Keep the Comments Coming!

I received a very thoughtful, extensive comment to the blog last night, in which Victoria Campbell mentioned that “this experiment doesn't take into account the numerous federal, state, and private charity resources available to low-income people.” Many of the points she raised were also considered by my family and those in my office. However, we did not want to convolute the issue and instead tried to bring in only a couple of the major subsidies that would be readily available to us. Nonetheless, I should address some of the points brought up in the comment in the event that others have similar questions concerning the project.

“First of all, your earned income of $1056 over 3 weeks is the equivalent of one person working 40 hours per week at $8.80 per hour. That means one spouse works, and the other spouse stays home with your child, i.e. no childcare costs. Even if you were only making federal minimum wage of $6.55 per hour and your wife were also working to bring in additional money, you wouldn't need to incur $487 in childcare costs unless she worked full-time. If you and your wife both worked full time at minimum wage, your household would be bringing in $1572 over 3 weeks, instead of $1056. That extra $500 would make a huge difference.”

To begin with, we decided to simplify our approach to this project. We determined that we would roughly calculate our wages using the current minimum wage (which is $6.55; it will be increasing to $7.25 this year) at 72 hours per week. This total, minus taxes (Social Security of $1,462, Medicare of $342, Federal Tax of $219, and State Tax of $52), puts us closer to the minimum wage. We are still over the line, but for the purposes of this project we decided to round down to “100 percent of the federal poverty line.”

To counter this discrepancy we gave ourselves a childcare subsidy that we would not be eligible at this point. I’ll explain that below.

“But more likely, you'd be working for $8.80 per hour and your wife would stay home with your daughter. So you won't receive $268 for childcare subsidy, but you won't pay $487 in childcare costs either. So that means an extra $219 spending money for your household.”

We are only taking 32 hours of childcare subsidy because my wife and my jobs only overlap 32 hours per week. As many people experiencing poverty are single parent households, the childcare subsidy could be increased to 40 worked hours per week. But unfortunately such a childcare subsidy increase would not make up for the lost hourly wages of a two-wage earner family.

One of the areas where we gave ourselves much more benefit than we would actually be receiving is with the childcare subsidy. Why? One of the problems with many of the services and programs available to assist low-income populations is that you have to have to pass income and asset tests. My family could pass some of the income tests only after being poverty for a minimum of a few months. My family would have to sell our house to past the asset test. Many people would have to sell their car or cars.

The way we understand the childcare subsidy is that it would only be available to us if we showed low-income pay stubs for three months. However, we gave ourselves this childcare subsidy anyway because without it we would not have been able to participate in the project. I suppose it would have been more realistic to just bump up are income level to, say, 110 or 120 percent of poverty. Though, again, we felt that this would complicate the issue. Nonetheless we may consider this approach if we try the exercise again next year.

This next point was the one that I was going to address in today’s blog:

“Next, you are eligible to receive the Earned Income Tax Credit (EITC). At your income of $18,310 per year for a family of 3, you'll receive about $2388 per year. EITC is a federal refundable tax credit. Your employer can add EITC right into your paycheck, or you can receive a lump sum after you file your taxes each April. EITC doesn't count as income when calculating the ‘poverty level.’ If you're getting it added into your regular paychecks, that's an extra $138 over 3 weeks.”

In practice, getting an employer to add the EITC right back into the employee’s paycheck (which is called the Advanced EITC) is not currently used on a widespread basis. There are several reasons for this that I will not go into here. There is an organization in the state that is working on spreading the usage of the Advance EITC. Regardless, a big EITC check at tax time would be a great help to our family ($2,145!!!) though that would not arrive until next February.

If you have any questions about EITC you can call Paul or Kori from my office (they help run much of the free tax help in the state which aids in the expansion of EITC usage); their number is 801.433.3025. EITC is not fully utilized, which is why my office is involved. It is estimated that over $60,000,000 goes unclaimed in Utah alone each year.

My office also works to spread the usage of the child tax credit.

“And don't forget your refundable child tax credit of $1000 per year, which (if you didn't spend it all at once) gives you an extra $57 over 3 weeks.”

