The Full Employment Route to Poverty Reduction

Efforts to alleviate poverty are often seen as being separate from the debate on overall economic policy, with the former involving a distinct set of issues that only marginally overlap with the latter. This is unfortunate, since the health of the economy, and specifically the level of unemployment, has an enormous impact on the prospects of the poor. In fact, there are few policies that are likely to have as much effect on improving the plight of the poor or near poor as a genuine commitment to full employment economic policies.

There are three separate channels through which a reduction in the unemployment rate is likely to benefit low-income people. The first is simply by increasing their probability of finding jobs. Unemployment is not evenly distributed throughout the workforce; the less-educated and disadvantaged see the sharpest rises in unemployment when the economy goes into a downturn.

In the year prior to the beginning of the recession, the unemployment rate for workers without a high school degree averaged just over 7.0 percent. Its average for 2010 was 14.8 percent, an increase of 7.8 percentage points. For workers with high school degrees the unemployment rate went from 4.3 percent to 10.3 percent, a rise of 6.0 percentage points. By contrast, the unemployment rate for college grads rose by just 2.7 percentage points, from 2.0 percent to 4.7 percent. While everyone got hit by the downturn, clearly those with less education saw the greatest increase in their risk of being unemployed.

There is a similar story about race. The unemployment rate for whites rose from 4.1 percent in the years before the downturn to 8.7 percent in 2010, a rise of 4.6 percentage points. The unemployment rate for African Americans rose from 8.2 percent to 16.0 percent in 2010, a rise of 7.8 percentage points. The unemployment rate for Hispanics went from 5.6 percent before the downturn to 12.5 percent, an increase of 6.9 percentage points.

We know that we can get more growth and lower rates of unemployment with more government spending. There is enough research on this topic that it should no longer be a debatable point.

There are various explanations as to why less educated and African American and Hispanic workers see the sharpest rise in unemployment during downturns, but there is little debate about this outcome. Also, there is no evidence of any change in this pattern as the economy has recovered, despite the claims of some analysts.

For the first five months of 2014 the unemployment rate for workers without high school degrees averaged 9.5 percent, a drop of 5.3 percentage points from 2010 levels.  The unemployment rate for college grads averaged 3.3 percent, a decline of 1.4 percentage points from recession peaks. This means the least educated workers have actually made more progress in getting back to pre-recession unemployment rates than the most educated workers. If the unemployment rate were to return to pre-recession levels for the population as a whole, it would almost certainly fall back to pre-recession levels for the less educated and minorities as well.

In addition to the unemployment channel, workers at the bottom of the income ladder are also likely to benefit from low unemployment as a result of having the opportunity to work more hours. In my book with Jared Bernstein, Getting Back to Full Employment (free download available), we show that the late 1990s boom was associated with an increase of 17 percent in the total number of hours worked for households in the bottom fifth of the income distribution. By contrast, the increase in hours worked for households in the top two income quintiles was just 1.0 percent. There are many low-income people who would like to be able to put in more hours on the job. The low unemployment of the late 1990s, which bottomed out at 4.0 percent as a year-round average in 2000, provided this opportunity.

Finally, low unemployment provides workers at the middle and bottom of the wage distribution with the bargaining power they need to get a share of the economy’s growth. Hourly wages have been largely stagnant for these workers for most of the last three decades. However, in the years from 1996-2000, workers at the middle and bottom saw substantial wage gains. According to our analysis, a sustained 1.0 percentage point drop in the unemployment rate translates to a 9.8 percent increase in the wages of a worker at the 20th percentile of the wage distribution. It would lead to a wage gain for a worker in the middle of the wage distribution of 4.2 percent. It has little effect on the wages of workers at the top of the income distribution.

For these reasons, a full employment policy is an effective way to increase the opportunities and income of people at the bottom. If full employment of the sort that we saw at the end of the 1990s could be sustained for a long period of time, it would almost certainly lead to a substantial reduction in poverty rates and a large improvement in living standards for low-income people.

When the unemployment rate was falling to thirty year lows in the late 1990s the press had accounts of suburban hotels and restaurants chartering busses to pick workers up in the inner cities and drive them to their jobs in the suburbs. There were stories of employers providing day care facilities and even making arrangements to accommodate elder care for workers caring for aging parents. Some firms actively sought out workers with disabilities. In a tight labor market, firms will make extraordinary efforts to recruit employees who at other times they would never likely hire.

