State of Working Philadelphia 2018

Authors: 
Mark Price
Publication Date: 
October 25, 2018

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Executive Summary

Each Labor Day the Keystone Research Center releases an annual checkup on the health of the Pennsylvania labor market, “The State of Working Pennsylvania.” (https://www.keystoneresearch.org/SWP2018)

The 2018 edition focused on state-level data, mostly available through June 2018. This addendum to that report focuses on 2017 data released last month by the Census Bureau on incomes and poverty for Philadelphia. We complement the Census data with statistics on employment and unemployment from the Bureau of Labor Statistics to provide a comprehensive assessment of the performance of the Philadelphia economy since 2005. We start with the year 2005 as that is the first year in which data at the county level are available from the Census Bureau’s American Community Survey.

Our findings in brief:

Employment growth in the City of Philadelphia has been stronger than in the state since the end of the Great Recession, growing at an average annual rate of just over 1%, compared to the statewide average of 0.85%. Indicative of this relative strength, the unemployment rate (6.2%) in the city in 2017 has fallen by almost half from its post-recession peak of 10.9%. The share of city residents with employment in 2017 at 53% is higher than before the recession began.

Further reflecting this economic strength, the poverty rate in the city has fallen from its 2011 peak of 28.4% to 25.7% in 2017. However, the poverty rate in 2017 was unchanged from 2016. Furthermore, in 2007, the best year for the U.S. and Philadelphia economy prior to the start of the Great Recession when the unemployment rate in the city was 6.2%, fewer than one in four (23.8%) of the city’s residents had incomes below the poverty line. On its own, economic growth in the city has not proved sufficient to lead to large reductions in the poverty rate. Workers need higher wages and better hours, and the disabled need a broader, more effective safety net.

The most direct route to raising wages is a minimum wage higher than $7.25, but here the city is blocked by state law from setting a higher minimum wage. In addition to low wages, many workers in the commonwealth of Pennsylvania continue to work in part-time jobs when they would prefer full-time work. Workers employed part-time but wanting full-time work is the primary reason that the underemployment rate in Pennsylvania remains high at 9.4% a higher level for this metric than following the aftermath of the dot.com recession in 2002. The challenge of insufficient hours is felt most acutely by Philadelphia’s service sector workers, just 17% of whom are employed full-time, with just under three in four of those working part-time needing additional hours to make ends meet.

Next week, the Philadelphia City Council takes up Fair Work Week Legislation that, in addition to providing workers with more notice on scheduling of work hours—a key requirement for all working parents also requires employers to offer hours first to incumbent part-time employees when expanding their schedule, rather than hiring new ones. Expanding hours for the underemployed is a key way to help more working Philadelphians move out of poverty.

Official poverty thresholds also understate the degree to which Philadelphia families struggle to get by. While the official poverty threshold is $16,895 for a single adult with one child, data on the costs that families in the city face for rent, food, child care and health care reveal that a basic family budget for a single parent requires an annual income of $56,912. Median earnings of $32,011 in the city suggest that for many Philadelphia families work doesn’t pay enough to provide a decent standard of living.

Since 2009, as the economy in Philadelphia has improved, both median household incomes and median earnings (for individuals) have begun to improve. In the last two years, however, median household incomes have fallen while median earnings are essentially unchanged.

Looking into these aggregate trends reveals persistent inequality in the city. The average income of the bottom fifth of households in 2017 remains 61% lower than it was for this group in 2007; for next fifth incomes remain 21% below their 2007 levels; and for the 3rd quintile they remain down 5% from 2007. More succinctly, as of 2017, the bottom 60% of households in Philadelphia still make less in real terms than their counterparts in 2007. Meanwhile, the average income of the top 20% of households grew 13% over the same period.

Internal Revenue Service data covering a shorter period, 2010 to 2015, suggest that income growth has been concentrated among the top 1% of the city’s families, who have seen their average income climb 32%.

Examining inequality more closely reveals the continued presence of gaps in earnings by race, ethnicity, and gender. Among full-time, full-year workers living in the city in 2017 we find that

  • white women had median earnings of $54,912 or 95% of the $57,542 median for white men (a difference that is not statistically significant, more reliable data from a larger sample reveal a statistically significant gap of 87.3%),
  • median earnings for black men were $39,367 or 68% of the median for white men,
  • median earnings for black women were $37,594 or 65% of the median for white men,
  • Hispanic men had median earnings of $36,465 a figure, 63% of the figure for white men,
  • median earnings for Hispanic women were $33,737 or 59% of the figure for white men,
  • among Asian men median earnings were $44,660 or 78% of the median for white men, and
  • at $38,355 median earnings for Asian women were 67% of the white male median.

In sum, economic growth by itself in the city of Philadelphia is not resulting in broadly shared growth in incomes. As detailed in the body of this report, it has left in place the gaps in opportunity and structural inequality that have resulted from the bias directed at all communities of color and women throughout the 18th, 19th, 20th and now 21st century.

The city of Philadelphia took important steps towards building a more inclusive economy by recently enacting a Wage Equity Ordinance and now considering Fair Work Week Legislation. The city also needs better policies from Harrisburg, including a higher state minimum wage and the power for Philadelphia to set its own higher minimum wage. In addition to rules that make the economy more inclusive, the city needs the state to establish universal access to high quality pre-K (http://www.prekforpa.org/), fully fund K-12 education (http://paschoolswork.org), and reduce the cost  attending the state’s public institutions of higher education (http://www.papromise.org/).[1]

While necessary, however, these changes are not sufficient to overcome the sharp divide in wealth inequality overall or by race, ethnicity, and gender. One proposal for reducing wealth inequality directly is the establishment of Pennsylvania baby trusts, opened for each child born in Pennsylvania and accessible by age 18 to fund investments in education, a home or a new business. A modest flat tax on wealth that would impose an annual burden of just $44 on the typical household could, because of the sharply unequal distribution of wealth, fund an average trust amount of just over $8,000. The trusts would be available to all families but scaled to provide larger trusts to the children of low- and middle-wealth families.

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[1] The We The People - Pennsylvania (WTP-PA) campaign has developed a comprehensive agenda to improve the lives of working families that includes most of the items highlighted here. The short version of the WTP-PA agenda is at http://wethepeoplepa.org/materials/ with more detail on many of the policies available at http://wethepeoplepa.org/the-policy/. As of October 17, 116 Pennsylvania candidates for the General Assembly had endorsed the We The People - PA agenda.