we are partnering with lawmakers, policymakers, executives, and academics in New Jersey and across the country to bring about positive change,” said John Franklin, CEO of the United Way of Northern NJ.

    For instance, RWJBarnabas Health, one of a number of funders of the ALICE project, has used the report’s findings as the basis for an action plan across the hospital system.

    “We’ve embraced the United Way ALICE Report recommendations and are focusing intensively on our local hiring practices, formalizing our internal career pipelines, and creating pathways to livable wages,” RWJBarnabas Health president and chief executive officer Barry Ostrowsky wrote in the report’s opening letter.

    Helping households earn a living wage is important not just to individuals, but to the state as a whole, the report notes: “Ultimately, if ALICE households can become financially stable, New Jersey’s economy will be stronger and its communities more vibrant — improving life not just for ALICE, but for everyone.”

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