There are many good tax and subsidy programs available. Child tax credits are two of these. The Child Tax Credit (which is non-refundable) would wipe out the federal tax of $219. The Additional Child Tax Credit (which is refundable) would bring our savings to exactly $1000. This certainly would help us if we were in such a situation. However, like the EITC, we would not receive that money until next February.

“You are also eligible for Section 8 housing, federal subsidized housing for low income people. With Section 8, you pay one-third of your income to rent, and the government pays your landlord the difference, up to fair market rate. So during the experiment period, you won't pay $636 toward rent. You'll pay one-third of $1056, which is $352. So put an extra $284 in your pocket.”

Section 8 housing certainly is a good program. And we would be eligible after selling our house (one problem that could come into play here is if we were upside-down on our mortgage, meaning that we owed more than it was worth). The only really problem with getting a Section 8 voucher is that we would likely need to wait a couple years to work our way up the waiting list. The current Section 8 waiting list for the Housing Authority of Salt Lake County is nearly 3000 households long and the list for the Salt Lake City Housing Authority is 8000 households long. There is also Section 8 project based housing Public Housing available. The waiting lists for these are just as long, particularly since the latter are fast disappearing for lack of federal funding.

If we try this experiment next year, we will consider laying out the methodology more clearly, and we may present all of the possible subsidies and their availability in more detail.

Ms. Campbell has a wealth of knowledge about these programs and would navigate the system very well. How many other people know about any of these programs? Where to get enrolled? What is offered? Most people do not. But that is what Community Action Agencies are there to help with. They can help people in need learn about and navigate the system. They can help people become self-sufficient before it is too late. That is also what 2-1-1 is all about. A 2-1-1 call can point people in the right direction.

The people I see that are living in poverty are those at the Road Home (the local homeless shelter) that is directly across from my office. The people I see are those living in my neighborhood that struggle to get by. Again, my wife and I do not think that we are experiencing real poverty through this project. But it seems to me that if we did have to actually live in a poverty situation such as the one that we are financially simulating, and if we did not know about any of the social services out there and did not know how to navigate them, our first three weeks would be much bumpier than our project has been.

Thank you again Ms. Campbell for your comments. Your viewpoint will certainly be useful going forward.

Shawn

Downtown Living

My wife and I have opted to live downtown so that we would never have an excuse not to attend the myriad festivals and events that our city has to offer. This weekend we took advantage of a number of the free ones.

• We started off at 4pm on Friday by biking to UTA Rideshare’s 14th Annual Bike Bonanza at the Gallivan Center.

• After filling up on free food we headed to the Living Tradition’s Festival and took in some music.

• On Saturday we went to the Utah Museum of Fine Art’s Third Saturday event.

• Sunday found us back to the Festival.

What is the Living Traditions Festival without the money to pay for food? We have grown accustomed to filling our bellies with the tasty treats that vendors have to offer. This year, we needed to consciously keep focusing our senses away from our taste buds and toward the rest of the Festival. And there was still certainly a lot to distract us, topping off the event with some dancing to Venezuela Cantando.

This city has a lot of free events to offer. (And other freebies as well… I’m sending this post from the downtown library’s free wireless.) It seems to me that we are taking advantage of them at a greater rate since the poverty project began. We are fortunate enough to live near many of these events that we can walk or ride bicycle to with ease. Without being centrally located, I’m sure that this project would be a far greater challenge.

Health Insurance

My allergies are finally here. I have been hoping that miraculously I would not be affected by grass seed and linden this year. But, alas...

What does that mean for the poverty project? Not much. But only because I have some medication left over from last year. On Monday I’ll be calling my doctor’s office to schedule an appointment. Likely I’ll be able to get in within a couple weeks to obtain a prescription before my current supply runs dry. The combination of a co-pay and the cost of medicine would be something that, if we were living in long-term poverty, would have to be paid for by credit card. Ultimately, we would be paying interest not out of convenience but out of necessity (my allergies are not only bothersome, they are debilitating).

