Connecticut's low-wage workers are often forced to play by a harsh set of rules.

Take Madelyn Figueroa, a 34-year-old former welfare recipient who now works an office job five days a week, takes college classes on the weekend and is applying to become a police officer. She earns $31,500 doing data-entry work at the University of Hartford, and is grateful for her paycheck and a supportive, flexible boss. "I really lucked out with this job,'' she said.

But hurt by higher costs of gas and milk this year, and a $3,400 car insurance bill, the single mother of four from Hartford faced a stark decision last year: pay for health care or save for retirement. She had money for only one. She decided that saving for retirement had to go.

From the room where she lives with her son at a Motel 6 in Hartford, Cheryl Folston, 50, looks back on more than four years of employment driving a school bus and tries to explain how she became homeless. Earning about $19,000 a year, Folston said she was evicted this year after she failed to pay $165 on her rent. She lost her Section 8 rental subsidy, and has little prospect of getting it back soon, given the current 2,800-family waiting list for Hartford's program.

"It got to the point where I couldn't stand the sight of a bill. So it got to the point where I wouldn't open them,'' she said, explaining the slow financial swoon that led to her eviction from a single-family house in Hartford where she had lived for 11 years.

Faced with what economists say is a recovery whose benefits have yet to flow to such lower-paid workers as Figueroa and Folston, social advocates plan to push next year for a major new anti-poverty program for Connecticut: a state earned-income tax credit that would boost state income tax refunds for low-wage workers.

"We feel that with the likelihood of a state budget surplus ... that the time really may be right to do this,'' said Jim Horan, executive director of the Connecticut Association for Human Services.

But whether or not a state earned-income credit becomes law -- and with an estimated price tag of about $47 million it is sure to be a contentious issue in the legislature -- advocates say there is a serious and worsening squeeze on Connecticut's working poor.

The U.S. Bureau of Labor Statistics reported last month that average weekly earnings for American production workers dropped by 1.4 percent in June, accounting for inflation, from the previous June -- the largest one-year pay slump since 1991.

In Connecticut, pay for workers at the bottom of the wage scale failed to keep pace with inflation over the past 14 years, despite the economic expansion of the 1990s, according to an analysis of census data by the Economic Policy Institute, a liberal research group based in Washington, D.C.

Workers at the top of the income pecking order, meanwhile, saw their paychecks grow nearly a third faster than inflation through the 1990s and into this decade.

During the 1990s, income for the poorest 20 percent of families dropped more in Connecticut than in any other state, according to a new report by Connecticut Voices for Children, another advocacy group that plans to push for a state income tax credit for the working poor.

The current economic "recovery is so concentrated among the top executives and the salaries of top executives,'' said Ellen Scalettar, a senior policy fellow with Connecticut Voices.

A state earned-income tax credit could "piggyback'' on the existing federal income tax credit for the working poor, advocates say. The credit would add up to 20 percent to a federal credit worth as much as $4,200 to a taxpayer with more than one child in 2003. It would be a "refundable'' credit, meaning that a low-wage worker eligible for the maximum federal credit would get an $840 check from the state, even if the worker had no state income-tax liability.

Opponents argue that a state earned-income credit would amount to an unfair cash transfer from the state's already burdened middle class to the working poor, especially when most workers with incomes below $24,000 pay no state income tax now.

"I don't think this direct cash payment is appropriate at this point,'' said state Rep. Robert M. Ward, R-North Branford, the House minority leader. "It sets up sort of a middle-class-vs.-working-class battle, that `we want to raise your [middle class] taxes to give the money directly to this other group.' I don't think that is particularly healthy for our democracy.''

Ward said he would prefer to restore the property tax credit on the state income tax to $500 a household for the current income year, saying broader-based credit would help more taxpayers.

"I think our middle class is heavily taxed in Connecticut now, and we should not set up a new social welfare program that in the long run will result in further increases in middle-class taxes,'' Ward said.

Gov. M. Jodi Rell also is not sold on the earned income credit. Rell said through a spokesman she wanted to review the fiscal benefits and costs of a state working-poor tax credit, but that the state may not be able to pay for it.