Full employment is also a desirable policy because it goes directly against the “makers versus takers” line that many conservatives push. Full employment is about giving people at the bottom the opportunity to work. In this same context, not pursuing full employment is effectively a policy of not offering people an opportunity to work.

This is a crucial point. We can talk about a policy to promote full employment—by investing in infrastructure, spending on retrofitting buildings or solar paneling to reduce greenhouse gas emissions, or subsidizing pre-K education; but accepting a higher level of unemployment is also a policy decision. We know that we can get more growth and lower rates of unemployment with more government spending. There is enough research on this topic that it should no longer be a debatable point.

We can also get lower rates of unemployment by reducing the size of the trade deficit. If we can increase our exports and replace imports with domestically produced goods and services, it will increase output and lead to more jobs. If we were to eliminate the trade deficit altogether and have balanced trade, it would create almost 6 million jobs. The trade deficit is also the result of policy decisions, most importantly ones pertaining to the value of the dollar. A dollar that costs less in foreign currencies makes our goods cheaper for the rest of the world to purchase, and makes imports more expensive. We could make deals with foreign countries to raise the value of their currency against the dollar as President Reagan did with the Plaza Accord in 1985, but our trade policy has taken a different direction.

There may be reasons why people want smaller budget deficits, but pushing for deficit reduction in the current economic environment is ultimately a policy of denying people jobs. In the same vein, supporting a high dollar, and therefore a large trade deficit, is also a policy of denying people jobs. And, since higher unemployment reduces the bargaining power of workers and leads to lower wages, a high unemployment policy is a policy that provides employers with low-cost labor, exacerbating economic inequality.

In short, a full employment policy is a tremendously effective way to increase the income and opportunities available to the poor and near poor. But the high unemployment policy we currently have in place is one that redistributes income upward and denies people the jobs they need to escape poverty.




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Media and Politics

A Historic Opportunity to Talk Poverty

I was five years old when my parents divorced and my father left. My mother faced a stark decision: return to India, where very few people divorced and, as a result, my older brother and I would face stigma that would limit our opportunities; or remain in the United States and find a way to support our family on her own, despite never having worked a day in her life.

We stayed.

We moved out of our middle-class house in Bedford, Massachusetts. Thanks to a state law that fast-tracked mixed-income rental development projects, and also a Section 8 federal housing subsidy, we were able to rent an apartment and remain in Bedford, a middle-class town with its good public schools.

I was acutely aware that a lot of nameless public servants had made decisions to expand opportunity and that those decisions had made all the difference for my family and me.

I have vivid memories of that difficult time. Checking out at the grocery store, we were the only shoppers in line using food stamps. At school, I was the kid in the cafeteria paying with a voucher for reduced-price lunch. At the welfare office, I remember my mother telling me to “shush” and promising “it would only be a minute.”

“It’s been a lot longer than a minute,” I told her.

“A minute is a figure of speech,” she informed me.

After three years my mother got a job as a travel agent. A couple years later, she was hired as a contracts administrator at Raytheon. By the time I was eleven—six years after we moved into an apartment and turned to the safety net for help—my mother was able to purchase a house for our family. It was a turning point for us, and one that wouldn’t have been possible without a lot of help during the lean years.

My ability to stay in Bedford’s good school system, in particular, changed the course of my life. I went on to attend UCLA and then Yale Law School. I was acutely aware that a lot of nameless public servants had made decisions to expand opportunity and that those decisions had made all the difference for my family and me. So today, I take great pride in leading an institution that at its very core is about expanding opportunities for all Americans. We talk a lot in this town about things like “sequester” and “the debt ceiling” and “target deficit rates”—but to me, public policy basically comes down to this question: is it expanding or contracting opportunity for most Americans?

I believe we have a historic opportunity to address poverty today, because the interests of low-income people and the middle class are converging. Median wages—the wages of middle-income earners—have been stagnant for twelve years. People recognize there is growing inequality in this country and that something is amiss when companies are doing well but people aren’t—when dividends, stock prices, and CEO salaries rise but wages don’t.

