Culture

How to Turn Anti-Poverty Work Into an Anti-Poverty Movement

About a month ago, I had the opportunity to spend a weekend at Harvard with a group of about 20 scholars and reporters. Many of them have worked for decades examining poverty-related issues—from hiring discrimination to segregation in housing and education, criminal justice reform to immigration, deep poverty to homelessness.

I was nervous about the trip. The combination of the venue—and the fact that I had long-admired many of the participants—led me to double-check the invite to make sure I was the intended recipient.  For sure, I was the guy.  So, even though my mother insisted that I needed new shoes to set foot on that campus, I packed my scuffed-up loafers with their separating soles and flew to Boston.

I’m not sure exactly what I expected, but it wasn’t this.

There was some consensus around a handful of policies that would lead to greater progress in the fight against poverty—more affordable housing and access to cash assistance, a fair wage and affordable childcare, public schools that aren’t separate and unequal, substantial investment in disadvantaged communities.  But there was a question that took me by surprise. Even though they had devoted their lives to fighting poverty, some of the participants asked whether their work made any difference at all.

More pointedly, a few asked how their work can help make people in power—particularly white people—do something about poverty.

The fact is, people in power don’t take action unless they are pushed by a movement.  Civil rights, women’s rights, and marriage equality all required movements.  Recent legislative victories such as passing the Affordable Care Act, winning $12 to $15 minimum wages, and implementing paid sick and family leave at the state and local level—all of these were made possible through movement-building at the grassroots too.  And so whether we work as reporters, researchers, advocates, or elected representatives, if we want to cut poverty in America then a key question is whether our work lends itself to building an anti-poverty movement—a movement that is desperately needed.

Despite the recent progress noted by the Census, there are still 43 million people who are officially poor. Nearly half of us are living paycheck-to-paycheck, unable to come up with $400 should an emergency arise.

There are signs of a nascent anti-poverty movement.

With such widespread economic hardship, it’s not surprising that the people with the most immediate stakes in the fight against poverty—the poor and working class—are beginning to take action. There are signs of a nascent anti-poverty movement—from Occupy Wall Street to the Fight for $15; from the Dreamers to Black Lives Matter; from Bernie Sanders’ rise as a viable presidential candidate, to the spread of Moral Mondays, to Climate Justice.

Reporters, researchers, and others invested in this fight have the power and the resources to support these efforts.  Together, our analyses can offer a portrait of who is poor and why, and explore the public policy implications; we can lift up voices and lives that are normally ignored or caricaturized by the media; we can include people living on the brink in high-profile events that explore poverty and in our advocacy efforts.

We are too often failing at this. When then-House Budget Committee Chairman Paul Ryan held a series of five hearings on the state of the War on Poverty, 17 witnesses testified—but only one (called by the Democratic Minority) lived in poverty.  A recent, all-day Brookings event on the lessons of welfare reform featured 25 speakers, but only two people of color and zero people in poverty.  And at strategy meetings among well-resourced, allied NGOs, poor people are heard from far too infrequently.

This exclusion of people in poverty is not only strategically stupid—would you talk about the impact of farm policy without talking to farmers?—it also reinforces a stigma and sense of shame among people who are struggling. We are implying that they don’t matter, that they have nothing to offer, that they are flawed, that they should remain on the sidelines while more “respectable” or “respected” people make the decisions that affect their lives—and that’s a message people in poverty have been hearing loud and clear for generations.

But by simply writing or speaking the truth about poverty, we help to create a platform where struggling people can be heard; and by fighting back against the shame and stigma of poverty, we play a small role in empowering people in poverty to take action politically.

So does the work of researchers and writers and advocates matter?  It sure does—especially if that work is opening new spaces for an emerging movement to grow.

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Labor

Lawmakers Want to Close the Loophole That Pays Disabled Workers Pennies An Hour

Recently released Census data reveal that, in 2015, the poverty rate dropped significantly for most demographic groups. One of the only groups who didn’t see an improvement were people with disabilities: the percentage of disabled Americans (age 18-64) living in poverty increased from 25.9% to 26.5%. For Americans without disabilities, the poverty rate decreased from 14.1% to 12.8%.

