Safety Net

The Child Tax Credit Doesn’t Reach the Poorest Families. Here’s Why It Should.

Earlier this month, the U.S. Census released its annual data update on poverty in America. The child poverty rate remains alarmingly high—over 16% after accounting for assistance from government programs—which is both damaging to kids and expensive for the country.

Fortunately, boosting the incomes of very poor families has been found to reduce the effects of child poverty, and the Child Tax Credit (CTC)—which offsets some of the cost of raising children—should be a key part of that effort. The problem, however, is that the CTC excludes families earning $3,000 or less per year and does not provide the maximum credit to other very poor families, so the children with the greatest need don’t receive full benefits.

If very poor children received the full tax credit—just like middle-class children do—the evidence suggests we would see healthier, better educated children with greater earning power as adults.

Boosting incomes for poor young children has long-term benefits

The benefits of income support during a low-income child’s early years last a lifetime—from higher birth weights (which impact future health), to better performance in school, to higher expected lifetime earnings.

Studies consistently show that income matters most for the poorest children. After conducting a systematic review of the academic literature on the effects of income during childhood, researchers at the London School of Economics and Political Science found that “there is very strong evidence that increases in income have a bigger impact on outcomes for those at the lower end of the income distribution.” For example, one study found that the Earned Income Tax Credit (EITC) boosted children’s test scores by almost three times as much for the poorest children as for other children.

Young children warrant particular attention. They have higher poverty rates than older children or adults, and the evidence that increased family incomes yield long-term benefits for children is particularly strong for those up to age 6.

Poorest working families get little or no Child Tax Credit

Unfortunately, the Child Tax Credit doesn’t do enough to help the children who are most in need (and stand to benefit the most, too).

The CTC is worth up to $1,000 per child under age 17. However, working families with earnings below $3,000 are ineligible for the tax credit. Once a family’s earnings reach $3,000 the credit phases in slowly, at a rate of 15 cents for each added dollar of earnings until reaching the $1,000-per-child maximum. As a result, families with two children don’t receive the full credit until their earnings reach $16,333. Roughly 8 million working families received only a partial CTC or none at all in 2014 (the latest year for which data are available).

What Congress can do

The CTC’s current design means that children in the poorest working families get no benefit and many other children in deep poverty—those with incomes below half of the poverty line, or less than about $10,000 for a family of three—get only a partial tax credit. This needs to change. Children shouldn’t be denied the credit’s full benefits because their parents have fallen into desperate times and have little or no earnings.

By making the full $1,000 CTC available to all low-income children—in tax parlance, making the credit “fully refundable”—Congress could boost young children’s potential to succeed in life, starting even before their first day of school.

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Labor

7 Steps to Make Sure Unemployment Insurance Is There When You Need It

Unemployment can be devastating—just ask the millions of workers who lost a job during the Great Recession. But it’s a commonplace experience: At some point during our working years, two-thirds of us will experience at least a year of unemployment firsthand (either ourselves, or for our household’s primary breadwinner).

The United States already has an effective program that protects workers from falling into poverty or losing their homes when they are laid-off, by temporarily replacing some of their earnings while they look for a new job. Unemployment Insurance (UI) isn’t exactly a household name, but the program’s benefits have provided stability and protection to working families for eight decades.

In 2014, just 1 in 4 jobless workers received UI benefits.

Unfortunately, the program isn’t reaching everyone who needs it—in 2014, just 1 in 4 jobless workers received UI benefits. In large part, that’s because policymakers have failed to update UI to keep pace with dramatic changes in the American workforce and overall economy. But in some states, lawmakers have done even more damage by cutting program benefits and tightening already-strict eligibility rules. This leaves workers—particularly low-wage workers, women, and people of color—without a safeguard if they lose their jobs.

Cutting UI also jeopardizes our entire economy, because it is our first line of defense against recession: it creates demand by boosting the spending power of struggling families, which helps to stabilize the economy during downturns. We’re currently enjoying our seventh year of economic expansion, but we’ve never had an expansion last longer than ten years—so lawmakers should be preparing for the next recession before it arrives.

