Online Summary

Investing in Pennsylvania Familes: Economic Opportunity for All

The United States today faces a basic challenge. By measures such as productivity growth and profits, the economy has in recent years performed better than in decades. By the measures that matter most to working families—wages and incomes, benefits and poverty levels—many families have been left behind by economic growth. In Pennsylvania, as in the nation, many families that work hard and play by the rules still do not earn enough to support their family.

Pennsylvania has begun to take action on the needs of low-income working families. With strong, bipartisan support from all areas of the Commonwealth, it has raised its state minimum wage and implemented new workforce policies that could give more workers career pathways to self-sufficiency.  But there is more work to be done.

Pennsylvania is well positioned to create a new era of growth that delivers opportunity and security for all. It can give more low- and middle-income working families access to job advancement, training and adult education, good pay and benefits, affordable, high-quality health care and child care—in short, to a better life. 

By seizing this opportunity, Pennsylvania can reclaim its proud heritage as one of America’s most equitable states, with a broad middle class, low rates of poverty, and a powerful commitment to family and community. Indeed, Pennsylvania can become a model for the nation.

A Portrait of Low-Income Working Families in Pennsylvania

Today, Pennsylvania is home to nearly a third of a million low-income working families with children.  Families are considered low-income when their income falls below 200 percent of the poverty line, a rough approximation of the income needed to pay for a family’s basic needs without public assistance.

• One quarter (25 percent) of all Pennsylvania working families with children are low income.
• Nearly l.4 million Pennsylvanians, half of them children, are members of these low-income working families.

Families left behind in Pennsylvania’s new economy live in every region and fall within every major race and ethnic group in the state. 

• 44 percent of all minority working families are low-income, compared to 20 percent of all white working families in the Commonwealth.
• The share of working families with low-income is highest in rural regions of the state along with the city of Philadelphia.  However, low incomes affect the lives of Pennsylvanians throughout the Commonwealth.
• Overall, 28 percent of families in rural Pennsylvania are low income, versus 22 percent in urban Pennsylvania. 

Low educational attainment is part of the challenge faced by Pennsylvania working families and improving their education is part of the solution. 

• Pennsylvania has a low share of workers with more than a high school degree. Only two out of five low-income working families in Pennsylvania have a parent with any post-secondary experience, ranking Pennsylvania 47th out of 50 states.
• Only Louisiana, Texas, California, West Virginia, and the District of Columbia have a lower percentage of working families with post-secondary experience.
• Only 6.8 percent of adults without a high school education or GED are currently enrolled in Adult Education programs. 
• Pennsylvania also has very low shares of adults participating in postsecondary education and training.

Low pay and low incomes are also widespread among many working families in which adults have a high-school degree—or more.  Thus, Pennsylvania also needs to combine education and training policies with policies that directly raise wages and benefits among low-wage workers. 

• Workers in families left behind concentrate in a small number of occupations in low-wage industries, including retail sales workers; wait staff, cooks, and dishwashers in fast food and restaurants; direct care workers; janitorial and cleaning occupations; and clerical and administrative workers.
• Today many workers who start at low wages remain there. For example, of about 1.5 million Pennsylvania workers earning below 200 percent of the poverty level in 1998, two-thirds of those still working in Pennsylvania continued to earn below 200 percent of poverty in 2004.

Lifting Working Families to Self-Seufficiency

The policy recommendations in this report make up three legs of a stool, each one of which is essential to boost economic security from Erie to Philadelphia, Greene County to Monroe County. These policies attack the root causes of large numbers of working families having low incomes.

Give All Working Adults the Skills, Credentials, and Career Supports to Advance to Self-Sufficiency. In the old economy, less educated workers could often take a job on the bottom rung of a company job ladder, learn skills and organizational routines specific to that business, and work their way up. Today, many entry-level jobs do not connect to any job ladder, while companies often recruit higher-level workers from the outside job market but struggle to find qualified applicants. Pennsylvania’s new “Job Ready PA” workforce strategy seeks to rebuild training systems and career ladders within and across companies, helping businesses get the skilled workers they need while enabling more workers to advance.