The data suggest the challenge disabled people face in trying to escape poverty.  But there is hope that an emerging bipartisan consensus on disability employment may mark an important step in the right direction.

Currently, under the Fair Labor Standards Act, a certified “sheltered workshop” can pay disabled Americans less than the minimum wage—sometimes as little as pennies per hour. As a result, approximately 400,000 disabled Americans are paid a subminimum wage, which makes it more difficult for them to work their way out of poverty.

It’s a relic from a time when our politicians embraced other draconian ideas like eugenics

For decades, activists were unable to get even top labor Democrats like former Senator Tom Harkin—a key sponsor of the Americans with Disabilities Act—to challenge this labor law. Harkin, like many Democrats, argued that it was a key policy that helped people with disabilities get needed training for better jobs.  However, studies show that rather than finding higher-quality jobs, the overwhelming majority of these disabled workers spend their careers continuing to earn the subminimum wage.

Ari Ne’eman, who was appointed by President Obama to the National Council on Disability, says the subminimum wage is an outdated idea. “It’s a relic from a time when our politicians embraced other draconian ideas like eugenics,” says Ne’eman. “This is 1930’s thinking.”

Fortunately, a movement to extend the minimum wage to disabled workers has now spread to four states and has reached the federal level as well.

In 2003, Vermont was the first state to eliminate the subminimum wage for persons with disabilities. Instead of paying nonprofits to employ these workers at a subminimum wage, the state invested those funds in wraparound services to help employers accommodate workers with disabilities. Rather than reducing the number of jobs for disabled workers, as critics of the policy had predicted, the employment rate for disabled workers rose—it is now double the national rate.  In the last five years New Hampshire, Oregon, and Maryland have followed Vermont’s lead.

At the federal level, President Obama raised the minimum wage for tens of thousands of disabled federal contractors working in “concessions and concession industries;” and Labor Secretary Tom Perez has said  that he wants all states to eliminate the usage of the subminimum wage to employ persons with disabilities.

Now there is also bipartisan support in both the House and the Senate for the TIME Act, which would ban the subminimum wage and provide funding to help transition disabled workers into mainstream employment.

Republican Congressman Gregg Harper, whose son has Fragile X syndrome, is a cosponsor of the legislation. Congressman Jim Langevin (D-RI), who is paralyzed, and House Republican Conference Chairwoman Cathy McMorris-Rodgers (R-WA), whose son has Down syndrome, are also supporting the push to pass the bill.

“For many of these people, it’s because they have family members with disabilities,” says Allison Wohl, Executive Director of the Association of People Supporting Employment First.  But she says education also plays a role.  “It’s universal—the reaction you get when you tell a hill staffer about the subminimum wage. Their face drops and it’s clear they don’t know what to say.”

Ne’eman hopes that the space created on both sides of the aisle to tackle low wages among disabled workers will lead to more creative thinking about how to raise wages for all workers.

“We call it the curb effect,” he says.  “Just like the [ramp at the] curb also makes it easier for [pedestrians with] a piece of luggage or a stroller.  It ends up helping everyone.”

So far it’s unclear if the legislation is going to move in this Congress, but advocates remain hopeful. These days, even the possibility of Republicans and Democrats coming together to support pro-worker legislation is a rare thing. And many in the disability and labor communities hold out hope that passing this bill will be the first of more victories that lie ahead.

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Labor

The Gig Economy Is Screwing Over Workers—And It Needs to Stop

For the past few years, we have been inundated with think pieces about the gig economy. They feature vignettes of Americans working flexible hours to pick up extra cash: the graduate student who drives for Uber in his spare time, the stay-a-home parent who brings in extra spending money with EasyShift, the high school student picking up odd jobs on TaskRabbit. Whether it is being praised as the newest innovation in work-life balance or a massive new industry that will displace traditional work relationships, we live in a period that touts the “gig economy” as the latest great phase of modern work.

