A renewed reason to celebrate this Fourth of July

by Corey Burres | Jul 15, 2021

A renewed reason to celebrate this Fourth of July

This year we celebrated our country and one of its biggest values…family.

For many the Fourth of July is more than just a celebration of our country’s birth—it is an opportunity to gather with family. An opportunity to connect and celebrate together. It feels like this past year, more than most, this was true as we came out of a period of social distancing and separation.

While many areas of our state refrained from large gatherings, most people returned to having small gatherings of family and friends. Picnics and backyard get-togethers returned and with them came improved social, mental, and relational health for many of our families and neighbors.

As we have discovered over the past 12-14 months, these previously mundane gatherings with family are much more important to our community and personal mental health than we may have realized. We have taken for granted the value and the connections we need to sustain our lives. And we have had a reawakening to the requisite relationships that ground us and support us through hard times.

It is why family is one of the pillars of the success sequence which models the tangible ways that we can make strides in addressing poverty. It is a recognition of the importance of the role family has in creating stability and support. It is why we must continue to value it and why, I believe, it is directly connected to our national identity.

The Success Sequence provides an outline of how to reverse the cycle of poverty in our communities.

But celebrating family happens outside of a single holiday (or even a nation). As the summer continues many of us will jubilantly gather and connect. It is as if the past year or so has reset our expectations and even our need to be with those we love.

I have seen many people recently post realizations of how much they missed being together and hugging someone. When it was part of our day-to-day, we just expected it. But since it was deprived from us for so long, we understand the importance of it.

Let us not forget the power of coming together. The strength we gain by being with one another and supporting each other. The power that comes out of family and relationships.

GCO Testifies Before U.S. House On Benefits Cliffs

by Corey Burres | Jul 13, 2021

GCO Testifies Before U.S. House On Benefits Cliffs

Examining the SNAP Benefit Cliff

On July 12, 2021, Eric Randolph, GCO’s Director of Research, testified before the U.S. House Agriculture Subcommittee on Nutrition, Oversight, and Department Operations about how welfare programs often hurt the very people they are supposed to help.

In this video, you will see how benefits cliffs are complicated and often have unintended consequences that harm families, inhibit upward mobility, and dehumanize people trapped in generational poverty. And you will learn more about GCO’s Benefits Cliff Model helps hard-working individuals improve their circumstances with better opportunities to thrive and become productive members of their communities.

On July 12, 2021, GCO’s Director of Research, Erik Randolph, joined 3 others in providing testimony and answering questions on Benefit Cliffs.

Promote Purchasing Power—Not the Minimum Wage

by Erik Randolph | Jul 13, 2021

Promote Purchasing Power—Not the Minimum Wage

How to help working families the most

During a focus group session on working class families we recently conducted at the Georgia Center for Opportunity, Jazmine* made an observation more perceptive than most experts.

Our focus group consisted of working-class African-Americans who did not have a college degree and who were not employed in a managerial position nor on track to become a manager.

Knowing financial stress up close, Jazmine essentially said that either the minimum wage should be increased or the cost of living should be lowered.

Her observation is a perfect segue from my prior blogs on:

the empirical economic evidence against the minimum wage,
why the minimum wage is bad news for small business and the overall economy, and
alternative strategies to the minimum wage that help everyone, instead of just some workers at the expense of others.

The Success Sequence provides an outline of how to reverse the cycle of poverty in our communities. GCO uses this as a framework for much of our work.

Promoting Purchasing Power

The Employment Act of 1946 declared it is the policy and responsibility of the federal government to:

“promote maximum employment, production, and purchasing power.”

Promoting purchasing power means lowering the cost of living, as Jazmine suggested.

Solidified in the 1951 Accord with the Treasury Department, the responsibility ultimately fell to the Federal Reserve to conduct monetary policy as we know it today.

How well has the Fed done with promoting purchasing power? Horribly, quite frankly.

Since 1951, prices have increased 3.4% annually on average, as measured by the geometric mean. In other words, the price level was tenfold higher in 2020 than in 1951. Prices doubled each generation.