And while we have a clear opportunity to make the connection between the interests of people in poverty and the interests of the middle class, we have our work cut out for us. Conservatives have successfully pitted people in the middle against people struggling near the bottom. They are skilled at exploiting economic anger and anxiety, fear and distrust. For example, they have convinced many Americans that many people who turn to the safety net want to be on welfare rather than having a job. This mistaken notion is particularly troubling right now, when the hardest-hit communities face high unemployment rates of 20 to 30 percent. Conservatives say we have to break up the safety net or people won’t pursue jobs. But the truth is those jobs just don’t exist right now. So the real effect of these heartless policies will be more people hungry, more people homeless, and more children with fewer opportunities to succeed—children just like my brother and I.

For my family, as for many American families, the safety net was a bridge that carried us through hard times. That’s why it’s important that I tell my story.

Among some on the center left, there is a political strategy to not talk directly about poverty.  Many will say things like “trying to get people to the middle class.” I think that strategy is a mistake. If we fail to talk openly about poverty, we miss an opportunity to address people’s anxieties and misconceptions about low-income people. We fail to correct the misunderstandings about who poor people are, and we fail to make progress we otherwise could.

That is why at the Center for American Progress we work hard to speak clearly and directly about poverty, and to ensure the conversation isn’t an abstract debate, but one about real people. So we support the Half in Ten campaign to reduce poverty by half over ten years—just as we did from 1964 to 1973—which engages people to tell their stories about what the safety net meant for their lives, just as I tell mine. Our new blog features contributors living in poverty today who write about the struggles they face. Teams as diverse as housing, healthcare, education, budget, and tax policy are working hard to determine the impact of policy decisions on people in poverty or at-risk of falling into poverty. (And let’s remember, there are now 106 million Americans—more than 1 in 3 of us— either living in poverty or on less than $37,000 annually for a family of three, which is a single hardship away from poverty.)

When we take on the assumptions and stereotypes directly—and actually look at the lives of poor people—we see in fact that their lives are full of struggle (including the struggle to navigate a welfare system that seems designed to make it as hard as possible for people to receive benefits).

Recently, I testified at a Senate HELP committee hearing on ways to improve the economic security of working women in America. One of the other witnesses on the panel was Armanda Legros. Ms. Legros was 6 ½ months pregnant when she pulled a stomach muscle at work. The doctor told her no more heavy lifting and gave her a written note for her employer, but the employer refused to comply. So Ms. Legros lost her job and had to go on unemployment insurance and food stamps. She is a perfect example of a person who wants to work but is forced to turn to the safety net. Her story is also a perfect example of the kinds of struggles low-income workers face in the workplace every day. We need to give more low-income people the opportunity to tell their stories at Congressional hearings, so our elected officials see the true face of poverty in America, and I applaud the Senate HELP Committee for providing Ms. Legros a platform.

It’s time for a new focus on the solutions to poverty, both in the November elections, and during the presidential election in 2016. To force the issue to the forefront of the national conversation, advocates in Washington and in communities across the country will need to mobilize and speak out. People will need to raise the issue at town halls just as we did for health care reform. We all need to stand with workers who are fighting for better wages and working conditions and give them opportunities to tell their stories. It’s not a question of whether change will come from the grassroots or Washington—we need to fight for good policy in Washington and raise our voices at the state and local levels.

We’re all in the same boat now, searching for economic stability for our families and an economy that raises wages for everyone. It’s time for us to make that case clearly and unapologetically. There are many times when we miss opportunities in public policy. We can’t miss this one.



Safety Net

A Pivotal Moment for the Fight to End Veteran Homelessness

This week, the 100,000 Homes Campaign announced it had reached its goal of helping U.S. communities find permanent housing for 100,000 homeless Americans in just four years. That number includes more than 30,000 veterans, many of whom had previously been homeless for decades. Veteran homelessness has been dropping precipitously in recent years, and the fight to eliminate it now faces a pivotal moment.

For the last several years, national efforts to end veteran homelessness have proceeded with unusual focus. During that time, the nation’s Department of Housing and Urban Development has been ably led by Secretary Shaun Donovan, an astute policy thinker with vast housing experience. At the Department of Veterans Affairs, General Eric Shinseki has provided similar leadership, repeatedly committing the country to finding homes for every homeless veteran by December of 2015. These two men have spearheaded an effort that has resulted in a 24 percent drop in veteran homelessness since 2010.  Today, there are fewer than 60,000 homeless veterans for the first time since the government began counting.

