Op-Ed: Hidden costs of getting a raise for America’s working poor

Op-Ed: Hidden costs of getting a raise for America’s working poor

by | Oct 2, 2024

Georgia news, in the news, current events, Georgia happenings, GA happenings

Op-Ed: Hidden costs of getting a raise for America’s working poor

As Congress continues to debate the Farm Bill and the reauthorization of the Workforce Innovation and Opportunity Act, a critical flaw in the U.S. safety net system remains largely unaddressed: benefits cliffs.

Our research, alongside studies from the Atlanta Fed and others, highlights a troubling reality. Many vital safety net programs penalize participants for working and earning “too much” money. These benefits cliffs mean that working poor who receive even a modest raise can suddenly see important benefits like child care, food stamps, and Medicaid dramatically reduced or eliminated entirely.

The loss often far exceeds the raise that triggered it. Compounding the issue, each of these programs is typically administered by different agencies and caseworkers in most states, leaving recipients unable to get a comprehensive view of their financial situation.

 

Read the full opinion in The Black Chronicle.

Op-Ed: Hidden costs of getting a raise for America’s working poor

Op-Ed: Hidden costs of getting a raise for America’s working poor

by | Oct 1, 2024

Georgia news, in the news, current events, Georgia happenings, GA happenings

Op-Ed: Hidden costs of getting a raise for America’s working poor

As Congress continues to debate the Farm Bill and the reauthorization of the Workforce Innovation and Opportunity Act, a critical flaw in the U.S. safety net system remains largely unaddressed: benefits cliffs.

Our research, alongside studies from the Atlanta Fed and others, highlights a troubling reality. Many vital safety net programs penalize participants for working and earning “too much” money. These benefits cliffs mean that working poor who receive even a modest raise can suddenly see important benefits like child care, food stamps, and Medicaid dramatically reduced or eliminated entirely.

 

Read the full opinion in The Center Square.

How safety-net benefits discourage low-income workers from escaping poverty

How safety-net benefits discourage low-income workers from escaping poverty

by | Aug 8, 2024

The proven building blocks of child development can empower communities to get involved in helping parents raise highly capable kids.

How safety-net benefits discourage low-income workers from escaping poverty

Key Points

  • A new research paper from GCO shows the ways social safety-net programs like food stamps and Medicaid provide critical support but also discourage career advancement.
  • The “benefits cliff” is a significant barrier, where earning more can mean losing benefits, deterring workers from seeking higher-paying jobs.
  • Government benefits can blur the true income disparity between low-income and middle-income households.
  • Policy reforms are needed to remove these barriers and encourage upward mobility.

At a time when income inequality and lack of economic mobility are hot topics, a report from the Georgia Center for Opportunity (GCO) sheds light on how our social safety-net system could be contributing to these trends. 

Entitled “Workforce Engagement: A Missing Link in Understanding Income Inequality,” the report explores how government support unintentionally discourages low-income workers from escaping poverty. The report also presents actionable policy solutions to avoid that trap.

What Are Safety-Net Benefits?

Safety-net systems include programs like food stamps, housing subsidies, and Medicaid, designed to provide financial assistance to those in need. While these programs are essential, they can inadvertently create barriers to long-term financial independence. This phenomenon is known as the “benefits cliff,” where individuals and families turn down career advancement opportunities to avoid losing government benefits.

The Source of Income Disparities

The GCO report reveals that government benefits often obscure the true income disparities between low-income and middle-income households.

When examining work-capable households, the unearned income from government benefits can paint a misleading picture of economic equality. Without these benefits, it’s clear that households in the lowest income quintile earn significantly less than their counterparts in higher income quintiles.

The report also highlights how these safety-net benefits can create disincentives for the lowest-paid workers to move up the economic ladder. For instance, after adjusting for taxes and transfer payments, the net income of households in the lowest quintile is almost equal to those in the second quintile, despite the latter earning nearly four times more. 

This equalization is largely driven by government transfers, which provide significantly more support to the bottom quintile compared to the second quintile. This scenario leads to nearly identical average per capita net incomes between these groups.