This brings up the issue of insurance during our project. A few facts about the health insurance (from the Annual Report on Poverty in Utah, 2008):

* In 2006 Utah passed the national average for percent of population uninsured, at 17 percent.
* In 2007 over half of the uninsured were employed full-time and 17 percent were employed part-time.
* The top reasons for being uninsured were cost (62 percent) and that employers were not offering insurance (38 percent).
* 67% of the uninsured in Utah are living below 200 percent of the poverty line.
* 17% of children below 200 percent of the poverty line are uninsured.

Would my family have insurance at all, working two minimum wage jobs and living at the poverty line? My daughter would under the CHIP program. But for my wife and me? I hope we never have to find out.

Please let us know if you are reading this. Comment to us if we are missing important details, if you like what we are writing, or if you think that this whole trial is pointless.

Thanks,
Shawn

Finally...

One of the reasons we decided to take on this poverty project was to create a dialogue. Well, I think we finally took one small step in that direction. (Actually, I did have one comment on the May 5th posting on this blog; thanks again!) I'm happy to say that this morning's Deseret News story has received a bit of feedback. We've been in the media several other places but until today there has been no proof that people are giving any additional thought to the poverty issue. Read the story and comments here.

Thanks Jim for the great story.

Necessities

Outside of our Food Stamp allotment we have just over $11 for the three-week period. What can $11.26 buy? For us it was only enough to purchase sunscreen for my daughter and mail a Mother’s Day photo. It will not be enough for the remainder of our poverty project. It will not be enough for dishwasher detergent when we run out this week. It would not be enough for:

Toothpaste
Dental floss
Hand and body soap
Shampoo
Dish soap
Laundry detergent
Toilet paper
Socks
Underwear

It would not be enough to cover my contact solution, or new contacts for that matter.

These are not extravagances. They are necessities that we take for granted. They are items that we drop into our grocery bag as needed, but items which Food Stamps do not cover.

This amount certainly would not be enough to keep a fast growing 2½ year old in clothing.

We did not stock up on any of these items before the project began, but had a few items remaining from prior purchases. When we run out of soap in the shower in the next few days we’ll have to take the bar of hand soap from beside the sink. I hope that that little bar lasts until May 21.

We are Broke (Except for Food, Thank Goodness)

May 10th was both a birthday and Mother’s Day in our household. But were able to do it on the cheap.

We were creative with gifts (a painting commissioned by my daughter for my mom, for instance)

We didn’t order a Carlucci’s tart:



But instead my wife made wonderful maple syrup scones with whipped cream and a blueberry compote (which was quite expensive, and so we’ll need to cut back over the next week to make up for it).

We got our free rental from Hollywood Video (always one free birthday rental) and tried to get our free ice cream from Baskin Robbins but found out that we needed to print off a coupon from their website first (and didn’t want to make the trip back to BR by bike).

Though we had been thrifty, our $11 discretionary budget is gone. With $6.99 plus tax for my daughter’s sunscreen and shipping on a Mother’s Day photo (the photos we had taken and printed months ago, before the poverty project idea was conceived, and so we exempted this expense) we are broke outside of our Food Stamp allotment.

Housing

My family lives in a two-bedroom home in Salt Lake City. Our mortgage and utilities are not far above “fair market rent” (or FMR) which is generally the median cost of rent and utilities for the community (in 2008 it was $754 in Salt Lake and $703 averages throughout Utah for two-bedrooms). The housing rule of thumb is that the rents should be no more than 30 percent of household income. (The term “rents” can be a complicated term for owners, including mortgage interest deductions, maintenance, capital gains exemptions and more.) This 30 percent is the measure that many organizations, including Department of Housing and Urban Development, use to determine whether or not housing is affordable. Many households spend more than 30 percent:



Living at the poverty rate, my family does not have affordable housing. In fact we would be considered “severely burdened” by our housing costs. To be under the 30 percent rule, to not have “burdened” housing, we would need to find a two-bedroom apartment for $458 with utilities included.

Sure, we could move to a less expensive community (FMR in Tooele was $638 in 2008), but finding close employment and services for low-income populations would be difficult. This would increase transportation costs.

What is the point? The point is that housing is a huge part of monthly costs, it is virtually unavoidable, and for a family living in poverty it is precarious. For an owner, one broken water heater would be unmanageable. For a renter, one foreclosure eviction notice (whereby the renter may not receive back the initial deposit) could put a family into homelessness.