Last month, Secretary Shinseki resigned and President Obama announced that he would move Secretary Donovan to the Office of Management and Budget. Advocates for homeless veterans have been anxious ever since.

But leadership changes at HUD and VA need not slow national progress on ending veteran homelessness, because both Donovan and Shinseki have spent years laying a firm, data-driven foundation to help their successors continue the fight.

When our veterans return home, our duty is to assist them, not make them prove that they are worthy of assistance.

To end veteran homelessness, the incoming secretaries should continue the proven policy of Housing First, push Congress to expand the cost-saving HUD-VASH voucher program, and continue to drive increased collaboration at the community level.

For years, VA and other homeless service providers worked to offer medical and mental health care, addiction counseling, job training and countless other services to people living on the streets. Most homeless veterans were told they had to earn their way to permanent housing by checking these supplementary boxes.

While the intentions behind this approach were good, the unfortunate result was that chronically homeless veterans rarely escaped the streets. For most, it was simply too difficult to battle addiction, take care of serious physical and mental health conditions or find steady employment while simultaneously battling homelessness.

Since 2012, both HUD and VA have adopted a Housing First policy toward chronically homeless veterans. This policy is simple: help veterans secure safe, permanent housing right away, without imposing strict employment or treatment requirements, and then continue to work with them on their social and mental health goals afterwards. This evidence-based strategy has been proven effective over and over in published research, but it remains controversial to many Americans, who still believe that homeless veterans should have to prove themselves before being offered subsidized housing.

We disagree. When our veterans return home, our duty is to assist them, not make them prove that they are worthy of assistance.

The successful push to implement Housing First has relied heavily on the HUD-VASH voucher program, a joint initiative in which HUD provides chronically homeless veterans with a rental subsidy while the VA funds basic case management. This program has been transformative, helping tens of thousands of veterans spend more time in their own homes and less time in expensive, publicly funded hospitals. In fact, a recent VA report found that HUD-VASH, combined with a Housing First approach, resulted in 84 percent of participating veterans remaining stably housed after 12 months while reducing VA healthcare costs by 32 percent.

It is not often that a policy achieves such impressive outcomes for our veterans at such a dramatically reduced cost. The President has moved to expand the HUD-VASH program, and Congress should move to follow his lead.

Still, federal money means nothing if it cannot be administered effectively on the ground. In most communities, where multiple local agencies own different parts of the housing process, it still takes far too long to move a single homeless veteran off the street. Unfortunately, this problem cannot be solved with the stroke of a pen in Washington. It requires strong local leadership to pull multiple agencies and organizations together around measurable, achievable goals.

The White House provided powerful backing for this task last week when it launched the Mayor’s Challenge to End Veteran Homelessness, and HUD and the VA should continue their demonstrated commitment to streamlining federal rules and processes in response to community input. Both departments should also lean heavily on the US Interagency Council on Homelessness, a support agency that houses top notch policy thinkers who are charged with streamlining and coordinating federal efforts to end homelessness.

Veteran homelessness can be eliminated—and far sooner than most Americans think—but ensuring that every veteran has a permanent home by December 2015 will require unwavering leadership from the new HUD and VA secretaries.  If the President’s new choices to lead these departments preserve and build on the gains of their predecessors, they stand to preside over the end of veteran homelessness in America. It is difficult to imagine a more powerful legacy.



Safety Net

House Republicans Exclude Just About Everyone from Summer Meals Expansion Pilot

In recent weeks, both House and Senate Appropriations Committees advanced 2015 Agriculture appropriations bills, taking the opportunity to meddle counter-productively in USDA child nutrition policies. Most visibly, the House version of the bill weakens the current science-based nutrition standards for both school meals and WIC – permitting schools to opt-out of the meal standards enacted in 2010, and allowing white potatoes in the WIC package. First Lady Michelle Obama is a leading champion of the current standards, and recently expressed her dismay with the House bill in the New York Times.

The House bill also restricts funding for a summer food pilot program to rural counties in Appalachia. While this language would not, as some media reports have erroneously implied, end all summer meals programs for children in cities, it is still troubling.