The cover of the Worker Engagment report

Workforce Engagement

A Missing Link in Understanding Income Inequality

The compelling new report that examines the unintended consequences of our nation’s social safety-net system on low-wage workers.

Download the full report

Policy Recommendations

Understanding the dynamics of income inequality and the unintended consequences of social safety-net systems is crucial for fostering economic mobility and improving the quality of life for low-income workers.

To boost workforce engagement and reduce reliance on social safety nets, the report suggests several policy reforms:

  • Reducing Benefits Cliffs: Adjust thresholds for benefit eligibility to prevent sudden losses of support as income increases.
  • Work Incentives: Offer incentives for part-time workers to transition into full-time roles.
  • Education and Training: Provide better access to educational resources and vocational training programs.

GCO is dedicated to working within underserved communities to understand the realities of poverty and the public policies that perpetuate it. Our previous research, including on intergenerational poverty, underscores that America’s social safety net is designed to address situational poverty rather than systemic poverty.

9 Benefits of Work for Teens and Young Adults

9 Benefits of Work for Teens and Young Adults

by | Jun 14, 2024

In addition to earning money, the benefits of work for teens include positive impacts on mental health, physical health, and relationships.

9 Benefits of Work for Teens and Young Adults

Key Points

  • Research has shown that there are numerous benefits of work for teens and young adults across all areas of life, including finances, relationships, and physical and mental health.
  • Labor force participation rates show teens and young adults are working less than previous generations.
  • Encouraging teens and young adults to work can be a valuable way of helping them lead meaningful lives and become healthy, resilient adults.

As summer break approaches for many teens and young adults, most will be looking forward to leisurely activities like a trip to the beach, camping, or even summer camp. Kids at this developmental age indeed need relaxation and rejuvenation over summer breaks, but it is also a valuable opportunity to reap lifelong benefits.

Parents, guardians, or even mentors may want to encourage their teen to get a summer job—not just to earn a little spending money but because work has many other benefits to the health and resiliency of teens.

It’s true that the brains and bodies of kids need some time to relax and rejuvenate after a long school year—and taking a much-needed break in the summer months can be a good thing. There’s also a lot to be said for getting a summer job that teaches the value of work and offers benefits that reap dividends over the course of their lives.

Work is good for young people

Research shows that seasonal and part-time employment for teenagers and young adults has almost universally positive impacts. The truth is that holding down a summer job is something that previous generations commonly experienced—and enjoyed—but kids today have been comparatively shielded from working until much later in life.

In fact, according to the U.S. Bureau of Labor Statistics, the summer labor force participation rate for 16- to 24-year-olds in July 2023 was only 60.2%—slightly down from the previous year’s rate of 60.4%. By comparison, back in July 1989, the rate peaked at 77.5% before trending downward over the next 20-plus years to settle between 60.0% and 60.6% from 2012 to 2018. 

Since then, the rate dropped significantly to 57.3% in 2020 due to the economic dislocation caused by the COVID-19 pandemic, though it has since returned to pre-COVID levels at around 60%.

Contrasting by gender, the 2023 gap in summer labor force participation was the smallest on record—at only 0.4%—with only 60.4% of young men working compared to 60.0% for young women. Interestingly—and not surprisingly—the gender gap was its widest at 40.9 percentage points back nearly 75 years ago in July 1950. Also not surprising is that today most summer jobs for teens and young adults are in leisure and hospitality (25%), retail trade (18%), and education and health services (13%). 

Clearly, the current generation of teens and young adults is working less than their predecessors. But what’s the impact on their lives?

They not only miss out on the financial benefits of earning money, but also on learning “soft” skills and attitudes that will positively impact them for the rest of their lives, including time management, respect for supervisors, following instructions, being reliable, demonstrating an upbeat attitude, dressing appropriately, accepting constructive criticism, and even using work-appropriate language.

As teens and young adults take on fewer seasonal or part-time jobs, they miss out on the benefits of work.

In July 2023, the summer labor force participation rate for 16- to 24-year-olds was 60.2%. In July 1989, the rate peaked at 77.5%. The drop means more young people are missing out on the benefits of work.

