Florida Republican senator Marco Rubio, a member of the bipartisan congressional task force on Puerto Rico, has proposed a unique approach to these challenges. He is introducing the Economic Mobility for Productive Livelihoods and Expanding Opportunity ('EMPLEO') Act, which would effectively reduce the island’s minimum hourly wage to $5 and use a federal wage subsidy to close half the gap between the wage paid by an employer and a target wage of $10 per hour.
A wage subsidy has the potential to both increase the earnings of low-skilled workers and expand the job opportunities available to them, helping to reduce poverty, increase labor-force participation, and boost economic growth. The ongoing economic crisis in Puerto Rico offers an ideal testing ground for the policy, and the policy offers an ideal tool for addressing the island's woes.
You need economic growth to create jobs but I think it's important to realize that economic growth is a necessary but not sufficient condition. That you can also get an awful lot of economic growth that doesn't create an awful lot of jobs. If you see it as part of the government's mandate to not just maximize GDP but actually make sure that people from their diverse backgrounds with their diverse talents and capabilities can find a place in our economy, then policy needs to do a lot more than just say what maximizes economic growth.
The 'long-term, holistic' studies that Carroll prefers show coverage for expectant mothers produced better health outcomes in their children and that children themselves receiving coverage had better health, educational, and financial outcomes. That's all great news, but there's one problem: Obamacare's Medicaid expansion does not target pregnant women or children.
Why not extend an olive branch toward the conservative voters she needs to attract, offering to include ideas from across the ideological spectrum in pursuit of major bipartisan reform? Instead, we get only cautious platitudes all the way down. Perhaps with a bit more focus on the stated passion for helping women and children, she might also get further with the exhibited passion for becoming president.
Is Medicaid worthless?' is the quintessentially liberal battleground and a ridiculous lens through which to evaluate policy. Furman's defense, for instance, amounts to a claim that providing Medicaid is probably better than not providing Medicaid. The Oregon experiment tested the same question--Medicaid only had to defeat 'no Medicaid,' and even then it largely failed. But the right question to ask is whether this is a good allocation of scarce resources--not 'is Medicaid worthless?', but 'is Medicaid best?' The critical study is not the Oregon experiment, but one that gives Medicaid to Group A while offering Group B a wage subsidy, housing voucher, or used car of equal value. Good luck to Medicaid achieving superior outcomes in terms of health, upward mobility, or any other measure of well-being in that match-up.
Because of Medicaid, the safety net feels weaker as it grows heavier, exposing bigger gaps even as it spreads. Bad design and political pressure have allowed this one program to dominate our ever-expanding anti-poverty system. Medicaid now accounts for most of what we spend to aid the poor, even though the program aligns badly with the needs of low-income households and offers stunningly little value for its cost. The opportunity to improve support for the poor without increasing spending by reallocating funds from Medicaid to better uses is great.
America's safety net is thicker and wider than ever: antipoverty spending in real terms more than doubled between 1995 and 2015. True, Congress froze federal spending for the specific welfare cash-assistance program targeted by the 1996 welfare reform, causing its budget to decline in real terms; but that decline represented less than 1 percent of the safety net with total spending of more than $1 trillion in 2015.
Clearly defined responsibilities, from educating children to caring for the elderly to fighting in wars, are fundamental to a society's character. They establish the terms of relationships, the scope and role of civil society, and the expectations against which people judge one another. And few are as important or pervasive as the responsibility of providing--for oneself, for one's family, and for future generations.
The 35 pages contain plenty of good ideas, but they place enormous faith in the federal technocracy to get things right where it has failed so many times before. Rather than a comprehensive strategy for improving America's safety net and promoting economic opportunity, the document reads like a description of how the current safety net might work better if only we had better bureaucrats. The title of proposal #8 (out of 41) sums up the approach: 'Pay More for the Good Stuff, Less for Everything Else.'
The social safety net provides more than $1 trillion a year for low-income households. Yet no coherent antipoverty strategy allocates the spending. As the various programs have been created, their individual funding streams have pooled resources haphazardly and inefficiently. Medicaid, in particular, dominates the safety net. From 1975 to 2015, total safety-net spending per American in poverty doubled, in 2015 dollars, from $11,600 to $23,400. Of that increase, 91 percent was the result of higher health-care spending -- nearly all for Medicaid, whose costs rose tenfold to $568 billion.