The pilot program in question is the Summer Electronic Benefits Transfer for Children (SEBTC), which the USDA initially piloted in 2011 as an alternative approach to providing food assistance to children during the summer. It was designed to address a major barrier in the current Summer Food Service Program (SFSP) – namely, that children must eat meals onsite at community locations. For families with limited access to transportation, and for parents who work, taking children to a meal site in the middle of the day can be a challenge. Instead, SEBTC provides low-income families with an Electronic Benefits Transfer card (like a pre-paid debit card) that contains $60 per child per month – about the same amount the federal government spends per child on school meals – that can be used to buy groceries.

In its first two years, SEBTC was tested in rural and urban areas in eight states and two tribal nations in different regions of the U.S., and was effective in reducing child hunger. Nine out of ten families issued SEBTC benefits used them, and the program eliminated very low food security for one-third of the children who would otherwise have experienced it. Children in participating households also ate more fruits, vegetables, and whole grains, and drank fewer sugary beverages. And with increasing child hunger during the summer when school’s out, but stubbornly low participation in SFSP nationally, it is promising that USDA is testing innovative strategies that work in communities across the country – urban, suburban, and rural. These results are so promising that Senator Patty Murray (D-WA) is sponsoring the Stop Child Summer Hunger Act, which would expand SEBTC nationwide beginning in 2016.

While the House Appropriations bill  would leave intact the larger summer meals program in urban, rural, and suburban areas, it would limit the successful SEBTC pilot program only to Appalachian counties.  That would mean the program would reach only a fraction of children living in poverty and experiencing food insecurity across the country, and it would also have deeply racialized outcomes – primarily benefiting White children. It is true that Appalachia has high rates of poverty and has for generations. However, only 7 of the 50 counties with the highest child poverty rates in the nation are in Appalachia; most of the others are in the Mississippi Delta and neighboring areas in Alabama and Georgia. And the counties with the largest numbers of children living in poverty are urban. In fact, pilot programs in just four counties – Los Angeles County, CA; Harris County, TX (Houston); Cook County, IL (Chicago); and Maricopa County, AZ (Phoenix) – would reach more children below the poverty line than pilot programs in all 418 Appalachian counties.

Likewise, limiting SEBTC to Appalachia in essence restricts participation in the program to majority White communities, excluding counties – both urban and rural – with high percentages of people of color. The Appalachian Regional Commission reports that Appalachia is 83.5% White, a much larger majority than the country overall, which is 63.7% White. Additionally, only 13 of the 50 counties with the highest child poverty rates are majority White – though 49 of those counties are rural. MSNBC reported earlier this year that the county with the highest overall food insecurity in the nation (Humphreys County, MS), and the one with the highest child food insecurity in the nation (Zavala County, TX), are similar in a few ways: “Both are in poor, rural areas of the South, [and] have socially and economically isolated populations.” They are both majority people of color, as well. But they are not in Appalachia.

These facts are not surprising when you consider how poverty disproportionately impacts people of color in both urban and rural areas. The national poverty rate is 14.3%; however, nearly one in four people who identify as Native American, Black, or Latino live below the poverty line. The poverty rate for Whites, on the other hand, is well below that of other racial groups and the nation overall, at 9.9%.

Geography, poverty, and race intersect in the U.S. in profound ways, and have for centuries, due to countless policies that have restricted access to economic and geographic resources by race. With its current proposal, the House continues the common practice of building policies that perpetuate racial inequities without actually naming race. If we want to ensure that all hungry children are fed—and all families have access to the most convenient and effective ways of feeding their children—then we have to make sure that our policies are truly inclusive of every child, considering both where they live and their racial identity.

Ending child hunger and ending racial inequities are not mutually exclusive. They must go hand in hand.





Lessons from Seattle and $15 an Hour

It wasn’t that long ago that Xochitl Cureno was paid minimum wage as a deli clerk. She had to scrape by to make ends meet, and between rent, gas and food there was no wiggle room if her son got sick or her car broke down. Finally, after eight years working at the same store, she’s being paid $15 an hour.