As teens and young adults take on fewer seasonal or part-time jobs, they miss out on the benefits of work.

In July 2023, the summer labor force participation rate for 16- to 24-year-olds was 60.2%. In July 1989, the rate peaked at 77.5%. The drop means more young people are missing out on the benefits of work.

For young people, benefits of work span all areas of a healthy life

Beyond this, the Georgia Center for Opportunity (GCO) team has thoroughly reviewed the literature and found that there are nine benefits for work that help teens and young men and women develop a strong work ethic that lays the foundation for success in every area of life: 

1. Personal finances: When we think of work, we immediately think of a paycheck. That’s the most obvious benefit. Work enables kids to buy both necessities and luxuries, to pay for education, even to start saving for retirement. Attaching to work early is also important for avoiding the trap of the social safety-net system that can unintentionally keep people mired in poverty.

2. Serving others: Earning money in a free market economy shows the ability to create value by serving others and learning self-reliance.

3. Economic impact: The more people work, the more the economy grows. This creates a more prosperous society and leaves those who work personally better off than those who don’t work. Those who don’t work deny society resources that could have made everyone better off—while simultaneously pulling resources away from other important societal needs.

4. Personal well-being: Work confers dignity and respect. It provides a sense of meaning and purpose in life. In contrast, those who don’t work are, overall, less happy and experience higher levels of personal and familial stress, sadness, despair, hopelessness, apathy, and depression.

5. Mental health: Those who work experience improved mental health outcomes and have higher self-esteem, fewer psychosomatic symptoms, less anxiety, and decreased suicide risk.

6. Alcohol and substance abuse: Those who work generally have reduced drug use and improved treatment outcomes. The impact of substance abuse appears to be greater on those who don’t work.

7. Physical health and lifespan: Those who don’t work generally have poorer physical health, including disrupted sleep patterns, higher risk for cardiovascular disease and respiratory infections, and shorter longevity.

8. Family relationships: Working has a particularly positive impact on males when it comes to family formation. Young men who work are much more likely to marry and have a family.

9. Crime: Working typically has a positive effect on teens and young adults by increasing future wages, building human capital, and reducing criminal behavior and recidivism—especially for economic crimes involving property damage, theft, and drugs. 

Taken together, the evidence is strong for teens and young adults to start working on a seasonal or part-time basis. Whether it’s learning to manage a summer job in between camps, family vacation, and other enrichment activities or working during the academic year after school or on the weekends, the benefits of employment go far beyond earning money. 

While it may be fashionable for parents to shelter their children from the working world as long as possible to allow them to enjoy a more carefree and leisurely adolescence, the data—and generational wisdom—show that we do kids more harm than good by unduly delaying their exposure to the workforce.

Op-Ed: Hidden costs of getting a raise for America’s working poor

How to ease the labor shortage by fixing the social safety net

by | Mar 15, 2024

Georgia news, in the news, current events, Georgia happenings, GA happenings

How to ease the labor shortage by fixing the social safety net

The United States is in the enviable position of having a labor force crunch: Too few workers chasing too many jobs. There is no shortage of speculation among economists about solutions to this labor shortfall. But one factor that could help, and is too often ignored, is the ways our nation’s current safety-net system prevents people from entering the labor market.

 

First, let’s consider the context we’re in. The U.S. unemployment rate has settled below 4 percent for over two years, the longest stretch since the 1960s. Even so, our labor force participation rate continues to lag, caused in part by an aging population, declining birth rates, and aftereffects of the pandemic.

 

In January 2000, the labor force participation rate was 67.3 percent. Today, it’s 62.8 percent. That might not sound like much on paper, but consider that it means 1.7 million Americans are still missing from the labor force compared to right before the pandemic alone. These are able-bodied, prime-age workers—defined as ages 25 to 54—and they are still on the economic sidelines.

 

What’s worse, the labor force participation rate is expected to decline even further to around 60.4 percent by 2032, according to estimates from the U.S. Department of Labor. On the flip side, consider that by 2023, 41 million Americans relied on food stamps to make ends meet and nearly 90 million Americans were enrolled in Medicaid.