If this were actually true, I would praise the dawn of a new era too—especially one where, for once, more people could have access to equal parts work, rest, and recreation. But this trend is actually just a collection of familiar, exploitative business practices re-packaged as a positive 21st century development.

Gig executives are using the hipness of company brands to mask age-old practices. Companies lure workers by projecting their apps as the new, fast way to achieve the American dream of being your own boss. And at first glimpse, the gigs may seem that way. As Guardian columnist Arun Sundararajan wrote last year, “this explosion of small-scale entrepreneurship” looks like Adam Smith’s capitalist ideal of “a genuine market economy of individuals engaging in commerce with one another.” The problem is that these self-employed entrepreneurs have very little autonomy. They aren’t setting their prices, outlining the scope of their development, or even determining what car to drive—the company still maintains control over those decisions.

There’s only one situation in which gig companies are willing to cede control to individual workers: when something goes wrong, and someone needs to be held accountable. In those cases, gig companies try to minimize their relationship with their workers. This is particularly clear in two recent lawsuits against Uber. In the first case, two women attempted to hold Uber accountable for the sexual harassment they experienced from a driver. The company claimed the driver was an independent contractor—not an employee—and thus they weren’t liable. In the second case, workers sued the company for mileage and tip reimbursements that they currently have to cover themselves. Again, the company argued that the workers aren’t employees—and that making them employees would undermine their business model by damaging driver flexibility and adding too many costs. So far, judges in both cases have decided against Uber (in the first case by allowing the lawsuit to proceed, and in the second by rejecting a proposed settlement that the judge felt was “not fair, adequate, and reasonable” for the drivers).

Companies’ goals are the same as always: to keep their costs low while maximizing profits

Classifying workers as independent contractors is key to many gig companies’ strategies, since gig workers are paid the same (or less) than formal employees and receive significantly fewer benefits such as health care, paid sick leave, or workers’ compensation for injuries. And at the end of the day, gig companies’ goals are the same as always: to keep their costs low while maximizing profits.

To be clear, I am not against the gig economy or the tech innovations that have made it possible. The issue is that the gig economy is sold to workers as a type of empowerment, but the actual jobs are designed to hold them back. Flexibility for workers does not automatically gel with the on-demand needs of company executives. Both parties need room to negotiate—which is most effective when workers are able to unionize.

Unsurprisingly, gig execs militantly combat workers who attempt to form unions. Again, Uber is an illustrative example: when Seattle granted its drivers the right to unionize, the company instructed its customer service reps to call through a list of drivers to explain why unionizing was a bad idea (a spokeswoman defended the practice in a statement, saying “it’s not clear a traditional union can serve such a large and varied group of people.”) The company also has a history of “de-activating” drivers who lead unionizing efforts (and its major competitor, Lyft, has been accused of similar tactics, though spokespeople for the companies have denied the allegations). NYU professor Aswath Damodaran explained that unions will ultimately hurt companies’ bottom lines, saying “they are likely to shake up the current revenue-sharing balance.” In other words, union workers get more of the total share, and that makes the execs nervous. And so it pays to keep gig workers from organizing.

So while the inevitability of the “gig economy” is upon us, it is far from the worker-powered revolution that companies are marketing. But workers at many gig companies are experimenting with different ways to negotiate over their conditions, from Seattle to New York and overseas. They are proving that the only thing inevitable about the gig economy is that, as with business innovations of the past, working people will eventually figure out how to organize. And frankly, it would save us all a lot of time if gig companies simply came to the table.

This article is based on a presentation given at the American Sociology Association national conference in Seattle 2016.

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Labor

Millennials Support Unions—So Why Don’t They Join Them?