Here are seven steps that would put the UI program on firm footing before the next economic downturn:

1. Give people enough time to find new jobs

Finding a new job takes time—in 2015, it took an average of 29 weeks. For that reason, UI was designed to replace about half of a typical worker’s wages for up to 26 weeks while she searches for work. But states have been slashing benefits so that they replace far less than half a worker’s wages, and nine states now offer fewer than 26 weeks of support (with Florida and North Carolina cutting off benefits after just half that time).

States are shortchanging workers on a protection they’ve earned.

Since UI is an earned benefit—workers contribute to the program through payroll taxes, just like Social Security—these states are shortchanging workers on a protection they’ve earned. It’s time for Congress to set standards guaranteeing all qualifying workers 26 weeks of protection, and replacing at least half of wages for low- and middle-income workers.

2. Keep workers in the jobs they already have

UI includes a provision that can actually prevent layoffs from happening in the first place. Work sharing  gives employers the option to temporarily reduce their employees’ work hours—rather than laying them off—while UI steps in to replace part of workers’ lost wages.

It’s a win-win—workers keep their jobs and businesses retain experienced employees—but 21 states still haven’t established work sharing programs. Policymakers should ensure work programs exist in all 50 states and the District of Columbia, so that employers and workers have an alternative to layoffs during the next recession.

3. Train unemployed workers for new careers

Many workers whose jobs fall prey to globalization and technological change will need to retrain for work in a different sector. Our nation’s workforce development system—and UI’s reemployment services, in particular—is highly effective, but it is woefully underfunded. As a result, the system doesn’t reach nearly enough workers. Worker retraining actually has bipartisanship support—the only hold-up is Congress’s failure to put more money where its mouth is.

4. Include low-paid workers

It’s bad enough that workers today can legally be paid a poverty wage. But leaving low-wage workers without assistance during unemployment because they were underpaid—even when they have typically contributed the same amount in unemployment tax as higher earners—is downright absurd. Yet because most states use an earnings threshold to determine who is eligible for UI, low-wage workers are only one-third as likely to get UI as higher earners (despite being twice as likely to be laid off).

To avoid punishing low-wage workers, UI eligibility should be based on the number of hours worked—not the amount of money earned. Once someone has worked 300 hours at the state’s minimum wage over the course of two calendar quarters, they should automatically qualify.

5. Protect more women in the workplace

Women are now primary breadwinners in 40% of American households, but UI hasn’t adapted to keep pace with this reality. Women are twice as likely as men to be part-time workers, but since part-time workers are excluded from UI in one-third of states, many women are being unfairly disadvantaged. Women are also more likely to have to leave the workforce to care for an ill relative or for personal reasons such as escaping domestic violence, and some states don’t allow them to receive UI when they search for new work.

All states should extend UI coverage to part-time workers, as well as workers who must quit for so-called “good causes.”

6. Make sure all workers pay their fair share

UI is funded through two modest payroll taxes. Nearly every worker—whether they are making millions of dollars or minimum wage—contributes the same $42 per year in federal UI tax. This is because workers only pay federal taxes on the first $7,000 of their wages every year. This hasn’t been adjusted in 33 years, and each year the tax gets more regressive. Congress should fix this by broadening the taxable wage base—for example, by applying UI taxes to earnings up to $59,000 (about half of the Social Security wage base). This would allow us to lower tax rates while still collecting the same amount of revenue.

7. Build the emergency exits before the next fire.

Jobs are scarce during recessions, so laid-off workers need longer on average to find new work. For that reason, UI has a program called Extended Benefits (EB), which is supposed to automatically activate when a recession approaches. It’s a great idea, but the triggers that turn on the EB program don’t respond quickly enough when unemployment rises, so the assistance EB provides is often too little and too late. To trigger EB now, more than 5% of the workforce would need to be receiving UI benefits—but since so few workers are eligible for UI, that’s a tall order.

Policymakers should fix these triggers so that the UI system is not caught unprepared when the next downturn arrives.

In the longer term, policymakers should give unemployment protections a big-picture update to match the modern economy.

Even if UI were fully updated, a substantial share of unemployed jobseekers today would remain ineligible for UI. This includes new college graduates and caregivers returning to work, as well as gig economy workers such as Uber drivers and TaskRabbit workers. To assist these workers, we should create a Jobseeker’s Allowance—a modest short-term stipend to support job hunting and training. Many countries—such as the United Kingdom and Germany—already have similar programs that help workers connect to job opportunities and improve their work-related skills.