It is widely accepted that the poor suffer most from inflation because they spend a higher portion of their income on necessities, and their income growth typically lags others.

For example, according to the most recent mid-year consumer expenditure report from the Bureau of Labor Statistics, consumers in the lowest income quintile spend 82.2 percent of their income on housing, transportation, food, and healthcare, compared to 64.4 percent for the highest quintile. A five percent inflation rate would cost those in the lowest quintile an additional $1,156 for these items on a budget that is already tight, averaging $28,141. A 10% inflation rate would double those costs to $2,312.

Worse, those in the lowest quintile are unable to save for their future, and inflation erodes away the value of the little savings they do have. Consider that on average, those in the lowest quintile purchased only $563 in personal insurance or toward their pensions, compared to $19,736 for those in the highest quintile. This disparity guarantees the poor will be inadequately prepared for retirement or unforeseen loss or tragedy.

Prior to the federal government taking on the responsibility of promoting purchasing power, prices not only remained fairly stable but actually decreased during times of relative peace. Typically, they only increased dramatically during times of war.

This pattern can be seen visually in the accompanying chart using the Consumer Price Index and related data from the Federal Reserve Bank of Minneapolis. For example, the price level increased 24% due to the War of 1812 but then deflated 57% over 47 years until the start of the Civil War, even after accounting for a slight bump up due to the Mexican War.

The pattern was similar for the remainder of the century. Prices increased 74% during the Civil War but then deflated 47% to its pre-Civil War level until the start of the 20th Century.* Although the price level rose somewhat during the progressive era, it was still 30% lower at the start of World War I than at the close of the Civil War.

America’s inflationary policy

Unfortunately, a 1978 law changed promoting purchasing power to become the lame “reasonable price stability,” which is not the same thing.

Over the years, the Fed has allowed inflation as a matter of policy. In 2012, Fed Chairman Ben Bernanke explicitly stated for the first time an inflation target of 2% per year. If the Fed can somehow hold to this target, which it has not been able to do historically, it equates to doubling the price level every 35 years. Last August, it backed away from this policy. Because of all the pandemic spending and monetary expansions, the Fed approved a policy to allow inflation to rise “modestly” above its 2% target.

It is not just the Fed that has shied away from promoting purchasing power. In 1978, and in the midst of the stagflation years, Congress legislated the modest goal that inflation should be 3% or less, but the target rate was supposed to come down to zero percent by 1988 unless it might have impeded employment.

The Fed is not alone to blame for the inability of the federal government to control inflation. Congress’s lack of fiscal discipline resulting in soaring budget deficits place the Fed in a tenuous position to keep interest rates low so federal debt service costs also remain low. Furthermore, recent Fed direct purchases of Treasury debt because of all that federal spending adds to the money supply, eroding—not promoting—purchasing power.

How Congress can better help the average working family

If economics has any immutable law, it must be that you can’t get something out of nothing. This explains why the Consumer Price Index increased 5.4% since last year, as announced today by the Bureau of Labor Statistics. And the rate of increase appears to be accelerating. The monthly rate was 0.6% in May but 0.9% in June. If this June inflation rate persists, and hopefully it does not, we will have double digit inflation. A 0.9% monthly rate equates to an 11.4 % annual rate.

Considering all the recent deficit spending by Congress and expansionary policies by the Fed, expect more of the same, or worse. In fact, according to a survey of economists in yesterday’s Wall Street Journal, “Americans should brace themselves” because economists are waking up to the prospect of higher inflation, expecting “brisk price increases for a while.”

Economic history indicates deflation should be the norm. In fact, innovation spawns increased productivity that allows prices to fall, which should show up as deflation. We have the opposite: productivity gains with inflation. This outcome places the blame squarely on monetary and fiscal policy.

In the meantime, Jazmine and other hard working Americans struggle to keep up with rising prices. Instead of pushing for increases in the minimum wage that help some at the expense of others, Congress needs to renew our nation’s purchasing power policy and get its fiscal house in order.

*Jazmine’s last name withheld for confidentiality.

