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Worker Compensation

Minimum Wage

Key Takeaways

  • Arkansas’s minimum wage is strong compared to neighboring states, but it is vulnerable to inflation.  
  • When the $11 minimum wage went into effect it was enough to lift a family of three out of poverty; now it is only enough to lift a family of two above the poverty level.  

Arkansas’s $11 minimum wage is relatively strong compared to most surrounding states, and it has increased many times since its inception in the late 1960s.1 The most recent change was due to a successful ballot initiative in 2018 that increased the minimum wage to $11 an hour incrementally over several years.  

Passing a new minimum wage was a triumph for voters and workers in Arkansas, but inflation is threatening the impact of this change. When Arkansas’s new minimum wage law first went into effect in January 2021, $11 an hour was enough to lift a family of three above the poverty level.2 Now, because of inflation, it is only enough to lift a family of two above the poverty level. 

Because our minimum wage is not indexed to inflation, it will continue to lose spending power every year. This means workers making the minimum wage will have less to spend on their family’s basic needs, such as rent, utilities, food, educational supplies, and clothing. Other states have taken legislative action to protect their minimum wage. Missouri is one of 19 states that has enacted legislation to protect their minimum wage by indexing it to inflation.3

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Wages for Typical Workers

Key Takeaways 

  • Wages for typical workers in Arkansas have been gradually increasing, but for the past two decades, median wages have consistently lagged behind those in neighboring states. 
  • Median wage disparities persist, costing typical full-time workers thousands of dollars per year. These pay gaps amount to an annual cut in income of $4,659 for Black workers, $5,900 for Hispanic workers, and $2,900 for women.  

Despite having a comparatively strong minimum wage, wages for a typical worker in our state are low. For the previous two decades, Arkansas’s median wage fell below the national average and below that of most neighboring states after adjusting for inflation. However, our median wage is slowly catching up. The gap between the US and Arkansas median wage narrowed 16% since 2000 (from a difference of $3.51 to $2.95).  

Income disparities also persist by demographic group in Arkansas and can cost women and Black, Indigenous and other People of Color (BIPOC) thousands of dollars a year. The median wage in Arkansas is $19.93 an hour, or about $40,200 a year for a full-time worker. Black workers earn a median wage that is $2.24 per hour less than average, which is equivalent to a $4,659 annual pay cut for a full-time worker. For Hispanic workers it is $2.84 an hour less, or $5,900 less per year. Similarly, women in Arkansas have a median wage that is $1.41 less than average, translating to a difference of about $2,900 less per year for a full-time job.  

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Income Inequality

Key Takeaways

  • Income inequality is on the rise in Arkansas and across the nation. Median wages for the top 10% in Arkansas grew 2.4 times faster than wages for typical workers from 2010 to 2022.  

Wages are improving for typical workers in Arkansas, but not as quickly as wage growth for top earners. The top 10% of earners in Arkansas saw a 23% increase in real wages from 2010 to 2022. That represents growth that is 2.4 times faster than the median wage. At the national level, the top 10% also outpaced median wage growth during that time, but at a smaller scale (1.74 times).    

At the national level, the gap in mean household income between the lowest quintile and the top 5% grew by 24%.4 Income inequality grew at a similar pace in Arkansas during that time. The gap in mean household income between the top 5% and the lowest quintile increased 21% in our state after adjusting for inflation. Adjusted mean household income for the top 5% of earners in Arkansas also rose at more than twice the rate of earners from the middle quintile. During that time, the lowest earning quintile in our state saw their real household income — that is, income adjusted for inflation — decrease by 12% on average.5

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Poverty in Arkansas

Key Takeaways 

  • Overall poverty rates and rates of child poverty in Arkansas are consistently above the national average. However, both have improved slightly after peaking in 2012.  
  • Child poverty rates for some minority groups are improving quickly, while other groups see more persistently high poverty. Hispanic child poverty rates fell 34% from 2012 to 2022, while Black or African American rates improved slower than average (9%).   

