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Louisiana families continue to struggle

Posted on September 14, 2017

The poverty rate in Louisiana for adults and children remained unacceptably high in 2016 even as other states saw significant improvements. New U.S. Census data released Thursday also show that Louisiana continues to have one of the highest rates of income inequality in the United States. The latest data point to the need for greater investments in programs that support low-income working families, such as child care assistance, need-based financial aid for college and an expansion of the state’s Earned Income Tax Credit.

Six key trends:

  1. The income and poverty gap widened between Louisiana and the rest of the country

One in 5 Louisianans — an estimated 918,187 people, or 20.2 percent of the population — lived in poverty last year, the second-highest rate among all states (behind Mississippi). This number is statistically unchanged from last year. That includes 313,926 children (28.6 percent; the 3rd-highest rate in the country (behind Mississippi and New Mexico).

Household income in Louisiana continue to lag behind the rest of the nation. Louisiana’s median household income was estimated at $45,146 in 2016, a 2.1 percent drop from the previous year’s estimate (which is not a statistically significant change). This came in a year when the national median income grew by a statistically significant 2.4 percent to $57,617.

Louisiana also continues to have some of the largest gaps in the country between rich and poor. Income inequality in Louisiana is 2nd-highest among the states, trailing only New York – one more reason the state should reform its upside down tax structure. Rounding out the five most unequal states are Connecticut, California and Florida. This makes Louisiana an outlier as a state that has high poverty, low median wages and high inequality.

Income inequality is measured by the Gini coefficient on a scale of 0 to 1, with 0 being a state where all income is distributed equally and 1 being a state where all income is held by one person. Louisiana’s high rate of inequality shows that even with high poverty a and low median wage, there is a significant group of high earners in the state that drive up income inequality. This means that with a more progressive tax structure, Louisiana has the potential to make important state investments and reduce inequality.

  1. The poverty gap between Louisiana and the country continues to grow

While the poverty rate in Louisiana was not statistically changed in 2016 from the previous year, the rest of the country saw a decrease in the share of people that cannot afford life’s basic necessities.

This is especially true for children – who experience poverty at significantly higher rates than adults in Louisiana and elsewhere. One in 4 Louisiana kids – 313,926 children or 28.6 percent –  are growing up in families that can’t afford the basics necessary for a good start to life because they make so little. That’s statistically unchanged from the previous year’s estimate of 28.4 percent. Nationally, it was a different story, as the poverty rate for kids dipped slightly to 19.5 percent from 20.7 percent the previous year.

  1. Racial disparities

A far greater share of African-American Louisianans struggle to make ends meet compared to white people in the state. More than 1 in 3 black Louisianans lived below the federal poverty line in 2016 and were more than 2.5 times as likely as whites to live in poverty (12.8 percent compared to 34.2 percent). The poverty rate for Latinos was 22.2 percent and 29 percent for Native Americans.

The outlook for African-American children in Louisiana is even more dire, with close to half (48.9 percent) living in poverty.

  1. Gender disparities

Women in Louisiana are more likely than men to struggle to afford basic necessities, a trend that also exists at the national level. More than 22 percent of women in the state lived in households with incomes below the poverty line in 2016, compared to just 18.1 percent of men in the state. Women are more likely than men to be single parents, and women’s earning potential is often limited by lack of affordable child care.

  1. Deep poverty is persistent

Deep poverty – defined as living on an income of less than half the federal poverty line – remains stubbornly high in Louisiana as it’s decreasing in the rest of the nation. One in 12 Louisiana households (8.7 percent) lived in deep poverty in 2016 compared to just 6.2 percent of households nationwide. Along with the state’s high rate of income inequality, this highlights the wide gulf between Louisianans struggling to gain basic necessities and those at the top. Tax reform and targeted public investments are needed to reverse this troubling trend.

  1. Things would be worse without the safety net

Major public investments at the federal level played a powerful role in building opportunity and helping people build a more secure future last year. Federal safety net programs lifted millions of people above the poverty line, according the Census’ Supplemental Poverty Measure (SPM). This measure accounts for both taxes and government programs, and shows the positive impact of programs like Social Security, SNAP (formerly food stamps), Supplemental Security Income, housing subsidies and tax credits for working families like the Earned Income Tax Credit (EITC) and Child Tax Credit.

In 2016, the Earned Income Tax Credit and the low-income portion of the Child Tax Credit lifted 8.2 million people out of poverty, including 4.4 million children. SNAP lifted 3.6 million people out of poverty, including 1.5 million children. Housing subsidies lifted 3.1 million people out of poverty, including 1 million children.

Louisiana can build on the success of the federal safety net by bolstering investments in child care assistance, need-based financial aid for college and through an expansion of the state EITC.

Reforms needed so Louisianans can make ends meet

There are several things Louisiana can do to build a more inclusive economy that betters the lives of families struggling to make ends meet:

  1. Increase the value of the state Earned Income Tax Credit (EITC): The federal and state EITC rewards and encourages work by increasing income. The credit is especially beneficial for children, as studies have shown that higher family incomes lead to stronger school performance and improved lifetime earnings. Unlike many other tax credits that have never been rigorously evaluated, the benefits of the EITC for Louisiana’s families and children are proven. Doubling the value of the EITC would be an important investment in a stronger economic future for Louisiana.
  2. Fund early care and education for the youngest Louisianans. The state does not provide any general fund dollars to the Child Care Assistance Program for low-income children and their parents. The number of subsidized child-care slots was cut by nearly 70 percent over 7 years. Investing state dollars in high quality early learning is proven to have a high rate of return.
  3. Fully fund K-12 schools: Despite evidence that education is the key to a strong economy and that funding levels matter, the dollars going to support public education have failed to keep up with inflation over the past decade.
  4. Ensure college financial aid for those who need it the most: Louisiana has cut funding to colleges by 45 percent since 2008 while tuition rose 101 percent over the same time frame. In addition, the Go Grant program, the state’s only need-based award, is chronically underfunded. Investments in those least likely to attend college provide the greatest returns. The state must invest in those who need a boost to achieve their dreams, including non-traditional students.
  5. Establish a state minimum wage above the federal minimum wage that is indexed to inflation to ensure that workers’ wages keep pace with increases in the cost of living.
  6. Allow municipal governments to establish local minimum wage and paid leave laws by eliminating the state preemption law that prohibits them from doing so.
  7. Maintain Medicaid expansion to ensure workers who do not have employer-sponsored insurance are protected from the health and financial risks of being uninsured.
  8. Promote pay transparency and ensure enforcement of existing labor market anti-discrimination laws.
  9. End costly tax exemptions that primarily benefit high-income households.
  10. Create a balanced tax system that raises adequate revenue and reduces inequality.

 

Note: All data are from the U.S. Census Bureau’s 2016 American Community Survey. https://www.census.gov/newsroom/press-releases/2017/acs-single-year.html

 

 

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