Economic expansions don’t last forever—and experts are increasingly calling on Congress to prepare the nation for the next recession. By taking concrete steps today to fix the cracks in our nation’s unemployment protections, policymakers can protect more working families against the hardship of job loss.

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Safety Net

Unemployment Insurance Helped My Family When We Needed It Most. So Why Are Lawmakers Trying to Cut It?

In 2012, I was diagnosed with multiple sclerosis. At the time, I was devastated—I imagined a life of injections and pills, MRIs, and neurological exams to manage the constant muscle spasms, fatigue, and forgetfulness that come along with MS. I worried about my husband and daughter, and how my diagnosis would change their lives. I was afraid I would not be my best self for them.

I decided I wanted to do more than just survive, so I did the things that people do when they embrace their lives. I took a spontaneous girls’ trip. I went to a Jill Scott concert. I bought myself a fancy pair of shoes, and I cut my hair short.

For a while, I felt like everything would be OK. Then, a few weeks after my 35th birthday, I lost my job.

The morning that I was laid off, I knew something was wrong as soon as I walked into my boss’s office. There was a woman in the room I’d never met before, from Human Resources. She said all the things she is trained to say to soften the blow—“it’s not you, it’s the budget,” and “there are ways to deal with a ‘Reduction in Force’”—but there was no amount of wordsmithing that could change the facts.

I was unemployed.

That night, I sat down with my husband to figure out how we were going to make ends meet. We made a lot of deep cuts in our budget, including taking our seven-year-old daughter out of the aftercare program she loved. We tried to explain it to her the best we could and she seemed to take it in stride—but her sleep terrors told a different story. One night, in her sleep, she asked: “Mommy, what happens if we run out of money?”  My heart was broken, but I couldn’t tell her how worried I really was.

The truth is, her aftercare wasn’t the only major loss. I also lost my health insurance, which is crucial for managing my symptoms. The medications and appointments are expensive, and without them I could form new lesions on my brain that make the condition worse. Plus, stress alone can exacerbate MS. Treatment for that requires IV steroids—another expense, which leads to more stress, which leads to more symptoms.

The problem is, it’s hard to stay calm when your identity is being called into question. I had been working in public health for a decade, and I’ve kept a steady job of some kind since I was 13 or 14 years old. I was raised to be a “worker bee”—I’ve been staff at daycares, offices, restaurants, and my church’s youth program—and I didn’t know what to do without a job.

I searched for a new position with fervor: I checked with community colleges, health departments, department of human services, and universities. It was important to me to find a job that I loved, and that matched my experience, but they were few and far between—and my family needed an income.

To help us get by, I applied for unemployment benefits. I completed most of the process online, and I was able to call and speak to someone when I had questions. Soon, I was approved and began receiving a weekly stipend.

The benefits certainly didn’t replace my job—they only make up for about one-third of my income—but they’ve given us a little time. We have been able to keep our two-year-old in daycare so that I can go to job interviews, and we can pay the power bill, buy groceries, and put gas in the car. But my benefits are about to run out, and our household expenses are not.

Compared to a lot of Mississippians, I’m truly blessed. Last year, less than 15% of unemployed people in the state received these benefits—the other 85% were left to piece together a living however they could. Still, politicians are talking about cutting the program even further.

I can’t help but wonder if they have ever had to walk a mile in these shoes. Have they had to make the decision to take their children out of school? Or choose between paying the mortgage and buying groceries? If they had, maybe they’d choose differently.

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Labor

The Gender Wage Gap Is Wider in States with a Low Minimum Wage

Last week, the Census Bureau delivered a spectacular report card to the nation for the 2015 calendar year. Poverty fell dramatically, working- and middle-class households saw a long-awaited jump in income, and the share of Americans without health insurance shrank to an all-time low. Even the fine print—the footnotes breaking progress down by race, gender, age, and so on—contained cause for celebration.

As part of this good news, the gender wage gap finally stumbled across the 80 cent threshold. That means that in 2015, the typical full-time working woman earned 80 cents for every dollar earned by her male counterpart. To be sure, it’s only an inch of progress from the previous year’s 79 cents. But any step in the right direction is welcome news, since the gender wage gap is a key reason why women continue to experience higher poverty rates than men.