 

These are the numbers and statistics, but they represent real human beings who are being left behind. One way to bring more individuals back into the labor market is by implementing badly needed reforms to our nation’s social safety net.

 

Read Randy’s full opinion in The Hill

 

U.S. Sen. Mitt Romney’s ‘One Door’ bill would allow states to integrate social safety net with workforce development

U.S. Sen. Mitt Romney’s ‘One Door’ bill would allow states to integrate social safety net with workforce development

by | Feb 29, 2024

press release, news, The press release prominently features the company logo and headline, with visible text detailing the announcement.

U.S. Sen. Mitt Romney’s ‘One Door’ bill would allow states to integrate social safety net with workforce development

PEACHTREE CORNERS, GA—U.S. Sen. Mitt Romney, R-Utah, has introduced a bill that would free up the 50 states to implement a “One Door” safety-net reform strategy similar to the very successful model created in Utah. As part of the Alliance for Opportunity, a coalition of groups seeking to drive state-level change in the safety-net system, the Georgia Center for Opportunity is in full support of the bill.

U.S. Rep. Burgess Owens, R-Utah, has previously introduced a “One Door” bill in the House, a version of which passed out of the House Committee on Education and the Workforce in December.

Despite a historically low unemployment rate across the country, states are still facing a workforce crisis with millions of able-bodied Americans on the economic sidelines. Our nation’s workforce participation rate has not fully recovered from the COVID-19 pandemic. By the end of 2023, 41 million Americans relied on food stamps to make ends meet and nearly 90 million Americans were enrolled in Medicaid.

Many of these Americans remain stuck in a safety-net system that simply doesn’t work. The One Door to Work Act, introduced by Sen. Romney on Feb. 28, would allow states the flexibility to implement Utah’s consolidation of federal workforce development and social safety-net programs into a single state entity. The end goal is to help work-capable recipients reintegrate more quickly into the workforce, empowering them to achieve the independence, stability, and purpose that are crucial to human well-being.

“Every state should have the flexibility to design an integrated workforce and safety-net model that enables people to succeed,” said Randy Hicks, president and CEO of the Georgia Center for Opportunity. “Every hour a safety-net recipient spends finding their way through the system is an hour they can’t spend working their way into opportunity. The One Door to Work Act allows states to create a system that works for people.”

The dozens of programs that make up the system have different and, at times, competing goals, inconsistent rules, and overlapping groups of recipients. Often, recipients must resubmit the same information multiple times for multiple programs with the aid of multiple caseworkers. This disconnect fosters despair and keeps recipients in a cycle of poverty—as every hour spent navigating the system is an hour not spent pursuing a path out of it.

What’s more, there is often a disconnect between safety-net programs and welfare-to-work initiatives. The end result is that people stay mired in generational poverty rather than receiving a helping hand to live a better life. The One Door to Work Act would free up state governments to explore ways to create a safety net that works for all citizens and doesn’t cause generational poverty.

“There are 8.7 million open jobs in this country, and the workforce participation rate has not fully recovered from the COVID-19 pandemic. States need the flexibility in the One Door to Work Act to use our workforce dollars to move our people off the sidelines,” said Greg Sindelar, executive director and chief operating officer of the Texas Public Policy Foundation, which is a member of the Alliance for Opportunity.

 “A robust workforce is not only integral to a thriving state economy, but also to its social fabric,” added Daniel Erspamer, CEO of the Pelican Institute for Public Policy, also a member of the Alliance. “When a person is unemployed for longer than six months, it is associated with decreased well-being, even measurably affecting mortality. The One Door to Work Act gives workers, employers, and taxpayers the system that they deserve.”

Learn more about the “One Door” policy here.

 

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Georgia Center for Opportunity (GCO) is independent, non-partisan, and solutions-focused. Our team is dedicated to creating opportunities for a quality education, fulfilling work, and a healthy family life for all Georgians. To achieve our mission, we research ways to help remove barriers to opportunity in each of these pathways, promote our solutions to policymakers and the public, and help effective and innovative social enterprises deliver results in their communities.

 

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