Poverty rates in Arkansas are elevated 

Nearly half a million Arkansans live below the federal poverty level. This puts Arkansas among the worst states for adult and child poverty rates. According to 2020 Census Data, Arkansas has the fourth highest rate of child poverty in the nation (21%) and sixth highest overall poverty rate (15%).6 Very young children are especially vulnerable to poverty in Arkansas. Nearly one in four children under age 5 in Arkansas live in poverty (24%).7  

Children in BIPOC groups suffer even higher child poverty rates in our state. In Arkansas, 43% of Black or African American children live below the poverty level as well as 27% of Hispanic or Latino children.8 The good news is that poverty rates have improved slightly in recent years. The overall poverty rate in Arkansas fell from a recent peak of 20% in 2012 to 15% in 2020. Child poverty rates had also been on the decline, falling by 24% since 2012. 

2024 Poverty Guidelines 
US Department of Health and Human Services  
Persons in family/household Poverty guideline 
1$15,060
2$20,440
3$25,820
4$31,200
5$36,580
6$41,960
7$47,340
8$52,720
For families/households with more than 8 persons, add $5,380 for each additional person. 

Child poverty rates are declining unevenly 

Child poverty rates have improved especially quickly for Hispanic children in Arkansas, whose poverty rate fell by 34% from 2012 to 2022. Black or African American children face more persistent poverty rates, which fell by 9% during that time, an improvement that is less than half the magnitude of the overall change in child poverty.  

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Beyond the Poverty Level

Key Takeaways 

  • ALICE stands for “Asset Limited, Income Constrained, Employed.” ALICE households represent working people who earn enough to put them over the poverty level, but not enough to meet basic needs for their families.  
  • Nearly half (47%) of families in Arkansas are either below the poverty level or are considered “ALICE.”  
  • Lower income households in Arkansas are more likely to spend more than 30% on housing and struggle to afford food.  

Rising above the poverty level is not enough 

Many families whose income officially places them above the federal poverty level continue to struggle to meet the basic needs of their households. These working families are categorized as “ALICE,” which stands for “Asset Limited, Income Constrained, Employed.”

The ALICE threshold for financial survival acknowledges that the federal poverty level levels are inadequate to provide a safe and healthy household environment. The ALICE threshold comes from the Household Survival Budget, which includes minimum costs for necessities like child care, housing, food, and transportation. ALICE budgets are unique to each state because they include regional prices.  

For a family of four, the Arkansas ALICE household threshold is $54,948 per year (the federal poverty level for a family of four is $31,200 a year). That is equivalent to a $27.47 hourly wage for a single earner.  

The increasing cost of basic family needs, like housing and child care, means that even earning above the poverty level is unsustainable for working families in Arkansas. In addition to the 16% of households in our state that were below the federal poverty level, 31% are “ALICE” households, who earned more than the poverty level but not enough to afford basic needs in their area. Nearly half (47%) of families in Arkansas — more than half a million households — are either below the poverty level or considered “ALICE.”  

ALICE households are on the rise in Arkansas  

United for ALICE reports that the price of household basics in Arkansas is far outpacing wage increases. For a family of four, the cost of those household necessities increased by 32% from 2007 to 2018.9 As we have seen overall poverty rates decline in Arkansas, the share of households categorized as “ALICE” is increasing. In Arkansas, ALICE households increased from 26% of all households in 2010 to 31% in 2021.10  

Many essential workers are in ALICE households 

Families in ALICE households are working hard at jobs that are critical to our communities, but their incomes are not enough to sustain household necessities. Some of the most common occupations for ALICE households in Arkansas are truck drivers, food service workers, retail workers, and cashiers. Most cashiers (60%), food service workers (65%) and cooks (54%) in Arkansas are in ALICE households. So are half of teaching assistants, 60% of personal care aids and more than a quarter of truck drivers (26%). During the COVID-19 pandemic, we saw just how critical many of these roles are to our society. They take care of us, but many do not make enough to meet their own needs.  

