Low Unemployment Doesn't Mean Financial Security

If you are like many Americans, you may have been reading news reports of the country's improving economy and falling unemployment rates and wondering why you are still struggling financially. Of course, there are many factors at play, but one factor in particular is impacting tens of millions of Americans: low wages.

A study released by the Brookings institute in November of 2019 revealed that 44% of all U.S. workers could be classified as “low wage.” That's about 53 million American workers between the ages of 18 and 64. Among these low wage workers, the national median hourly wage is $10.22, and median annual earnings are about $18,000.

Who are the Nation’s Low Wage Workers?

Common assumptions about the low wage workforce don't necessarily hold true. While it's easy to assume that those who are working for minimum wage or close to minimum wage are teenagers, college students, retirees with part-time jobs and others who don’t rely on work to pay all of their living expenses, research doesn't bear that out. Instead, 56% of low wage workers are between the ages of 25 and 50. Many are parents, and more than half are wholly or largely responsible for the support of their households.

More than 1/4 of low wage earners live at or below 150% of the federal poverty line, which is the cut off point for eligibility for many social services and public benefits, including the Supplemental Nutrition Assistance Program (SNAP).

Women, racial minorities and people with low levels of education are most likely to be trapped in low wage jobs.

Low-Earning Workers in Alabama

Alabama has no state-specific minimum wage, meaning the only applicable minimum is the federal floor of $7.25/hour. That’s one reason Alabama has a higher-than-average rate of workers being paid at or below the federal minimum wage. 3.1% of Alabama’s hourly employees fall into that category. Just five states have a higher percentage of workers earning at or below the federal minimum wage.

The problem, though, is much bigger than minimum wage workers. Hundreds of thousands of Alabama’s hourly wage earners work in fields where the average experienced worker earns less than $12/hour. In 2019, the Alabama Department of Labor identified 27 such fields. While some fields include only a small number of workers, others have far-reaching impacts. For example,

the average wage for food preparation and serving-related occupations is just $10.78, and the average experienced worker in that field earns less than $1.00 more. This category alone accounts for more than 178,000 Alabama wage earners. Similarly, the state’s 65,000+ cashiers earn an average of $10.41/hour, with experienced cashiers averaging less than $.80/hour more. In these fields, experience does not equal the pay increase that one might expect.

In a few professions, such as substitute teaching and driving school buses, experienced workers average less than $10.00/hour.

If you have a full-time job but aren’t seeing the benefits of the improved economy you keep hearing about, it may be because you are working in a field that pays low wages and doesn’t offer significant increases for experience.

Poverty in Alabama

Nationwide, the percentage of households living at or below the poverty level is 13.4%. Alabama’s statewide average is higher, at 16.9%. However, that average doesn’t tell the whole story. Some areas and some types of households are hit harder than others.

Perry County leads the state with a poverty rate of 37.2%, but it’s far from the only Alabama County with a poverty rate far above the state average. While Jefferson County comes in slightly below the state average, at 16.7%, both Winston and Montgomery Counties have poverty rates above 21%.

Across the state, 47.6% of female-headed households with children are below the poverty level.

Finding Solutions to Financial Challenges

If you’re one of the many in Alabama and around the country wondering why you’re working hard and still can’t make ends meet, the answer may well be a disconnect between your income and the cost of living in your area. Ultimately, the only way to balance the budget will be to cut back on expenses or increase income. If you’re working in one of the fields where tens or hundreds of thousands of experienced workers are earning barely more than their entry-level counterparts, it may be time to consider a shift to a role that has more opportunities for advancement, or where experience has a more significant impact on earnings.

At the same time, look for places to cut expenses, at least until you’re able to increase your income. What often happens is that before you are able to increase your income or reduce your expenses, you end up falling back on credit cards or other high interest options in order to pay for an unexpected expense or keep up with things after a job loss. This can be incredibly overwhelming to deal with. Here at Bond and Botes, we can help you resolve your debt problems and move forward to a better future; bankruptcy options like Chapter 7 and Chapter 13 can help provide relief. If you’re already overwhelmed by debt and looking for a fresh start, schedule a free consultation to learn more about your options and how we can help.