This is another article about Millennials, and how we value fulfillment over money in our jobs, and experiences over things. But it’s also about why—it’s about how, when the financial crisis hit, we were the ones who couldn’t get jobs. Or money. Or things. And it’s about how, when our country decided that higher education was no longer a public good, we were the first generation hit—really, truly hit—by the staggering cost of college and the interest rates that went along with it.

This is an article about security, and empowerment, and how Millennials feel disengaged from the political process, but not from politics. In the end, this is an article about unions, and how maybe, just maybe, they could be Millennials’ silver bullet.

In 11th grade I began each day at 7:15, fingering my way towards the off button on my alarm clock. I never hit snooze in my three years at that school, not once. For me, in boarding school, there was no time to snooze. I was out of my league in every way, from the clothes I wore, to the way I spoke, to the way I thought. My class at Andover was the 234th entering class, the 34th that admitted women, and the first to receive need-blind admission.

My second period class was U.S. history with Mr. Jones, a notoriously hard teacher who sometimes played a game called “attendance” with us. He’d ask us for our favorite band, television show, or movie of the moment. If he didn’t like an answer, he threatened to mark us as absent for the day. The school only granted you five “free” absences per the term—any more and you were assigned extra work duty.

Near the middle of the term, as we inched closer and closer to the precise center of our textbook, we began learning about the labor movement. Our textbook, despite its colored pages, featured only black and white images of factories filled with older white men—perhaps a necessary product of the time, perhaps not.

I’m not sure if any kids in the class had family members who worked in unions. No one said they did. No one said they didn’t.

After midterms, I mostly forgot about unions. I graduated from high school and then college, and landed a job at a think tank. My first day was June 1. By the end of the month, I had signed a union card.

***

“There’s this perception that young people don’t really care about their work, like insurance and benefits. Because they’re young,” Eunice How tells me.

Eunice is 26, Chinese Malaysian American, and an organizer with the UNITE HERE union in Seattle. Her parents, who are ethnically Chinese, immigrated to the United States when they were denied access to higher education in Malaysia. They moved to Illinois, where Eunice was born, then to Singapore, then back to Illinois, and then Eunice moved to Washington state for college, where she’s lived ever since.

Do we care about insurance and benefits? I wonder. Do I care about insurance and benefits?

I pause and think back to when I was offered my job. I was lying in my bed fiddling about, in the last few weeks before college graduation, when a representative from HR called to offer me the job.

“Really?” I asked.

“…really,” she said, skeptical of my skepticism.

“I’m sorry,” I stuttered back. “I’m just. I’m surprised,” I said.

When did employment become a surprise? When did the story change from sending out one résumé to sending out 100?

Millennials are a generation defined by insecurity.

Millennials, generally defined as those aged 18 to 35, are a generation defined by insecurity. Our lives were rocked by national insecurity, with 9/11 and terrorism and the Iraq War, and then financial instability, when we watched parents and relatives and loved ones across the country lose their jobs in the wake of the greatest economic recession in recent memory. A recession that was so sudden, so unforeseen, that it reverberated across families, towns, and local economies like an earthquake, leaving behind a tremoring 10% unemployment rate.

Today, Millennials are still reckoning with the aftermath. And, if history is any indication, we always will be. Recessions tend to follow generations: if you enter the economy during a recession, when demand for jobs is high but the supply is low (and so are wages), your earnings will stay low even when the recession fades. It’s no wonder that, according to recent polling, Millennials are the only generation that prioritize economic stability over economic prosperity.

Financial insecurity is like trying to build an Ikea bookshelf after you mess up the first step: the bookshelf will never balance quite right. Financial insecurity affects the job you decide to take, where you live,  whether you buy a house, how many kids you have, if you have kids, how much money you put toward your health care, whether you can travel to see the world, and your views, beliefs, and relationships.

Unions improve conditions for workers in many ways, from higher wages to stronger benefits, but, taken together, they can be summed up in one word.

What do unions offer young workers? I ask Eunice. “Security,” she tells me.