Rent and food costs squeeze Arkansas budgets 

Households that spend more than 30% of their income on housing are cost burdened. The risk of being a cost-burdened household increases as income levels go down. Households making less than $35,000 a year in Arkansas are far more likely than other groups to spend more than 30% of their household budget on rent. More than three quarters of households in the $10,000-$20,000 per year group spend at least 30% of their household budget on rent.11  

Many families in Arkansas are also struggling to afford food, and 15% are food insecure. Of the food-insecure people in our state, most of them (59%) are not eligible for SNAP assistance because they earn slightly more than the limit of 130% of the federal poverty guidelines or they have more than $2,750 in assets.12 Arkansas could raise the income limit if it contributed state funds to the program. Arkansas could also raise the asset limit. Both policy choices would lift more families out of poverty. 

In a 2021 report, Feeding America projected that Arkansas is second in the nation for overall food insecurity. The report also showed that Arkansas has the highest projected rate of the most severe category of food insecurity for the third straight year. This level of food insecurity involves “reduced food intake and disrupted eating patterns.”13  

Children in Arkansas face even higher rates of food insecurity (23%).14 Arkansas ranks 6th in the nation for the highest rate of projected child food insecurity, improving slightly from 4th place in 2019.15 Philips County in Arkansas stands out as the seventh worst county in the nation for projected child food insecurity in 2021.16

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Footnotes

  1. Source: Arkansas Advocates for Children and Families, “The Impact of a Minimum Wage Increase on Arkansas Families,” https://www.aradvocates.org/wp-content/uploads/AACF.miniwage.webfinal.rev_.9.17.18.pdf ↩︎
  2. Source: Arkansas Advocates for Children and Families, “The Impact of a Minimum Wage Increase on Arkansas Families,” https://www.aradvocates.org/wp-content/uploads/AACF.miniwage.webfinal.rev_.9.17.18.pdf ↩︎
  3. Source: Economic Policy Institute, “Minimum Wage Tracker – Arkansas,” https://www.epi.org/minimum-wage-tracker/#/min_wage/Arkansas ↩︎
  4. Source: AACF analysis of US Census table B19081 Mean Household Income of Quintiles, ACS 1 year estimates. Adjusted to 2022 Dollars. ↩︎
  5. Outliers and large differences in income within quintile groups can skew the calculation for mean household income. Extreme inequality within quintile groups is more evident in a mean calculation compared to a median. ↩︎
  6. Source: AACF Analysis of Arkansas Kids Count Data Center and American Community Survey Data ↩︎
  7. Source: Arkansas Kids Count Data Center ↩︎
  8. Source: Arkansas Kids Count Data Center ↩︎
  9.  Source: United for ALICE, “Arkansas,” https://www.unitedforalice.org/state-overview/Arkansas ↩︎
  10. Source: United for ALICE, “Arkansas,” https://www.unitedforalice.org/state-overview/Arkansas ↩︎
  11. Among the universe of renter occupied housing in Arkansas.  
    Source: U.S. Census Bureau, American Community Survey 1-Year Estimates, 2022, Table B25074 ↩︎
  12. Source: Feeding America, “Overall Food Insecurity Rate in Arkansas (2021),” https://map.feedingamerica.org/county/2021/overall/arkansas ↩︎
  13. Source: Feeding America, “Local Projections Brief” (March 31, 2021), https://www.feedingamerica.org/sites/default/files/2021-03/Local%20Projections%20Brief_3.31.2021.pdf ↩︎
  14. Source: Feeding America, “Overall Food Insecurity Rate in Arkansas (2021),” https://map.feedingamerica.org/county/2021/overall/arkansas ↩︎
  15. Source: Feeding America, “Local Projections Brief” (March 31, 2021), https://www.feedingamerica.org/sites/default/files/2021-03/Local%20Projections%20Brief_3.31.2021.pdf ↩︎
  16. Source: Feeding America, “Local Projections Brief” (March 31, 2021), https://www.feedingamerica.org/sites/default/files/2021-03/Local%20Projections%20Brief_3.31.2021.pdf ↩︎