To build on this strategy, Pennsylvania needs to enact Job Ready II, with three key components.

• Make permanent new industry training partnerships that promote skill development and the improvement of jobs and productivity in key industries
• Give all Pennsylvanians access to two years of post-secondary education and training.
• Fund industry partnerships explicitly to promote career advancement for low-income workers and link adult literacy and welfare programs with the state’s career building strategy.

Invest in “Worker Ready” Economic Development That Creates Good Jobs and Strong Industries Accessible to Low-income Working Families.  Traditional economic development policy emphasizes subsidies and tax breaks to recruit individual businesses to Pennsylvania.  With regions across the globe now bidding to attract businesses, states risk giving away more to get a company than they receive in good jobs, tax revenue, and other community benefits.  In response, Pennsylvania has experimented with new economic development approaches to create jobs in homegrown businesses and strengthen key industries.  Pennsylvania should now link these new tactics into a comprehensive “Worker and Community Ready” economic development approach.  By generating more jobs that workers want, this would complement a “Job Ready” workforce strategy that develops skills that companies want.

• Implement business subsidy accountability that requires that companies receiving state subsidies pay decently, locate in places accessible to low-income communities, and disclose basic information regarding the jobs they create.
• Assess, and develop plans to improve, job quality in low-wage industries that receive economic development resources, including agriculture and tourism. 

Improve the Wages, Benefits, and After-Tax Incomes of Low-Income Working Families. The third leg of the stool necessary to lift up low-income working families would directly address the wages and benefits accessible to workers in these families.  It would raise wages and benefits in private sector jobs while also bolstering work supports so that more families can meet their basic needs.

• Index the Pennsylvania minimum wage to the cost of living. Ten states have now indexed their minimum wage to the cost of living. Pennsylvania should do the same so that low-wage workers enjoy the same pay packet protection from inflation as state legislators.
• Establish a Task Force on the Pay of Working Families to explore the full range of public policies, from occupation-specific wage standards to innovative forms of worker voice, which could restore the broken link between productivity and wages.
• Ensure access to affordable child care and health care for all low-income working families.
• Transform Pennsylvania’s unemployment insurance system into an employment and wage insurance system —a trampoline that would launch workers back into family sustaining careers instead of a frayed safety net that inadequately cushions job loss.
• Create a minimum standard for paid sick leave and paid family and medical leave for Pennsylvania’s workers.
• Make Pennsylvania’s state tax system less regressive through a state earned income tax and a modification to the Pennsylvania constitution that permits shifting income taxes towards those with greater ability to pay.

Back to Broadly Shared Prosperity

Investing in Pennsylvania Families challenges the misconception that social equity and economic progress are at odds. It shows that we can do right by low-income families at the same time as strengthen our economy.  In this spirit, the recommendations here are designed—and deliberately so--to work with, not against, Pennsylvania businesses. These recommendations include a few simple constraints, such as a higher minimum wage and the use of wage standards for business subsidies, to discourage companies from competing by keeping wages and benefits low. Implementing the recommendations would also help grow businesses committed to innovation, high quality service, and rising productivity.

Investing in Pennsylvania Families also calls on Pennsylvania to invest in the future.  Neglecting our less advantaged families and their children is a deceptive savings, a time bomb of social deficits destined to become budget deficits in a generation. 

Three years ago the Brookings Institution report, Back to Prosperity, focused on Pennsylvania’s economic decline and reinforced, for some, a sense of gloom about the future. This report takes a more optimistic view, highlighting Pennsylvania’s history and values as key assets in confronting the anomaly of robust growth that leaves out many working families. Drawing on these assets, Pennsylvania has a chance to help bring back the American Dream for its low-income working families and to stamp on a rejuvenated middle class, “Made in Pennsylvania.”

This document is an on-line summary of a PathwaysPA report, produced in cooperation with the Keystone Research Center. The entire report is available for download as a PDF file at the KRC Web site www.keystoneresearch.org.