Major Findings: Finding 2

The rise in worst case needs does not reflect lack of effort on the part of low-income workers. Consistent with the economic recovery and welfare reform, there is clear evidence of increased work effort among all lower-income households. However, even in this period of economic expansion, full-time work may not provide families with sufficient income to afford a decent place to live. Thus, even though the number of lower-income families that are working has increased, the number of working families with worst case needs has risen as well.

• Worst case needs increased faster for very-low-income renters with full-time earners than for other households. Between 1991 and 1997, the number of such households increased by 28 percent. This growth is more than three times the growth rate in worst case needs for all other very-low-income households, which over the same period rose by 8 percent.

Among all worst case households, including those with elderly or disabled heads of household, the share for whom earnings were the main source of income rose from 48 percent in 1991 and 47 percent in 1995 to 54 percent in 1997. In 1997, almost 3 million worst case households had earnings as their main source of income; 2.3 million were working more than half-time at the minimum wage. Over 1.4 million worst case households had earnings equivalent to those of full-time work at the minimum wage. ¹²

As Exhibit 10 shows, the number of worst case households with earnings equivalent to those of a full-time worker earning the minimum wage rose steadily during the economic expansion of the 1990s, and worst case needs increased faster for those with full-time earnings than for other households. Since 1991, the number of such households increased by 28 percent. This growth is more than double the rate of 12 percent for all households with worst case needs over the same period. Between 1995 and 1997, worst case needs among households with full-time earnings grew only among families with children, accelerating by 17 percent in only 2 years.

• One in three families with children who have worst case needs have earnings representing full-time work at or above the minimum wage. Growth in worst case needs was fastest among working families with children. Between 1995 and 1997 alone the number of worst case working families with children increased by 17 percent, while between 1991 and 1997 the number with needs grew by 29 percent.

Growth in worst case needs among households with full-time earners was higher for families with children than other household types, particularly between 1995 and 1997. Almost all of this increase occurred among families with children living in central cities. Between 1991 and 1997, the number of worst case families with full-time earners rose by two-thirds in central cities, from 250,000 to 406,000. Minorities were responsible for all of this increase, as the number of working worst case families rose by 74 percent among Hispanics and by 31 percent among African-Americans.

Other indicators of work effort rose among families with children as well. Among worst case families with children, the share having earnings as their main source of income rose by one-fifth between 1995 and 1997 so that by 1997 fully 60 percent of worst case families with children had earnings as their main source of income. Those families earning more than half-time work at the minimum wage increased from 45 to 51 percent, and those earning more than full-time work at the minimum wage also rose, from 31 percent to 37 percent of families with children and worst case needs. At the same time the share of worst case families with children who reported receiving any income from welfare or SSI disability payments fell, from 44 percent to 32 percent.

As Exhibit 11 illustrates, comparing all low-income renter families with children against equivalent results for 1995¹³ shows that work efforts rose and welfare income dropped in particular among families with children with income below 30 percent of area median income. (At income above 30 percent of median, almost all low-income families with children have earnings greater than the equivalent of full-time work at minimum wage.) Between 1995 and 1997, each of the indicators of work effort shown in the exhibit rose by at least 10 percentage points among families with incomes between 20 and 30 percent of area median. Slight increases also occurred for those with incomes below 20 percent of median.

• Working households with worst case needs were increasingly likely to have "extremely" low incomes, that is, incomes below 30 percent of area median income. Over 2 million extremely-low-income renters with earnings as their main source of income had worst case needs, an increase of 400,000—or one-fourth—between 1995 and 1997.

The increased work effort among the lowest-income renters had the effect of markedly increasing the number of working worst case renters with income below 30 percent of area median. As discussed below (Finding 4), both the proportion and number of all worst case renters that have extremely low incomes have increased significantly during the 1990s. Between 1995 and 1997, the rise in working worst case renters with extremely low incomes was especially dramatic. In 1997, over 2 million extremely-low-income households with earnings as their main source of income had worst case needs, an increase of 400,000-or one-fourth-in the 2 years between 1995 and 1997. As Exhibit 12 shows, almost one million of these households were families with children.

In sum, as adults in families move to work as a result of welfare reform and other factors, they may not earn sufficient additional income to overcome worst case needs for housing assistance. Instead, as extremely-low-income individuals enter the workforce, they still often have worst case needs for rental assistance. In fact, the transition to work can generate new financial pressures and expenses, including the cost of child care and the cost of transportation to and from work. With rent already consuming over half of their incomes, the vast majority of worst case needs households face enormous difficulties in affording these additional expenses.