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The Consequences of Insufficient Household Income

This new Consequences of Insufficient Household Income report provides a deeper level of understanding of the choices that ALICE and poverty-level families across the country make when they do not have enough income or assistance to afford basic necessities, and the consequences of those choices.

K–12 EDUCATION

K–12 EDUCATION The only cost for education included in the Household Survival Budget is that for child care, which is essential in order for parents to work. Public K–12 education is one of the key ways students from ALICE families can improve their circumstances. Yet the quality of public schools varies widely, and private school tuition is out of reach for many low-wage workers. One area of particular concern for ALICE households is the achievement gap for many students in K–12 public schools. On average, four groups of students – economically disadvantaged students; Black, Hispanic, and Native American students (who are disproportionately lower-income); students with limited English proficiency; and students with disabilities – perform lower on test scores throughout K–12 and have high school graduation rates below the national average (Stetser & Stillwell, 2014). Schools’ performance results are strongly correlated to household income. The more students in poverty who are enrolled in a particular school, the lower that school’s average performance scores. In 2007, students who were eligible for free lunches were two years of learning behind their classmates who were from more financially secure families. Among children entering kindergarten, children from families earning below the FPL scored the lowest on reading and math tests, while children with family income above 200 percent of the FPL were the highest scorers (McKinsey & Company, 2009). Strategy 7: Move to a Better Performing School or District Past policy choices and an array of systemic forces – including housing discrimination – have segregated many children in under-resourced neighborhoods with low-quality schools. Although neighborhoods and schools are modestly more integrated by race than they were decades ago, significant racial segregation persists. In most states, there is wide variation in school performance across school districts. Parents in search of better performing schools can change schools, if school choice is available, or move to a different neighborhood (National Center for Education Statistics, 2014; U.S. Department of Housing and Urban Development (HUD), 2016). Consequences Long commute: Very few students in higher-income neighborhoods attend open enrollment schools or charter schools outside their neighborhood school zones, but that percentage tends to increase for students living in disadvantaged areas. For example, in Chicago in 2009, more than 20 percent of public school students attended open enrollment schools and another 7 percent chose charter schools. These low-income students face the longest commutes to school, which adds time and expense and limits opportunities for school activities and studying – challenges that similarly achieving students in higher-income neighborhoods do not have to face (U.S. Department of Housing and Urban Development, 2016; Burdick-Will, 2015; Denice & Gross, 2016). More expensive housing: Most higher-performing schools are located in neighborhoods with more expensive housing. In the top 100 largest metropolitan areas, housing costs almost $11,000 more per year near high-scoring public schools than near lower-scoring ones. Housing vouchers have the potential to enable moves to areas of opportunity, but they have not worked in practice because many landlords will not accept them. Most families with housing vouchers live near a school that has 74 percent low-income students and ranks at the 26 th percentile by state test scores (U.S. Department of Housing and Urban Development (HUD), 2016). 32 UNITED WAY ALICE REPORT – THE CONSEQUENCES OF INSUFFICIENT HOUSEHOLD INCOME

Strategy 8: Drop out of High School Low-income students are the least likely to graduate high school, with a dropout rate of 11.6 percent among students in the lowest income quartile, compared to 2.8 percent for students from families with the highest incomes (National Center for Education Statistics, 2014). Consequences Lower wages: Dropping out of high school may have short-term benefits for those who can get a job. And in all states studied by the United Way ALICE Project, most jobs do not require a high school diploma. But these jobs predominantly pay less than $15 per hour and have few career paths for advancement. As a result, in the long term, those without a high school diploma on average earn less than those with higher education. In 2015, workers with less than a high school diploma earned $494 per week compared to $697 for high school graduates, $782 for those with some college or associate degree, and $1,155 for workers with a bachelor’s degree (Bureau of Labor Statistics (BLS), 2016). Lower lifetime earnings: The difference in the net earnings of a high school graduate versus a high school dropout in the U.S. is $305,000 over that person’s lifetime, according to a 2009 estimate by the Center for Labor Market Studies at Northeastern University. The gap in lifetime earnings between high school graduates and those who hold a bachelor’s degree is estimated to be $830,800. Included in these calculations is income from tax payments minus the cost of government assistance, institutionalization, and incarceration (Center for Labor Market Studies, 2009; Daly & Benagli, 2014; Klor de Alva & Schneider, 2013; Tyler & Lofstrom, 2009; Carnevale, Rose, & Cheah, 2014). UNITED WAY ALICE REPORT – THE CONSEQUENCES OF INSUFFICIENT HOUSEHOLD INCOME 33

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