Welfare Cliffs Exist—Concludes Team of Economists

Welfare Cliffs Exist—Concludes Team of Economists

by | Sep 17, 2020

 

 

 

Welfare Cliffs Exist—Concludes Team of Economists 

 

 

 

 

 

 

By Erik Randolph

 

 

Since 2016, the Georgia Center for Opportunity (GCO) has demonstrated the existence of welfare cliffs. Now a team of five economists has come to the same conclusion.

Welfare cliffs are an unfortunate feature of the American welfare system. They occur when a family’s breadwinner, or an individual, discovers that his or her family will become worse off economically by earning more money. It sounds paradoxical, but it happens whenever the loss in welfare benefits exceeds the additional take-home pay.

Exactly when the cliffs occur, and how bad they are, depends on many factors, including the characteristics of the family, how much they earn, and where they live. And because of the haphazard way the welfare system is constructed, it turns out that there isn’t a single cliff but multiple cliffs that a family can encounter over the range of potential earnings.

For more information on GCO’s work on the cliffs, check out this website that shows cliffs in eight states by common family types.

New Study

Authored by economists at the Federal Reserve Bank of Atlanta, Boston University, and the University of California, Berkeley, a newly published study takes a sophisticated approach to identify disincentives in the U.S. tax and welfare structure. Published as a working paper by the National Bureau of Economic Research (NBER), the authors fed the results of the most recent Survey of Consumer Finances through a fiscal analyzer.

The Economic Team

David Altig, Federal Reserve Bank of Atlanta

Alan J. Auerbach, University of California, Berkeley and NBER

Laurence J. Kotlikoff, Boston University and NBER

Elias Ilin, Federal Reserve Bank of Atlanta and Boston University

Victor Ye, Boston University

 

 

The Survey of Consumer Finances is a project of the Board of Governors of the Federal Reserve System. It is the most comprehensive survey examining the personal finances of American individuals and families. Thus, the input data for their study represent a statistical picture of how families are faring economically.

In other words, the financial situations of a representative cross-section of families in America was fed through a fiscal analyzer. This particular fiscal analyzer was based on a personal financial planning tool developed by the software company of Laurence Kotlikoff, one of the study’s authors.

The fiscal analyzer estimates the likely future financial path that individuals or families will take over their remaining lifetime, along with the future taxes and benefits they will pay or receive. The study uses standard mortality rates to predict lifespans and gives a unique calculation on the degree and magnitude that incentives or disincentives exist over that likely path.

The study defined the future fiscal burdens, consisting as taxes and benefits, as marginal tax rates. If a person’s remaining marginal tax rate increases, then so does the tax burden. The greater the magnitude of the marginal tax rate, the greater the disincentive.

Study Results

Given our own work, the conclusion of the authors was not surprising. To quote from their study:

“Our findings are striking. One in four low-wage workers face marginal net tax rates above 70 percent, effectively locking them into poverty.”

“… one in four bottom-quintile households, regardless of age, face marginal tax rates above 65 percent. Thus, a major share of poor households are effectively locked into poverty by America’s fiscal system.”

The authors were careful to point out that this study looks at the structure of America’s fiscal system, meaning these disincentives are hardwired into the laws and rules of the system. This corroborates exactly with our research. The very rules themselves are what create the disincentives and the cliffs. The silver lining here is that rules can be changed.

This study did not attempt to measure how people react to the disincentives. Some might bite the bullet, take the hit, and still advance their earnings anyway. On the other hand, others may take a defeatist tact, backing off from earning more to draw down more government assistance. This is a ripe area for future research, to determine the proportion of people who forge ahead anyway versus those who give up and retreat.

In the meantime, we shouldn’t wait for future research on how many people accept defeat and remain poor. It makes more sense to fix the rules now so the question becomes moot.

Erik Randolph is Director of Research at the Georgia Center for Opportunity. This blog reflects his opinion and not necessarily that of the Georgia Center for Opportunity.

 

 

 

 

DISINCENTIVES FOR WORK AND MARRIAGE IN GEORGIA’S WELFARE SYSTEM

Based on the most recent 2015 data, this report provides an in-depth look at the welfare cliffs across the state of Georgia. A computer model was created to demonstrate how welfare programs, alone or in combination with other programs, create multiple welfare cliffs for recipients that punish work. In addition to covering a dozen programs – more than any previous model – the tool used to produce the following report allows users to see how the welfare cliff affects individuals and families with very specific characteristics, including the age and sex of the parent, number of children, age of children, income, and other variables. Welfare reform conversations often lack a complete understanding of just how means-tested programs actually inflict harm on some of the neediest within our state’s communities.

