The American Enterprise Institute’s Robert Doar recently testified before the U.S. Senate Committee on the Budget with ”Back to Work: How to improve the prospects of low-income Americans”. His recommendations are based on the four principles:
- Work requirements as a condition of public assistance. The work first approach has been shown to have better outcomes with regard to attachment to the labor force than even approaches which focus on training and education.
- Robust work supports for those who are working at low wages. The Earned Income Tax Credit accomplishes this and should be extended to childless adults.
- Business growth and investment. Policies that raise the cost of doing business and deter growth do little to create what the poor need most: jobs.
- Foster married, two-parent families. We need to mitigate marriage penalties in public assistance programs and we need to be honest about the consequences for children of single parenthood.
Mr. Doar points out that 10.2 million American’s are unemployed at the present time, 3.6 million have been jobless for more than 27 weeks, 7.3 million are involuntarily working part-time and 837,000 workers are so discouraged that they have stopped looking for work. Labor force participation has dropped from over 66% in 2007 to 63% today while the poverty rate has risen from 12.5% to 15%.
Raising the minimum wage will not help the job prospects of most poor Americans. Only 11.3% of individuals who would benefit from raising the minimum wage are living below the poverty line. The Congressional Budget Office estimates that raising the minimum wage to $10.10 per hour would lead to 500,000 people losing their jobs. CBO also estimates that the Affordable Care Act will reduce full-time employment by 2.3 million by 2021. Given the strong anti-correlation (see the above chart) between labor participation and poverty, this means that the poverty rate may go higher yet.
The conclusion to draw from this excellent poverty synopsis (with lots of references) is that there are intelligent and effective ways to fight poverty and also much poorer ways to try to do it. Good intentions are not enough!