***

If you’re a Millennial, you’re likely making less money than your parents did at the same age. Wages for a 30-year-old today are lower than they were for a 30-year-old in 2004, and more Millennials live in poverty today than older generations did at the same age. In addition to earning less, each successive graduating class over the past few years has received the dubious honor of the most indebted graduating class in history; the average student debt burden per borrower now surpasses $35,000.

We’re also the most educated generation in history. And we’re part of a workforce that has become more and more productive, even though we haven’t seen that trend reflected in our wages.

That is the first reason that it’s confusing that more Millennials aren’t in unions: unions are proven to raise individual wages. According to a 2011 analysis from the Bureau of Labor Statistics union workers averaged $23.02 an hour, compared to $19.51 for nonunion workers. These gains are collective: increases in union density raise wages for nonunion members. More broadly, when low- and middle-class Americans have more money in their pockets the entire economy benefits from increased spending.

Americans seem to recognize this: in 2016, a (slim) majority of Americans said labor unions mostly help the U.S. economy. What’s more, in another Gallup poll, Millennials appear to be the generation most supportive of unions. In 2015, Gallup found that 66% of 18- to 34-year-olds approved of labor unions, versus 53% of 35- to 54-year-olds.

And yet, while Millennials appear to be the most supportive generation of unions, they’re also among the least likely to actually be in one. In 1984, 17% of 30-year-old private sector workers were covered by a union. In 2004 that number dropped to 7.6%, and in 2014 it was down to just 5.9%.

Why do Millennials value unions, but not experience their value?

While an uptick in anti-union activity explains part of the mismatch between the number of Millennials covered by unions and the number who could be, there’s another a problem. There’s a pervasive idea that unions are only for certain kinds of people: low-income, industrial, white, older, male workers. For Millennials, the most diverse generation in history, this image isn’t simply outdated—it’s prohibitive.

***

“I never really learned about the labor movement until I was in college,” Eunice says. Her mom was in a teacher’s union, but since her school was a closed shop she didn’t really have a choice in the matter. “I guess I recall thinking unions are for working class people.”

“That’s changed!” she exclaims. “There’s all sorts of people who are in unions: office staff, nonprofit workers, health care workers. It’s not just like the white man who’s a plumber! That’s the media view.”

That’s also—whether by consequence or coincidence—the view of a lot of Millennials.

Shawn Fields is 27, black, and a graduate student at the University of Illinois Urbana Champaign. She’s also a member of the American Federation of Teachers (AFT) Local 6300. She grew up in Detroit, home of the American auto industry, and the auto workers’ unions. Union blood runs through her veins: her great-grandfather worked in the factories, and her grandmother, as a preschool teacher, was also a member of the AFT.

But Shawn never saw herself joining a union. “I didn’t think about it,” she says. “In Detroit, a lot of the unions are very much industrial, and I didn’t see myself getting an industrial job so it never necessarily occurred to me that that was an option.”

The three things that came to mind when Shawn described how she thought of unions growing up? Detroit, auto workers, older men.

When she landed at the University of Illinois for grad school, a mentor reached out and told her about the union. Though graduate students at private universities only just won the right to unionize this summer through a National Labor Rights Board (NLRB) decision, as a public university, graduate students at UIUC have been unionized since 2002.

Shawn joined and is now an active member of her bargaining unit, and has also served on the AFT’s racial justice task force.

What do you think of unions today? I ask. Who do they represent?

“It’s definitely more diverse than what I imagined when I was younger. It’s definitely young people, a lot more women and people of color than [what I thought] when I was younger,” she says.

***

Millennials are the most diverse generation in the history of the United States. When the AFL-CIO, the largest federation of unions in the country, passed a resolution in 2013 recognizing the importance of youth engagement for the future of the labor movement, it simultaneously passed a resolution on diversity. “A diverse and inclusive labor movement is essential to connecting with and representing the workforce of the future,” the resolution read.

The demographics skew in unions’ favor. Millennials are more likely to be people of color than previous generations, and some racial minorities—notably black Americans—tend to be over-represented in unions and to hold more positive views of them. According to the AFL-CIO, African Americans constitute 11.7% of the workforce but 14% of union members. At the same time, 69% of black Americans view unions positively, versus 51% of the general population.

