The Crisis of the Near Poor

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By KATHERINE S. NEWMAN and VICTOR TAN CHEN

Tamar and Victor Guerra support three sons on her income as a factory worker and his as a street vendor.

They rent a two-bedroom apartment in the northern outskirts of New York City. They don't receive welfare. They struggle day to day, unprotected by union membership and vulnerable to any crisis — a layoff, divorce, illness — that could hurtle them into poverty. Meanwhile their sons are trapped in underperforming schools and sorely missing the supervision of their working parents. Unless things change soon, the boys appear destined for minimum-wage careers.

More than 50 million Americans live in the netherworld of strapped finances and grueling workweeks that the Guerra family knows so well. Call them "the missing class," the near poor whose incomes place them above the poverty line, but well below the middle class. Near-poor families with two parents and two children subsist on $20,000 to $40,000 a year, which disqualifies them for virtually all public subsidies, but is a far cry from what they need to be self-sufficient.

As a society, we don't count this missing class. While we keep an eye trained on the number of people who fall below the poverty line, we don't gauge our success or failure by asking how many near-poor households we have. Families like the Guerras are absent from the national conversation, although they vastly outnumber the poor population and include a fifth of the country's children.

In academe, too, the missing class is somewhat of an afterthought. Researchers working on the problem of the uninsured have included the near poor in their studies because so many Americans who lack coverage fall in this group. Otherwise, little is known about them. We hear about the working poor, as distinct from those on the welfare rolls, but by definition both of those groups subsist below the poverty line. The near poor are considerably better off than the "real poor," but because they are not counted, tracked, or even thought about outside discussions of the nation's strained health-care system, they exist in the shadows of our policy debates and academic scrutiny.

In part the lack of attention derives from the legitimate desire to concentrate on those who are in the most desperate need of help. It is also because we find it convenient to chart our society's progress — or lack thereof — using a durable benchmark: the poverty line. As important as that national standard is in keeping our government accountable, its narrow focus inevitably diverts attention from other vulnerable groups, including the near poor.

Yet what happens to this class — whether they maintain their hard-fought position above the poverty line or tumble below it — matters a great deal.

Near-poor women work in clothing stores, minimarts, and child-care centers; they clean subway cars on the night shift. Near-poor men often hold down more than one job, working days as aides for the mentally impaired and nights as security guards. Native-born members of minority groups are well represented in the ranks of the missing class, as are immigrants, many of whom gave up good jobs in Brazil or China or Russia so their children could grow up in a land of opportunity.

Our examination of their lives began with a survey, sponsored by the John D. and Catherine T. MacArthur Foundation, of 900 adults in New York City. Our new book, The Missing Class: Portraits of the Near Poor in America (Beacon Press, 2007), tries to convey the complexities of life in this unknown group through deep immersion in the lives of nine missing-class families whom we followed for more than six years. Of particular concern was the unfolding fate of the children in these households, who were coming of age at a time when a national movement of high-stakes testing — culminating in the No Child Left Behind Act — put relentless pressure on them to perform even as their parents were clocking longer hours on the job to keep their families clothed and fed.

In the course of our research, we learned about the trade-offs that the near poor have to make to protect their hard-earned status above the poverty line. We also became convinced of the need for policies that could enhance their chances for stability, if not upward mobility. We point to five areas: expanding college access and other educational opportunities, broadening health-care coverage, making work pay, encouraging household savings, and revitalizing the commercial infrastructure of neighborhoods.

It can take many years for adults in this class to complete their education, in part because our financial-aid system was never designed to support the kind of intermittent learning that fits their schedules and needs. Yet we know that higher education has an enormous payoff in terms of the increased wages that graduates earn over their lifetimes.

Just ask Beatriz Coronado (a pseudonym, as are all the personal names in this article). In her late 20s, after years of struggling in various dead-end jobs, she enrolled in a community college. It took her five years to complete a two-year degree, burdened as she was with two young sons, tight finances, and a disintegrating marriage. Community college seemed like a place for "poor people," Coronado told us. But she took some worthwhile classes, and with a friend's help she landed a job in a computer lab.

Once she graduated, she was able to parlay those skills into an entry-level position doing filing at a Manhattan medical clinic. Eight months later, Coronado had received three promotions and was handling the scheduling for all the clinic's doctors. "I am in charge," she explained proudly. Thanks to her hard-won college degree, the former waitress and assembly-line worker is now ensconced on a professional track to success.

We could do more to help workers like Coronado get the training and credentials they need. Supporting community colleges is a sensible first step. For the nearly one out of six Americans over 25 without a high-school degree, we also need to promote so-called second-chance high schools that offer intensive tutoring and flexible scheduling.

And what of children in the missing class? Recent research has shown that children raised by poor wom-en with college degrees reap the cultural and educational benefits of growing up in an educated household. Children in missing-class households would also benefit from having parents who have more education.

