Making Ends Meet in North Dakota
FS-577,
March 2002
NDSU Extension Welfare Reform Task Force
What would it take for an employed
mother with two children to meet her
monthly bills in North Dakota without
relying on government assistance?
Welfare reform has mandated the dual challenges of moving recipients off public assistance into
employment and limiting access to public
assistance for a lifetime total of only 60 months. However,
these changes in the social safety net assume not only
that enough jobs will be available, but that they will
pay sufficiently to end any further need for assistance.
So there are two questions to be answered: What
is the amount of monthly income necessary to support
a family without having to fall back onto public assistance? And, is North Dakota's economy
producing the kinds of full-time employment
opportunities that will eliminate the need for assistance?
Calculating a
Cost of Living Budget
Since the beginning of this century, there have
been efforts to determine the minimum costs of meeting
a family's monthly needs. Typically, these efforts
were based on actual household spending
(frequently urban households) as reported in surveys or diaries.
Today, the discussion of a living wage arises in
part from the inability of the current minimum wage
to provide an income adequate for a family to live
above the poverty line. These debates are about
whether businesses applying for government grants or
subsidies should be paying a wage sufficient to
keep their workers above the poverty line, eliminating
the need for their employees to seek further
government assistance.
A living wage is the amount of earnings
necessary for a family to meet minimum monthly costs.
Typically included in this are the costs for housing
and utilities, food, child care, transportation, and
basic household and personal care items. Not
typically included are costs for things such as
entertainment, birthday or other gifts, toys, tobacco products,
or alcohol.
Existing models figure these costs in order to calculate what a family must earn to meet a
minimum monthly budget. Typically, advocacy groups
calculate these for urban areas, especially those with
upcoming or pending living wage legislation. However,
because costs are not the same in rural and urban areas,
the results cannot be generalized across the
geographic spectrum.
Differences in the local cost of living vary not
only by region, but also by rural and urban residence.
In urban areas, public transportation is available
not only for getting to and from work, but also for
doing grocery shopping, visiting a doctor, or many
other purposes. But in rural areas, public transportation
is rare. The only way for an individual to get around
in most rural communities is by personal
transportation, whether owning one's own vehicle or sharing a
ride with someone who does.
Further evidence of this disparity can be found
in the 1999 Consumer Expenditure Survey.
Transportation costs are 18.4 percent of urban but 23.6 percent
of rural monthly household expenditures. Utilities
are 6.3 percent of urban but 7.8 percent of rural
household costs. Health care costs consume just over 5 percent
of the average urban household's expenditures and nearly 7 percent of rural households.
What, then, would it take for an employed
mother (age 24) with two children (age four and six) to
meet her monthly bills in North Dakota without relying
on government assistance?
The information designated * are costs
associated with essential living items that were collected
by research done in the Fargo-Moorhead area. In
instances where local data were not available,
reasonable estimates were derived from the 1999 Consumer Expenditure Survey for the
Midwest region. Food Costs were taken from the USDA Cost
of Food at Home, Thrifty plan, July 2001 for a
female age 20-50 and two children, aged four and six.
The estimated cost of living for an employed
single mother with two children in North Dakota is $647
a week, $2,805 a month, or $33,660 a year. To meet
her monthly cost of living, a single mother must earn
a take-home wage of $16.18 an hour.
The estimated monthly cost of living for a family of three in North Dakota.
--------------------------------------------------------------
Item Monthly Cost
--------------------------------------------------------------
* Housing (rent, insurance, utilities) .............. $ 705
* Phone .............................................. 35
Food ............................................... 290
* Child care ......................................... 661
Household, personal care items and clothing ........ 331
Transportation (car payments, gas,
repairs, insurance, etc.) .......................... 578
Health care (insurance, prescriptions, etc.) ....... 205
Total per month ................................ $ 2,805
Total per year ................................. $ 33,660
--------------------------------------------------------------
--------------------------------------------------------------
* Based on local information
Adding OASDI and Medicare taxes, which are deducted regardless of income level, the
necessary minimum monthly income would rise to
approximately $3,020 or $36,235 per year. This would
require an hourly wage of $17.42 per hour for full time
work for a year in order to both meet a minimum
monthly budget and pay these taxes.
Opportunities in
North Dakota's Economy
Over the last decade, North Dakota's economic news has been mixed. Unemployment rates
have dropped from 4.3% in 1989 to 3.4% in 1999,
placing North Dakota lower than the 4.2% national rate. There is an increase in the availability of
jobs, yet
the per capita income for North Dakotan's in 1999
was $23,313 compared to the national per capita income of $28,542.
Given this, what are the prospects of
low-income North Dakotans enrolled in TANF (Temporary
Assistance to Needy Families) achieving the stated goal of the program — economic self-sufficiency?
According to the United States Department of Labor, May 1999, the median weekly income for
a female aged 20-24 was $3.19 or $7.98 per hour.
The median weekly income is that point where half
of all weekly incomes are more and half less than
the median figure. For women aged 25-34, the
median weekly income was $451 or $11.28 per hour.
Median hourly income for men in these age groups was
$8.93 and $13.60, respectively.
Relying on average wage masks the earnings differences for men and women, by educational
level, and by employment sector. In 1990, the median
hourly wage of all North Dakota women employed full
time was $8.70 an hour compared to $12.13 for men.
These figures rose to $10.15 for women and $13.45 for
men in 1995. In 2000, the median wage for a woman
in North Dakota was $10 an hour in 2000, while for
men it was $13.90.