However, these gains weren’t consistent across all 50 states. A second round of Census data released on Thursday revealed that while no state has yet closed the gender wage gap, places like New York and Delaware are getting closer, with working women earning nearly 89 cents to men’s dollar. But in states like Wyoming and Louisiana, the gender wage gap was just 64.4 cents and 68 cents, respectively.

These stark state-by-state differences aren’t coincidences. In states where the minimum wage increased in 2015, workers with the lowest incomes—those whose wages were in the bottom 10 percent—experienced much faster wage growth than workers in states where no minimum-wage change took place. This wage growth was particularly strong for women, who make up two-thirds of low-wage workers. And in the 21 states where low-wage workers are stuck at $7.25 an hour for the seventh year in a row, the gender pay gap is nearly 25 percent wider than in higher minimum-wage states.

Gender Wage Gap in States with a $7.25/Hour Minimum Wage

If the minimum wage were increased to $12 by 2020, 19.6 million working women would see their wages rise. But Congress—steered by the Republican majority—has stubbornly refused to follow states’ successful examples and heed the will of the voters. Not a single Republican lawmaker has stepped forward to support raising pay for millions of working women—and other struggling low-paid workers across the country—by co-sponsoring the Raise the Wage Act. This federal minimum-wage legislation, introduced last year by Senator Patty Murray (D-WA) and Representative Bobby Scott (D-VA), would raise the wage floor to $12 over a period of five years and gradually phase out the separate sub-minimum wage for tipped workers, which has stood at $2.13 per hour for 25 years. It’s a move supported by more than 3 in 4 American voters, including a majority of Republican voters, yet Congress has yet to pass the bill.

The lawmakers who are dragging their feet on increasing the minimum wage could look to their home districts to see the dire need for the policy. In $7.25 states, working women are struggling disproportionately; poverty among working-age women in these states was more than 7 percent higher than in other states. However, when 80 percent of the U.S. Congress is made up of men, and more than half of its members are millionaires, maybe voters shouldn’t be surprised when lawmakers show they’re out of touch with the challenges facing working-class women.

In a country where 23 of the 30 lowest-paying occupations are female-dominated—and working-age women are 35 percent more likely than men to live in poverty—it should be self-evident that an economic justice agenda and a women’s economic justice agenda are one and the same. Once policymakers recognize this, they should line up behind the public policies that pick up the pace of economic progress for working women

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Safety Net

Is New Orleans ‘Better’ After Katrina? Depends Who You Ask.

In August 2015, New Orleans’ University Medical Center opened its doors for its first patient. Before being damaged in Hurricane Katrina, it had been known as Charity Hospital—a place where all of the city’s residents could seek care regardless of ability to pay. But after the storm, the entire Charity health care system—the only state-run, state-wide public hospital system in the U.S.—was disassembled in favor of a system of privately run hospitals. This rapid move toward privatization has come to define the post-disaster city.

Although more than a decade has passed since Hurricane Katrina hit the Gulf Coast, there is a stark discrepancy between those who can access the resources they need to rebuild their communities—the relatively affluent—and those who cannot. This has been fueled in large part by a market-based approach to recovery, which considers economic recovery more important than restoring social services. And when privatization comes at the expense of public goods, it’s the poor who pay the price.

For example, the Department of Housing and Urban Development’s rebuilding program paid homeowners based on the market value of their houses rather than on the cost of repair. This left many black working-class homeowners unable to rebuild their homes, because they lived in areas with lower market values—a result, in part, of discrimination past and present. The limited resources to rebuild, combined with the dramatic reduction in public housing—many large public housing developments were shuttered—have fueled the city’s affordable housing crisis.

Public schools met a similar fate. After the storm the city eliminated jobs for 7,000 teachers, who were dismissed without pay. The city also began moving towards a charter-based school system—a model based on market-driven ideas of choice, efficiency, lack of centralized oversight, and limited union control. This switch pushed many of the city’s most disadvantaged students out of high performing schools through a process known as “creaming” that is designed to inflate test scores.

The force of a global economy

Why has funding for disaster recovery shifted away from supporting citizens’ and communities’ needs, and towards models that favor privatization of public services? The answer lies in the shifting nature of the global economy.

Beginning in the 1970s, the deregulation of finance, transportation, and the environment—as well as the loosening of trade barriers—increased the flow of goods and jobs across national borders. This shifted manufacturing out of the U.S., and created pressure to compete globally for ports, shipping, finance centers, and tourism, as well as other high-end service industries such as the medical industry—areas in which New Orleans has historically played a significant role.