There’s a new American majority, but we’re going to focus on white guys?

And yet despite the promise of these statistics, Rachel Bryan, a staff member at the International Brotherhood of Electrical Workers—who is black and formerly incarcerated—sees a disconnect between unions’ potential and their reality.

“We’re not organizing in an effective way. We’re not organizing where [young people] are. We’re not linking ourselves back into the community in ways that young people are there…There’s a new American majority, but we’re going to focus on white guys?”

“It doesn’t work that way,” she says.

***

For the organizers I talked to, unions were about security. But for the young union members I talked to, their union experiences were defined more by a sense of empowerment. For the generation that founded Occupy Wall Street and then Black Lives Matter, the association of unions with empowerment is important.

“I didn’t feel comfortable at my old job to ask for more things, because I felt lucky to have a job,” says Jane Tandler, a 26-year-old Ph.D student at Duke University and a leader of the movement to organize the school’s graduate students. She pauses, twisting an idea around her mind.

“I’m trying to think if this is an issue of empowerment,” she finally muses aloud.

Jane first joined Duke’s graduate student unionization efforts because she wanted to improve her school’s policies concerning sexual harassment. Originally, she says, it hadn’t occurred to her that a union could help address her concerns and work to improve the policy. Now when I ask her to name how unions impact Millennials, she rattles off a list of issues prominent to our generation: Black Lives Matter, sexual assault and harassment, environmental justice. For Jane, whether she realizes it or not, unions represent a distinct kind of empowerment: the ability to organize around specific issues.

Without prompting, Shawn, the grad student at UIUC, volunteered the idea of empowerment when I asked her why she decided to join a union in the first place. “You can kind of feel very disconnected from everything” as a graduate student, Shawn says. But when a mentor introduced her to the union, she says, she had a realization: “Oh this is something I want to do that makes me feel more empowered.”

***

Economists talk a lot about matching: when the workforce’s skills match the demand of the local labor market, unemployment is low. In a similar sense, unions match Millennials’ needs. They’re a platform to agitate for higher wages and better benefits, which Millennials need to counteract the lasting effects of the Great Recession. They also provide a bridge to advocate for the issues Millennials care so deeply about.

Sometimes it feels inevitable to me: there must be a swell of Millennial support for the labor movement coming. The pieces fit too perfectly. They match. But the image problem—the idea that unions only represent older white male workers—can feel intractable. It’s not just prohibiting Millennials from securing better wages or stronger benefits—it may also be blocking Millennials from using unions as an outlet for their politics.

Millennials don’t turn out to the polls in overwhelming numbers (in fact, the numbers underwhelm). We may be withdrawing from traditional measures of political engagement, but we’re not withdrawing from politics. We demand accountability for biased policing, we rally to raise the minimum wage to $15 an hour, and we organize against the campus sexual assault epidemic.

Unions—which, almost by definition, uplift the 99% and rely on collective action—could be the platform that finally captures Millennials’ particular breed of political engagement. Are unions—and Millennials—ready to turn the page?

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Safety Net

Everything You Wanted to Know About Payday Loans but Were Afraid to Ask

Editor’s Note: On Friday, October 7th, the Consumer Financial Protection Bureau will close the public comment period on a rule to rein in payday loans. Please submit a comment to tell the CFPB why a strong rule to rein in the worst payday abuses is critical.

For seven straight years the United States’ economy has been in an expansion—one of the longest on record. Even better, data released earlier this month by the Census Bureau showed that middle class and low-income Americans have finally started to benefit.

Still, a huge number of Americans live paycheck to paycheck. Almost half of all Americans—a full 46%—say they would not be able to come up with $400 in the event of an emergency. Unfortunately, many will turn to payday loans to make ends meet.

What are payday loans?