The American social safety net's overwhelming emphasis on health care is the unintentional result of skewed incentives, leading to an ineffective antipoverty strategy poorly aligned with the needs and preferences of low-income Americans. Reforms that allow states to reroute substantial sums from Medicaid to other programs would better meet the needs of the poor at no additional cost to taxpayers, marking the first step toward a more flexible and effective safety net.
The federal government should package up the money it spends so ineffectively and send it back to states in proportion to their populations, to allocate as they see fit. Doing so will satisfy neither the Left's enthusiasm for expansive new programs nor the Right's appetite for shrinking government. But the American people would benefit enormously.
America spends nearly $1 trillion on anti-poverty programs, yet no one seems happy with the results. Mindlessly writing another, bigger check is not evidence of 'caring.' Pursuing substantive reform within the existing budget is not an attempt to 'ignore' anything.
Ensuring that even those with very low human capital enter and remain in the workforce offers one of the highest leverage points for breaking the cycle of social decay. A job provides not just a wage, but also structure, skills and social engagement. It gets someone onto the first rung of the economic ladder, which is the first step to climbing any higher. New policies should aim for this outcome -- making work pay, not paying regardless of work.
America's 'lower class,? for lack of a better term, is undergoing an unprecedented social collapse that threatens to destabilize core American principles. The data on marriage, parenting, employment, civic engagement, and basic values show a widening and sometimes accelerating gap between classes. This form of inequality is far more consequential than income inequality because strong families and communities, unlike high incomes, are the cornerstones of a free and fair society.
Politically, there is much for both the left and the right to like about a wage subsidy. It does not discourage hiring or raise prices, some of the right's main complaints about the minimum-wage increase. But it also lifts paychecks directly, which is what the left likes so much about raising the minimum wage. Best of all, it would use current government spending in a way that helps the poor find work and better helps the working poor -- which should make everyone happy.
Two wage-support tools typically receive consideration: the minimum wage and the Earned Income Tax Credit (EITC). Both have the potential to significantly increase disposable income for at least some low-income workers. But their mechanisms--and impact--differ dramatically. The minimum wage, a price floor under wages, performs well vis-?-vis an individual worker but poorly in its labor-market and distributional effects. The EITC, a subsidy for income earned, has strengths and weaknesses roughly the opposite. The drawbacks of both tools prevent them from delivering fully on their antipoverty goals. Any discussion of wage-support options should include a third policy tool with the potential to deliver the best of both worlds: a wage subsidy delivered directly to low-wage workers, via their paychecks, as additional dollars per hour for every hour worked.
An ideal policy would look to workers like an increased minimum wage (more pay for every hour worked) but to the labor market and broader society like an expanded EITC (a government subsidy to support the low-income worker). A wage subsidy would do just that.
Instead of vilifying low-wage employers and low-wage subsidies, we should recognize the valuable role they play in our economy. The more we can reorient anti-poverty spending to function as a subsidy for low-wage work, the more effective it will be.
Any of the proposals working from these principles is a major improvement both on what conservatives have offered in the recent past and on the never-changing more-programs-more-spending approach from the other side. As more policymakers work from these principles toward innovative reforms the proposals will only get stronger.
Too often, particularly among conservatives, the anti-poverty issue is actually used as a budget issue, that when we think we're talking about anti-poverty programs, we're actually talking about ways to cut the budget deficit. And that's a fine conversation to have if you're looking across places to cut from the budget ? anti-poverty programs may be one of them, given how big they are ? but it's not a solution to the poverty crisis to cut dollars.
An effective anti-poverty program requires reform in two ways: first, restructuring the funding system to give state-level policymakers the incentives and authorities they will need if substantive reforms are to succeed; second, sharply dividing programs designed to provide a safety net for those not working from programs designed to increase the incomes of those who are working, coupled with reestablishing an income gap by increasing the relative generosity of the latter.