A recent study, “Working Hard is Still Not Enough,” by the N.C. Justice and Community Development Center in Raleigh, claims that nearly two-thirds of North Carolinians fail to earn a living income. These conclusions are based on the center’s “living-income standard,” “a bare-bones budget indicating how much average families…must have to meet their basic needs.”
But the standard is anything but bare bones. It uses costs-of-living measurements well above what reasonable people would consider to be the minimum and leaves out important components of income such as child support, food stamps, and housing subsidies.
To determine food costs, the center uses the U.S. Department of Agriculture’s “low-cost food plan.” But the low-cost plan is not the measurement the USDA uses to determine minimum food costs. The USDA uses the less-expensive “thrifty food plan,” defined as “market baskets [that] specify the type and quantity of foods … people could consume at home to obtain a nutritious diet at a minimum cost.” The thrifty food plan is used as the basis for food-stamp allotments. In refusing to use the thrifty food plan, the Justice Center exaggerates annual food costs for a family of four by more than $1,600.
For housing costs, the center uses the U.S. Department of Housing and Urban Development’s “fair market rent,” which is the cost in an area for “decent, safe, and sanitary” housing at the 40th percentile of the rent distribution. In other words, 40 percent of the decent, safe, and sanitary housing in the area rents for less than the cost figure used by center. Also, the center considers only two-bedroom apartments, regardless of family size, assuming that it would be less than bare bones for a single mother and her baby to live in a one-bedroom or efficiency apartment.
The Justice Center also exaggerates health costs. Its study dramatically underestimates the percentage of North Carolinians receiving Medicaid and leaves out all benefits from the State Children’s Health Insurance program. While more than 16 percent of North Carolinians are on Medicaid, the Justice Center adopts the methodology of the Economic Policy Institute, a leftist think tank in Washington, D.C., and assumes that the number is 8 percent. Also under the S-CHIP program, families earning 150 percent to 200 percent of the federal poverty level qualify for free health insurance for their children. The Justice Center considers none of this.
In calculating child-care costs, the Justice Center assumes that all families must use three-star licensed providers. North Carolina has established a rating system of licensed child-care providers based on five stars. Costs are higher for providers awarded more stars. For example, in Wake County it costs $2,000 a year more for a 2-year-old to go to a three-star rather than a two-star day-care center. All centers are fully licensed—none are substandard. The center also assumes that no parents use grandparents, stay-at-home-parents, or other family members to care for their children.
The Justice Center also lists a miscellaneous category, which includes items such as union dues, music, and television. In reality, though, only a small portion of North Carolina’s work force is unionized. While the study calls on business and industry to raise wages, it does not call on unions to waive dues for low-income workers. (The study notes the AFL-CIO as an important source of information.) Also, the center does not define music and television. For example, is the center referring to the purchase of concert tickets or the latest music compact discs? These are hardly necessities. Since over-the-air television is free, the center apparently includes the cost of cable TV as a bare-bones necessity.
A true measurement of the minimum cost of living in North Carolina would be useful to policy makers. Unfortunately, the Justice Center’s standard doesn’t fit the bill. In reality, the center appears to have constructed the standard with the sole purpose of justifying a host of new income-redistribution schemes and a $10.60-an-hour minimum wage, which would kill jobs and discriminate against low-skilled workers. In spite of its stated concerns, the center has failed to propose any policies that would lead to a lower cost of living or higher average incomes.