This shift happened on a city level too, and it fundamentally changed the relationship between local governments and their citizens. Governments have moved from public management to entrepreneurship, with an emphasis on increasing the economic standing of their city. Since the focus following a disaster is on restoring economic growth, the decision-making process for post-disaster cities—such as New Orleans after Hurricane Katrina or the greater New York region after Hurricane Sandy—often increases inequality of access and delivery to much needed public services, such as health care, affordable subsidized housing, and public schools.

A vulnerable health care system

In New Orleans, the health care system is perhaps one of the clearest examples of how this harms the city’s poorest residents. As the main trauma hospital, New Orleans Charity Hospital should have been a key component in recovery efforts. Though it was damaged during the storm, the National Guard had cleaned and restored the hospital so that it was able to receive patients within a few weeks. However, state and local officials chose to keep it shuttered. Instead, they opened an interim hospital and continued with plans to build a new hospital complex that would require razing nearly 70 acres of a national historic district.

For state officials, Hurricane Katrina presented an opportunity. As early as 1991, a strategic plan from the Louisiana Health Care Authority showed that officials who oversaw the state hospital system had been looking for ways to get out of the business of “charity,” and to move away from the two-tiered system that left the Charity hospitals serving most of the state’s uninsured. This was raised again in the early 2000s after Louisiana State University took over management of the hospital, when a report commissioned by LSU argued that the proportion of low income patients the hospital was serving was hampering its financial stability. But as long as Charity Hospital remained open and serving predominantly indigent patients, it would be hard to justify the expense of constructing a new building.

The damage sustained during Katrina provided the justification and funds for a new building with a new name. This was shown most pointedly in the fight over FEMA funds to repair the hospital—FEMA initially estimated repairs would cost $23 million, but the state and LSU fought for nearly $500 million to fund the hospital’s full replacement. When asked for comment, representatives from LSU said “planning for a replacement hospital was well underway with appropriated state funding from the Louisiana Legislature.” LSU had received $1.8 million for a master plan study in 2003 and was seeking funding for a move before Katrina. But even after Katrina, the state only offered $300 million towards construction of the 1.2 billion dollar hospital.

For ten years, Charity Hospital remained shuttered while the new building, now renamed University Medical Center, was constructed. Officials hoped to build a public-private partnered “destination” hospital that would be the lynchpin in the larger effort to transform the medical corridor into an economic engine for the city, though a leaked draft study challenged the hospital’s financial footing, particularly in light of the changing federal health care rules. This same report did note the successful effort to rebrand the hospital.

In the meantime, the city suffered the gutting of a trauma center and psychiatric care facility after one of the most traumatic social disasters. Psychiatric patients who had been served at Charity ended up in the local jail— notorious for human rights abuses—in higher rates. When community members questioned why Charity could not be reopened to serve the population as a hospital for the future (at meetings the author attended in Spring of 2011 on Charity’s reuse, as well as meetings on the process of expropriating houses in the new hospital’s footprint)—as a study suggested could be done for a much lower cost—board members replied that the Charity facility “does not meet the programmatic requirements for the LSU hospital moving forward.” LSU declined to comment on this conversation, but stated that “it was well documented that Charity Hospital was no longer an appropriate building for health care.”

Remaking our cities

It’s worth asking: In what image are cities remade after disasters? Public schools and the Charity system were in need of funds and a system-wide overhaul before the storm, but a narrow view of how to fix these pre-existing problems moved both towards privatization.

Much of the national conversation after Hurricane Katrina focused on the inequalities of class and race that made New Orleanians vulnerable before the storm. But throughout the recovery effort that vulnerability has not changed for many of the city’s poorest—a particularly dangerous risk as cities face more disasters, more often, as a result of climate change. Shifts in formerly public institutions often to private and non-profit oversight did not increase access as much as they removed decision-making from public oversight, and changed the nature of public participation in these key institutions.

If cities are going to be prepared for the future and foster sustainable communities, they should seriously question whether a healthy business environment is more important that the health of its citizens. Now, Louisiana is faced yet again with another long recovery from massive flooding. It also has new leadership, which has placed the health care of its citizens as a primary concern.  Hopefully, we will see something new emerge from the waters.

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