As hard as it still is sometimes for her to make ends meet, Xochitl thinks more about her co-worker, a single mom with two children, who is paid a lot less. Almost her entire paycheck is spent on rent and childcare. Last week, her co-worker – and more than one hundred thousand workers like her – got a well-deserved raise when the Seattle City Council voted to raise the minimum wage to $15 an hour.

This vote has been a long time coming. While it took bold leadership from the City Council and Mayor Ed Murray, this achievement is about more than politicians. Through this victory, Seattle has demonstrated that when diverse groups unite – community organizations like OneAmerica Votes and Washington CAN!­, labor and faith-based groups, and the small business community – we are a force to be reckoned with.

We know our economy works best from the bottom up, not the top down.

It was nearly two decades ago that a coalition of community and labor groups came together to raise Washington state’s minimum wage and index it to inflation, giving Washington State the distinction of having the highest minimum wage in the country.

But that wasn’t enough. At less than $10 an hour, the state’s minimum wage still left many people living in Seattle unable to afford life’s basic necessities, and it was clear from workers that we had to set the bar higher. From them we heard the demand, “Fight for $15,” and we took up the challenge. What once seemed impossible is now a reality.

Two years ago Seattle workers enjoyed a similar victory, when the small business community joined us in the fight to win paid sick days for workers – and win we did.

Last year, community groups and labor unions began the Fight for $15 by setting our sights on SeaTac, the city outside of Seattle that’s home to the state’s major airport. This effort built on an ongoing campaign to raise the wages and improve the working conditions of workers at the airport and Port of Seattle.  Last November SeaTac residents voted to raise the pay for more than 6,000 low-wage workers to $15 an hour.

But the Fight for $15 really took off last year with the fast food workers striking throughout the country.

And as the campaign gained momentum, politicians’ ears perked up. They realized that raising the minimum wage was a winning issue and that they shouldn’t stop there. More and more, elected leaders were noticing that platforms based on higher wages and good jobs help win votes at the ballot box.

Elected leaders are now paying attention to the young, single women and minorities – the “rising American electorate,” as they were dubbed by the Obama campaign – who suffered the greatest harm during the economic downturn. These individuals are the ones who have the most to gain from economic policies – and policymakers – that value people who work.

So we’re definitely onto something here in Seattle.

We know our economy works best from the bottom up, not the top down.  The plan to raise the minimum wage in Seattle recognizes that our local economy is stronger when low-income and middle class families have greater economic security and more money to spend. There will be a $2.9 billion stimulus to low-wage worker households in the Seattle region as a direct result of this wage hike.

The vote here in Seattle has energized the growing national debate over income inequality in America.

Those at the very top have built a system in which their wealth is created by people who are paid meager wages under despairing conditions. Make no mistake – Wall Street, big banks, corporate CEOs and many of the wealthiest members of our society reap huge rewards because they pay other workers poverty wages.

Fights across America for higher wages, better working conditions, and benefits are about building an economy that creates prosperity for all, especially the 106 million Americans – more than one in three of us – who live at or near the federal poverty line, on less than about $37,000 annually for a family of three, struggling to afford the basics.

The message of the Seattle victory is clear: Working people are demanding  – through a diverse coalition with a common voice – that they be paid what they have rightfully earned.

For too long, threats and intimidation – whether overt or lurking below the surface – have confined low-wage workers to a system that essentially exploits their work and transfers the wealth that they create to the top.  This comes at a real cost to the economy.  Despite the fact that productivity in this country has surged over the past 30 years, wages have stagnated, leaving workers less able to provide for their families, and less able to purchase goods and services which promote economic growth and good jobs in their communities.

Seattle is showing that this does not have to be the predominant economic narrative. We know how to build an economy that no longer produces millions of workers who cannot afford even the basics.

Our goal must be to make sure every person in our nation has access to a good job.  A good job means a living wage, decent benefits and workplace protections.  It means much greater equality in compensation between men and women and people with different skin colors. It means that productivity and wages are once again aligned.

Low-wage workers, with a strong and diverse coalition firmly behind them, are finally saying enough is enough.

When Xochitl began working at the deli eight years ago, a minimum wage of $15 per hour seemed an impossible dream. Now, 100,000 Seattle workers like Xochitl, will watch as their paychecks increase, and their rent, car payments, and childcare costs become a little easier to shoulder. When we come together as we have in Seattle, we have the power to expand what people believe is possible.