The state's tight budget "will make it difficult to fund any new initiatives, let alone one that could cost tens of millions of dollars,'' Rell said through the spokesman, Adam Liegeot.

Connecticut is the only New England state with a state income tax and no earned-income credit. If there isn't a budget surplus, Horan said, advocates will push for higher income taxes on the wealthiest 1 percent of Connecticut taxpayers. They said a combination of higher living costs for working poor people in cities like Hartford, and declining pay for people at the bottom of the wage scale, make a state earned income credit a top anti-poverty priority.

"I think most people would agree that if you're working, you shouldn't be poor,'' Horan said. "The [earned income credit] is one way to bring working people out of poverty. And I think wealthy people, if they had to pay a bit more in taxes, would be supportive of that.''

Both Folston and Figueroa are well above the federal poverty line -- $14,824 for a single parent with two children in 2003 -- illustrating that government poverty statistics often understate the number of struggling people in high-cost states like Connecticut.

But even at the height of the economic expansion in 2000, 5,800 Connecticut families in which one or both parents worked full-time, year-round jobs were below the federal poverty line, according to Census data. Nearly 40 percent of those poor, working families lived in Hartford, New Britain or other large cities; most were headed by single women.

Connecticut Voices and other anti-poverty organizations say the higher cost of living in Hartford and other cities, reflected in such things as automobile insurance and food, fall heavily on the working poor.

"In some cases, the issue is not only the high cost of being poor, but also the additional cost of being poor in a poor community,'' said a recent report funded by the Annie E. Casey Foundation.

With the number of jobs dropping in Hartford and growing in the suburbs, a car has increasingly become an employment prerequisite for city dwellers. But Hartford residents pay hundreds of dollars more to insure a car than most of their suburban counterparts, because of an insurance practice called "territorial rating'' that charges higher rates in Hartford, Bridgeport and New Haven than in all suburban and rural areas of the state.

The Casey report concluded that someone living on Laurel Street in Hartford and driving a 1992 Honda Accord would pay 33 percent more for insurance -- more than $400 a year -- than the owner of the same car living on Farmington Avenue in West Hartford across the city line. In addition, state and federal budget cuts have left thousands of people on waiting lists for housing and child-care subsidies, programs that advocates say are essential supports for low-wage families.

During the current recovery, lower-income workers are less likely to have benefited from federal tax cuts on stock dividends and capital gains that have boosted the fortunes of many wealthier Americans, economists say. And in Hartford, which has one of the lowest rates of homeownership among U.S. cities, relatively few people have benefited from the recent run-up in housing prices.

Figueroa had been putting aside $10 to $20 a week to buy a house, using an Individual Development Account -- programs that use state or federal money to match the dollars she saved.

But with money tight, she said, she had to stop saving. She pays $750 a month to rent a two-bedroom apartment in Frog Hollow. She gets $62 a week in child-support payments for her three older daughters -- if their father is working. Thanks to a state subsidy, she only pays $111 every two weeks for child care.

"If it wasn't for the Care 4 Kids subsidy,'' she said of the child-care subsidy, "I wouldn't be able to make it.''

Still, she often finds that there is not enough money to feed her children healthy food and pay all the bills.

The premium price she pays for car insurance is one reason money is so tight. "I called so many insurance companies,'' she said. "That was the best I could do.'' She said she has received one speeding ticket and another ticket for driving without insurance in recent years.

Despite having to pay more than 10 percent of her annual income for car insurance, Figueroa said she can't do without a car: It's impossible to get to child care in Bloomfield and to work without one.

"I get paid tomorrow, and it's already gone,'' she said. "There's a lot of people who are in my situation.''

Folston, the motel resident, knows she needs to find permanent housing soon. But she said many landlords won't rent to somebody who has been evicted, and that she can't come up with the two months' rent -- often $1,500 -- that many landlords want for a security deposit. She is also trying to figure out how to pay a car insurance bill of more than $3,000 for herself and her son.

Folston said she had four goals in life: Get off welfare, have a car that was registered and insured, buy food without food stamps, and live without a Section 8 housing subsidy.

"I've achieved all four now,'' she said in her tidy motel room, where the beds were neatly made, the shelves were lined with her son's food and a cheerful beach scene glowed on the screen of her computer. "But how am I going to survive?''