DOWNLOAD WHITE PAPER
DOWNLOAD EXECUTIVE SUMMARY
VISIT BENEFITSCLIFFS.org

Field Trips in the Time of COVID

Field Trips in the Time of COVID

by | Aug 26, 2020

Field Trips In The Time Of COVID

 

By Heidi Holmes Erickson

 

We all remember a time as students when we boarded a bus, a brown paper bag with a smashed sandwich in hand, anxiously waiting as our teacher gave us information about the day’s field trip. Field trips are a long-standing tradition in K-12 education and may be some of our most vivid memories from school. Butin the  COVID-19 era, field trips may be non-existent for the upcoming school year as many school districts across the country prepare for fully virtual instruction.  

Many parents are already looking for ways to supplement the virtual education experience. Families are forming academic/learning pods; joining (and forming) homeschool co-ops, hybrid homeschools, or micro-schools; and searching out anything that will help enhance their children’s education and expose them to a world outside of their own home (and, let’s be honest, keep parents’ sanity). This is where museums and other cultural institutions can help.

There is a growing body of research that finds that culturally enriching field trips to art museums, the theater, and other such institutions are an important part of education.Students experience significant educational and social emotional benefits from such culturally enriching trips, including greater tolerance, empathy, higher academic achievement, and greater school engagement, with some evidence that economically disadvantaged students experiences the largest gains. 

The Importance of Field Trips

Why do students see such significant benefits from field trips? There isn’t a clear answer, but one theory is that arts expose students to a broader world beyond their own. Art exposes all of us to people, places, ideas, cultures, and history that we didn’t know before. In a time where students have limited interactions outside of their own homes and neighborhoods, arts and other cultural institutions can provide connecting experiences. 

Art museums typically see thousands of school groups throughout the year. With social distancing guidelines, however, it seems impossible to take an entire class of young children anywhere, let alone on a bus to a theater. Yet many museums and some theaters have now reopened and are offering tours for small groups, limiting capacity inside, or moving to outdoor venues. 

For example, here in Georgia, the High Museum of Art is open daily with reservations, and the Alliance Theatre is preparing for the 2020-21 season which includes multiple productions for youth as well as young children. Museums can easily and safely accommodate “academic pods” with a few children and parents. Now, attending museums with family and friends is not something new, but it may play a more important role in enhancing students’ education this cloistered year than it has previously.

 

The Power of Experience

These in-person cultural experiences are more important for student learning than some might expect. There is some evidence that field trips done “virtually” or in an at-home or in-class setting are not as impactful as when students visit the actual institutions. For instance, a recent study found that students who attended a live theater performance had greater command of the plot than students who saw a movie version of the same play. Another study found that students who visited an art museum asked more complex questions about works of art and recalled the experience in more detail than students who saw the same art but in a classroom setting. This evidence suggests that an in-person experience has a unique importance that isn’t always transferred to other settings. 

With the 2020-21 school year looking nothing like anyone could have predicted, parents and students should embrace the change and enjoy educational experiences that are not limited to something on a computer screen. Taking time away from instruction in core subjects isn’t going to harm student academic performance—it might even help!

Heidi Holmes Erickson

Heidi Holmes Erickson is a faculty member in the Education Economics Center at Kennesaw State University.

EVERY CHILD WITH ACCESS TO A QUALITY EDUCATION

 

A quality education is key to a child’s future success. Academic achievement paves the way to a good job, self-sufficiency, and the earned success we all want for our children. To learn more about education options in Georgia click here. 

Children excited as they leave school

The Power of Second Chances

The Power of Second Chances

by | Aug 24, 2020

The Power of Second Chances

By David Bass

Imagine stepping from a life of homelessness characterized by desperation and deprivation to a full, rich life in which you can contribute and build a future.

That was Jonathan’s story of transformation. As a graduate of CKS Packaging’s Second Chance Program, Jonathan went from homeless to employed in an entry-level job with a solid upward trajectory, allowing him to support his family,  save money for the future, and continue job training and education.

“What the Second Chance Program did was provide discipline, provide structure, and provide a lifeline,” Jonathan shared.

We love stories like these because they demonstrate so vividly this truth: When people are desperate, they need a sense of control over their lives. Without it, they are more likely to fall back into old bad habits and ways of doing things, such as substance abuse, crime, and homelessness.

