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investment in low-income workers key to exiting kentucky's poverty trap

 

May 23, 2010

 

By Jason Bailey

Printed in the May 23, 2010 edition of the Lexington Herald-Leader

 

A Census Bureau report released last fall had bad news for Kentucky: new data showed that only Mississippi, Louisiana and New Mexico had higher state poverty rates. Over the last decade, the gap between Kentucky’s poverty rate and the U. S. rate has grown.            

 

In response, legislative leaders created a Poverty Task Force to explore what Kentucky could do. A December task force report contained many good ideas ranging from support for early childhood education to transportation, from rural philanthropy to broadband access.

 

Then the legislature began work on a new state budget, and the options focused on how deeply to cut existing services. Proposals to raise new revenue through reforms of Kentucky’s tax system have been largely off the table.

 

But as a recent MACED report suggests, lack of adequate funding in important areas of training and family supports is making it harder for low-income people to access good jobs that could improve their standard of living. Without a skilled workforce, Kentucky’s businesses and economy also suffer. That in turn limits the tax base from which to raise needed revenue.

 

This poverty trap will only tighten through ongoing budget cuts to vital educational programs and services.

 

Our report shows that despite participating in the workforce or actively seeking work, a full one-third of Kentucky’s working families were low-income in 2007 using measures that approximate a basic family budget. This share has only increased further during the current recession.

 

These families face significant barriers to better jobs. Over half have no adult with post-secondary education, and over one-fourth have an adult without a high school diploma or GED. More than a third lack health insurance, and most do not own their home.

 

One area of opportunity is in what are labeled “middle-skill” jobs—those that require more than a high school diploma but less than a four year degree. The Kentucky Labor Cabinet reports that about half of the job demand now and in the future is in middle-skill jobs. They range from jobs in health care including licensed practical nurses and health technicians; to jobs in construction such as carpenters and electricians; to jobs in manufacturing including mechanics and equipment installers.

 

In 2007, about 56 percent of the Kentucky job demand was in middle-skill occupations, but only an estimated 44 percent of the state’s workers had adequate training for those jobs. By contrast, 19 percent of jobs in the state were low-skill, but low-skill workers made up 28 percent of the workforce.

 

To help more Kentuckians avoid an endless series of dead-end jobs, Kentucky needs a stronger and more comprehensive workforce development strategy. That strategy should help individuals obtain the training that allows them to get better jobs and achieve continual progress along a career and skills path. To reach rungs on the ladder requires support services that allow people to pursue education. And it requires accessible training linked to real, growing career opportunities.

 

Kentucky has several models that are steps in the right direction. The Career Pathways initiative of the Kentucky Community and Technical College System (KCTCS) was built precisely on this idea. It has demonstrated greater success in student retention and graduation than the KCTCS average. Another success story is the Ready to Work program, which provides support services, counseling and access to education for individuals in the state’s Temporary Assistance to Needy Families program.

 

But for the most part, the rungs on the ladder are missing—particularly at the lower end. Fifty-four percent of Kentucky adults have basic or below basic literacy, but the state spends 26 percent less than the national average on adult education per adult without a high school diploma or GED. Tuition at Kentucky postsecondary institutions rose 60 percent between 2002 and 2007, and 47 percent of applicants for need-based financial aid are being denied funding despite meeting the income guidelines. A 2007 state auditor report suggests that rising college costs have begun to impact enrollment growth.

 

And the support services needed to help low-income families obtain education, retain employment, and make work pay are missing or underfunded. Medicaid in Kentucky covers parents only up to 62 percent of the poverty line. Kentucky has among the highest child care co-pays for low-income families among the states. And unlike 24 other states, Kentucky does not yet have a state earned-income tax credit to help families in the workforce make ends meet.

 

Workforce development and income supports are not the full solution to poverty in Kentucky. But by helping more low-income families access better jobs and improve their economic status, they are part of the answer.

 

And they are critical for the development of the Kentucky economy. Many middle-skill jobs, for example, provide vital services: increasing the energy efficiency of our housing and building stock; improving the health status of our populace; and enhancing the competitiveness of our manufacturing base.

 

But embracing this opportunity requires new thinking about the relationship between economic development and poverty and the potential benefits of tax reforms that raise new revenue. Given the trends in our poverty rates, new thinking is exactly what we need.

 

Jason Bailey is Research and Policy Director at the Mountain Association for Community Economic Development.

 

MACED, “Investing in Kentucky’s Working Families: A Path to Shared Prosperity in the Commonwealth” http://www.maced.org/WPFP-2010-release.htm