*This is not intuitive. It takes a smaller percent decrease to offset a percent increase, such as a 43% reduction will offset a 74% increase. For example, suppose you receive a 20 percent pay raise this week, but next week you receive a 20 percent pay cut. Are you back where you started? The answer is no; you are worse off. If your weekly pay was $100, the increase took you to $120, but then your pay cut took you to $96, even lower than your starting point.

Erik Randolph is the Director of Research at the Georgia Center for Opportunity.

Gov’t. check can’t beat work’s dignity | AJC

by Corey Burres | Jul 9, 2021

Gov’t. check can’t beat work’s dignity | AJC

The latest unemployment statistics are in and show trends continuing with millions of jobs across the nation going unfilled as unacceptably high numbers of Americans draw on generous unemployment benefits. On June 23, the U.S. Bureau of Labor Statistics reported its unrevised May 2021 figures, showing a drop in the unemployment rate for Georgia from 4.3% in April to 4.1% in May.

The good news is that our state has fared much better than many others in the COVID-19 pandemic recovery. States with more draconian restrictions — such as California — have had a much slower economic recovery.

Georgia’s rate is 16th-lowest in the country, beating out 34 other states. And the U.S. as a whole has a 5.9% unemployment rate, significantly higher than Georgia’s...

Read the full article here

Help From Where You Least Expect It

by Eric Cochling | Jul 8, 2021

Help From Where You Least Expect It

“I don’t know what I’m going to do if I don’t find a better job; I might have to go back [to prison].”

Two months out of prison, Ray (name changed for anonymity) was explaining to me that he had reached the end of his rope. He had been struggling to find work that paid enough so that he could simply afford the basics. His part-time, minimum-wage job, just wasn’t cutting it. But, at least it was something.

Ray had the added complication of having to take custody of his son shortly after being released, meaning another mouth to feed when he could barely feed himself.

During his most desperate days after leaving prison, Ray said he was blessed to have the help of local church ministries who provided temporary housing for him and his son at a local extended stay hotel. He called GCO because that assistance was running out. He needed more help so he could remain at the extended stay but, more than that, Ray knew he had to solve the job problem to have any hope of getting off the hamster wheel he was on.

“I’m “clean” and have no intention of going back to that life.”

With a record that included drug and property crimes, Ray worried he might not have a shot at a better job. “But I’m willing to do any job that pays enough,” he assured me.

With those details in hand, our team started looking for the resources Ray needed and found some great opportunities for him and his son. There was a local church ministry offering help with additional days in the extended stay motel, there was the local restaurant eager to interview Ray for a better-paying job.

In the end, help came from a place Ray least expected it: the extended stay motel owner himself.

After hearing Ray’s story and observing him on the motel property, he offered Ray a job as a maintenance technician, a position that also included room and board on the motel property – an answer to Ray’s prayer for better pay and housing stability for him and his son.

The Success Sequence provides an outline of how to reverse the cycle of poverty in our communities. GCO uses this as a framework for much of our work.

Like Ray, you might be surprised the motel owner stepped in to help the way he did, but you shouldn’t be. Many times, our local business owners bridge the gap for those in need in big and small ways – from helping support the nonprofits that serve emergency needs to, like the motel owner did for Ray, helping directly.

Too often, it’s business owners who get the negative press and little credit for the good they do. In reality, as Ray’s story reminds us, they are a huge part of the solution to poverty – both in the jobs they provide through their risk-taking and in their philanthropy made possible through the profits they generate.

Is this the end of Ray’s story? I don’t think so. Ray seems to have a drive that’s going to keep him reaching for better opportunities and, of course, if we can help him, we’ll be here to do that.

The point is that Ray’s story isn’t unique. For those reaching out and seeking help – for housing, for work, for food – there are often caring community members willing to help.

And sometimes that help comes from the place you least expect it.

If you or someone you know is struggling to find employment in Gwinnett or is looking for help to meet their basic needs, please visit www.betterworkgwinnett.org to find resources or to be connected to one of our “guaranteed-interview” employment partners.