A job with an upward trajectory is a key way to restore control and confidence in someone’s life.

 

Find out our full analysis of this
Second Chance Program.

READ THE FULL REPORT

A second chance

CKS Packaging is an Atlanta-based company that manufactures plastic containers for such clients as Coca-Cola, Chick-fil-A, and Kroger. The company created the Second Chance Program in 2016 to partner with service organizations in the Atlanta area with the sole purpose of recruiting struggling individuals who need a second chance at employment. 

Georgia Center for Opportunity recently published a research report on the impressive results from the Second Chance Program.

According to Lloyd Martin, the VP of manufacturing and leader of the Second Chance Program at CKS Packaging, many service providers in the community deal with surface issues without addressing the root cause of a person’s problem. In contrast, the Second Chance Program recognizes that a job, and the stability it provides, is a vital plank in rebuilding a foundation for a fruitful life.

Another graduate of the program, Greg, shared that Second Chance provided him a job after hundreds of companies had rejected him due to his criminal record. “When so many other people have said no to you, and then someone steps up and gives you a chance and has faith in you, it makes you want to give it 150% every day,” Greg says. He now plans to stay with the company until retirement.

CKS Packaging didn’t just provide a second chance for Greg. It provided a career.

Doing good while making a profit

CKS Packaging and the Second Chance Program show that it’s possible to do good business while doing good for the community. In fact, they go hand in hand.

According to CKS Packaging, the Second Chance Program has allowed the company to fill the gap in labor they were facing with long-term, dependable employees who otherwise may have not gotten a chance to turn their lives around. In the last five years, the company has hired 473 people through the program.

That impact extends beyond a company’s bottom line and individual lives to enrich an entire community.

 

To learn more about what Georgia Center for Opportunity is doing to help get Georgians back to work check out our Hiring Well, Doing Good initiative.

Gov. Kemp signs bill into law expanding job opportunities for military spouses

Gov. Kemp signs bill into law expanding job opportunities for military spouses

by | Aug 20, 2020

Gov. Kemp signs bill into law expanding job opportunities for military spouses

 

 

By David Bass

 

With our state experiencing a 7.6% unemployment rate in June (the most recent numbers available), it’s clear that every Georgian needs all the help possible to find and maintain stable employment. That’s why the Georgia Center for Opportunity team was excited to see Gov. Brian Kemp sign a new bill into law (HB914) that knocks down a significant barrier to employment for new Georgia residents.

 

The new law provides a temporary occupational license to spouses of members of the armed services who move to Georgia. Georgia has the 5th largest number of military, civilian direct-hire, reserve, and national guard employees in the U.S. Spouses of these employees will now have a greater opportunity to obtain employment in the career of their choice.

 

“Particularly in the COVID-19 era, breaking down barriers to employment is more important than ever,” said Buzz Brockway, vice president of public policy at Georgia Center for Opportunity. “Restrictions on occupational licensing can be an enormous one of these barriers. It’s the least we can do for our men and women in uniform to ensure that their spouses have the ability to work in their area of expertise in our state.”

 

Gov. Kemp signs ‘second chance’ expungement bill into law for ex-offenders

Gov. Kemp signs ‘second chance’ expungement bill into law for ex-offenders

by | Aug 20, 2020

Gov. Kemp signs ‘second chance’ expungement bill into law for ex-offenders

 

 

By David Bass

 

For many Georgians, past criminal conviction can be the most significant hurdle to overcome in getting a job. On this front, there is good news: Gov. Brian Kemp recently signed a bill (SB288) into law that allows formerly incarcerated individuals to petition the court to have certain misdemeanor convictions erased from their record four years after the completion of their sentence. 

 

The new law excludes certain offenses, including sexual offenses and DUIs. In a crucial move, the law also creates incentives for employers to make “second chance” hires.

 

This new law allows for an easier transition back into the workforce for a segment of Georgia’s population that has paid its debt to society and stayed on the straight and narrow.

 

“This new law is monumental because it takes Georgia off the list of only a handful of states where a criminal offense stays on an ex-offender’s record perpetually,” said Buzz Brockway, vice president of policy at Georgia Center for Opportunity. “We know that unemployment is a key way to help ex-offenders not repeat their crimes. Particularly in the COVID-19 era, breaking down any barriers to employment that we can is always a huge win. We applaud Gov. Kemp and the Georgia Legislature for making this law a reality.”