Payday loans are advertised as quick and easy loans that borrowers can repay when their next paycheck comes around. There’s a catch, though. The interest rates are so high—often 400% and above, compared to about 16% on the average credit card—that borrowers simply cannot afford to pay back the loan and cover basic expenses at the same time. Instead, the vast majority of loans—80%—are rolled over or followed by an additional loan within just two weeks. The result is that borrowers wind up in debt—the median borrower for more than six months in a given year.

Why do borrowers use them?

It’s fairly common knowledge that payday loans are a trap. So why do borrowers—let alone 12 million annually—even bother?

First of all, most payday loan borrowers—who are disproportionately people of color—have low or moderate incomes and struggle to obtain credit from mainstream sources like a credit card company or banks mostly because they have low credit scores. As a result, payday loans often appear to be the most accessible option.

Most of these borrowers take out payday loans cover everyday expenses (it’s a common misperception that payday loans are used as stop-gaps for unexpected financial setbacks). Since the cost of basic necessities, like rent and child care, has surged in recent years—at the same time that wages have stagnated—many low-income Americans have been left without an adequate and reliable cash flow.

How bad are they?

Payday lenders have the right to seize borrowers’ bank accounts.

All told, the median borrower will pay $458 in fees on a typical $350 two-week payday loan. Many borrowers, however, will pay an even steeper price. Small payday loans often balloon into thousands of dollars in debt, and the effects of default are severe. If loans aren’t repaid quickly enough, payday lenders have the right to seize borrowers’ bank accounts to make sure that they are prioritized for payment above all other bills—no matter how urgent or essential. Borrowers can also end up saddled with insufficient fund fees from banks when lenders try to draw too much money from borrowers’ accounts. Even worse, an indebted borrower is more likely to have her bank account closed against her will, which pushes many consumers further out of the financial mainstream and forces them to use expensive alternative financial services—like check cashers and pawn shops—that carry higher fees and risk.

These problems affect entire families. Low-income families with access to payday loans are also more likely to struggle with bills like the mortgage, rent, and utilities. This can lead to foreclosure or eviction, which can devastate families in the short- and long-term. Payday loans are also linked with delinquency on child support payments, which deprives families of needed income and carries severe consequences for the parent unable to make payments, from a suspended drivers’ license to incarceration.

On some level, the entire nation is paying for this practice. Each year, payday loans drain more than $4 billion in interest and fees from the economy—and that’s just the direct cost.  It doesn’t include the costs associated with homelessness (like emergency shelter) for families who lose their homes, or increased enrollment in public assistance programs to cope with the debt trap.

How can we protect borrowers?

State-level efforts to cap interest rates and fees to 36% or below—as 14 states and the District of Columbia have done—are key. But attempts to regulate predatory lenders otherwise have, by and large, proven to be exercises in futility. For example, after 64% of Ohio voters elected to ban the practice in 2008, loan sharks obtained licenses as mortgage lenders and continued to peddle payday loans under that guise. Predatory lenders in Texas acted similarly. In states where payday loans have been banned altogether, lenders have lured borrowers through online channels that can operate nationwide.

This “legislative Whack-a-Mole” at the state level has made it clear that the country needs federal reform to effectively protect borrowers.

Fortunately, the Consumer Financial Protection Bureau proposed new rules in June that target some of the most egregious practices in the industry. Under the new rules, loan sharks will have to determine whether prospective borrowers are actually able to repay a loan before they take one out (in most cases). The rules will also prohibit the repeated loans that trap borrowers in debt: Lenders will not be permitted to directly roll over loans or loan to those who seek to re-borrow within 30 days, unless those borrowers can prove that they will be in a better position financially. It will also place important limitations on lenders’ ability to seize borrowers’ bank accounts.

But here’s another idea: Eliminate the need altogether. If borrowers use payday loans to address chronic shortfalls, then economic insecurity has to be addressed as well through wage hikes and improvements to public assistance programs. These can go a long way to protect against cash shortages that lead families to take out loans with such insidious costs.

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