Educated parents might help missing-class children avoid the kind of dismal educational options that befell Rasheea Fletcher, a bright sixth grader who was raised by her grandparents in a previously poor, now gentrifying corner of Brooklyn. One of her teachers told us flat-out that Rasheea did not belong in the school she was attending. Scoring in the highest percentiles nationally in reading and mathematics, she needed more of a challenge. Private schools were out of the question, and the public schools in her neighborhood were overcrowded, understaffed, and chaotic. Her grandparents volunteered at school and stayed up late to help with homework, but they couldn't properly advise a child as gifted as Rasheea — Grandma Sondra, in fact, had never finished high school herself.

As we reform schools across the nation to make them more accountable for their dropouts and underachievers, we must not forget the children like Rasheea whose gifts go underused or overlooked because their neighborhood schools can't provide the intellectual stimulation and academic guidance they crave. Higher teacher pay and smaller class sizes would do much to improve those schools, as would a greater degree of public-school choice. At the college level, we must reverse skyrocketing tuition and student debt. The missing class finds it almost as difficult as the poor do to pay those costs; both are at risk of dropping out of college when prices rise.

The second strategy to help the near poor is to make sure they have adequate health insurance. This group is precisely the one at greatest risk for medical calamities: They are not eligible for Medicaid (which goes to the poor), and yet their jobs typically provide no insurance or weak insurance covering only catastrophic needs. When the adults become sick, they can easily drop out of the labor market and descend into poverty.

That is what happened to Gloria Hall, a missing-class single mother of three who lost a job in law enforcement after she became ill with cancer. Hall had coverage of sorts, but she was underinsured: Her private insurance didn't pay for the treatment recommended for her rare form of cancer. Only as her income plunged did she eventually became eligible for Medicaid, which did pay for the treatment.

Congress recently passed legislation (now under veto threat) to expand public coverage of children from lower-income families, including the missing class. The very least we can do is ensure that families who have struggled to remain above the poverty line are not dragged under it by health emergencies they cannot afford to treat.

Third, we need to make work pay. Reforming laws that make it hard for workers to unionize would give the near poor a fighting chance to improve their wages. The earned-income tax credit — the government's wage subsidy for low-income workers — is another proven way of supporting working families and encouraging others to seek employment. We should expand the credit, especially for childless workers who right now are all but ignored under the policy.

Tomas Linares is a good example of why progressive taxation is so crucial. A divorced father of two adult children, he works two jobs at centers for people with disabilities. Tomas makes $20,000 a year by toiling seven days a week. Officially he no longer has dependents (tell that to his daughters, though, who keep hounding him for cash), so he does not qualify for most forms of public assistance, including the earned-income tax credit, which for childless workers phases out at an annual income of $12,000.

President Ronald Reagan argued during the tax-reform debates of the mid-80s that the government should not be taxing Americans deeper into poverty, and yet 20 years later Linares and other low-income workers without dependents owe Uncle Sam on April 15 every year.

Fourth, we need to help near-poor families save money, so that they won't have to turn to public assistance when a crisis strikes. America already spends billions on tax deductions to help wealthier households save — for mortgage interest and capital gains, for instance — and it's time to pay attention to working families who struggle admirably to set aside a little money for the future.

Savings accounts with matching government contributions would create strong incentives for such families to grow their assets. Increasing access to homeownership would give the missing class a chance to build up wealth through equity, something that two-thirds of American households depend on to underwrite financial well-being and old-age retirement. The problem is the near poor often can't get the necessary loans, and the crisis roiling the subprime lending market has made matters worse. We should do more to assist first-time home buyers with mortgage financing. Rooting out predatory lending and extending housing vouchers to cover home purchases would also help.

A final way we can aid the near poor is by investing in their communities. We need to finance the kinds of training, counseling, day care, and infrastructure that will give families a chance to succeed at work and at home. Public-private partnerships are key. Many cities are experimenting with ways to entice major grocery chains and retail outlets to plant their flags in the kinds of neighborhoods where the near poor live. The larger stores tend to offer cheaper prices, and having access to better-quality food — especially fresh fruit and vegetables — will improve the health of near-poor families who suffer, as do the real poor, from obesity, diabetes, and heart disease in large numbers.

Wooing banks will help, too. Many banks shun poorer neighborhoods, depriving families of opportunities for savings, alternatives to check-cashing companies and their exorbitant fees, and loans at reasonable interest rates for buying a car or paying for a college education.

The policies we've suggested are not handouts but investments in the potential of our country's people. They will put in place the kinds of incentives that inspire individuals at the bottom to rise to the top. They will pay off for the whole country by making workers more productive and less at risk of sinking into poverty and illness — personal crises that nonetheless create burdens for the rest of society.

As our system stands now, the hard work and determination of the near poor are compensated too little, and their gains remain precarious.

Katherine S. Newman is a professor of sociology and public affairs at Princeton University. Victor Tan Chen is a doctoral student in the sociology and social-policy program at Harvard University. They are authors of The Missing Class: Portraits of the Near Poor, published last month by Beacon Press.