The Census 2000 for North Dakota shows that the three largest types of employers in North Dakota
are services, retail trade, and agricultural. Women
are more likely than men to be employed in services
and retail trade than in agriculture. In 1995, the
national median weekly earnings for service industries
were $264 for females ($6.60 per hour) and $357 for
males ($8.93 per hour), and it was $330 ($8.25 per hour)
for females and $579 for males ($14.48 per hour) employed in sales.
Currently the federal minimum wage is set at
$5.15 an hour. If a single mother worked 2,080 hours a
year at the current minimum wage, she would earn
only $10,712 a year before taxes. If this single mother
had two dependent children, these wages would not
bring her and her children above $14,630 a year, the
current poverty threshold for a family of three. This
means that to meet the basic cost of living in North
Dakota for a family of three, a single working mother
would need to earn an additional $11.03 an hour, or $1912
a month, $22,948 a year, on top of minimum
wage.
At the current minimum wage, this would require
our single mother to work an added 85.7 hours
every week, just to meet the most basic monthly
cost of living budget without further assistance.
If the employer offered health insurance or
other benefits, the monthly cost of living for this
family would decrease dramatically — over $200 a month
if health insurance were provided. And
arrangements may be available for child care that costs much
less than the average price of $661 a month for two
children. Food Stamps are another resource that
can extend the earnings of limited resource
individuals and families.
In addition, housing costs may be much lower
in rural areas, but food and transportation may be higher. For this analysis, we have chosen to
highlight the Fargo-Moorhead area because it is the
largest community in the state where jobs are available.
Conclusions
How much does an employed single mother with two dependent children living in North Dakota
need to earn in order to meet her family's monthly
needs? And, how likely is this mother to find
employment that meets this monthly budget without also
needing government assistance? This analysis
demonstrates that even presuming employment opportunities
in North Dakota, there is likely to be a significant
gap between earnings and the actual cost of meeting
a monthly household budget for the typical family currently receiving public assistance (i.e. a
single mother with two dependent children not
receiving child support).
North Dakota's labor market is heavily weighted toward the services sector, which has a high
proportion of minimum to low wage jobs. These are
jobs unlikely to provide wages at the $17.42 an hour
before taxes necessary for a single mother with two
dependent children to live without additional
assistance. Yet, the opportunity for welfare recipients to
move into jobs with adequate pay is the key
assumption upon which the success of welfare reform depends.
North Dakota adults currently receiving public assistance who are required to move into the
labor force as quickly as possible face a labor market
where jobs, when they can be found, will likely be at or
just above minimum wage. Yet, since the majority
of TANF cases are single parent families —
typically single mothers - they will need to find
employment that pays enough wages to meet their monthly costs
of living.
This analysis indicates that with welfare
reform, North Dakota's employed single mothers living
in rural areas are facing even greater challenges
in meeting their families' minimum needs. The
analysis also highlights an unanswered question: If
individuals are employed full time but still do not earn enough to meet their families' monthly costs of living, how
do they close the gap between earnings and monthly costs, especially after exhausting their
60-month lifetime limit of assistance?
Percent of 2002 poverty income guidelines for all states (except Alaska and
Hawaii) and the District of Columbia.
---------------------------------------------------------------
Household Size 100 % 120 % 130 % 133 % 185 % 275 %
---------------------------------------------------------------
1 8,860 10,632 11,518 11,784 16,391 24,365
2 11,940 14,328 15,522 15,880 22,089 32,835
3 15,020 18,024 19,526 19,977 27,787 41,305
4 18,100 21,720 23,530 24,073 33,485 49,775
5 21,180 25,416 27,534 28,169 39,183 58,245
6 24,260 29,112 31,538 32,266 44,881 66,715
7 27,340 32,808 35,542 36,362 50,579 75,185
8 30,420 36,504 39,546 40,459 56,277 83,655
Each additional 3,080 3,696 4,004 4,096 5,698 8,470
---------------------------------------------------------------
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Federal Register -- February 14, 2002. Vol. 67, No. 31, pp 6931-6933.
Sampling of programs in which eligibility is partially based on Federal Poverty
Guidelines.
------------------------------------------------------------------------
-- Head Start .............................. 100% of poverty or below
-- Food Stamps ............................. Gross income less
than 130% of poverty
-- Free school breakfast and/or lunch ...... 130% of poverty or below
-- Reduced price school
breakfast and/or lunch .................. 130% - 185% of poverty
-- Medical Assistance ...................... 133% of poverty or below*
-- WIC (Woman, Infants & Children) ......... 185% of poverty or below
-- Healthy Steps
(children's health insurance program) ... 140% of poverty or below*
------------------------------------------------------------------------
------------------------------------------------------------------------
* certain stipulations apply
For North Dakota programs on Child Care Assistance and TANF (Temporary
Assistance for Needy Families) contact your local Social Services office.
Revision data compiled by Rebecca Ziegler, CDFS Intern, NDSU Extension
Service.
Program information provided by Barbara Holes-Dickson, Family Nutrition Program
Specialist, NDSU Extension Service.
Comments and suggestions on the content of
this manuscript are appreciated.
Debb Pankow ( dpankow@ndsuext.nodak.edu
)
NDSU Extension Family Economics Specialist
277 EML
Fargo, North Dakota 58105
701/231-8593 Phone
701/231-7174 Fax
Adapted from
"The Bottom Line: Making Ends Meet in Rural
Kentucky," University of Kentucky,
College of Agriculture,
January 1998.
For more information on this and other topics, see: www.ag.ndsu.nodak.edu
FS-577,
March 2002
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