Numbers Don’t Lie: How Paid Parental Leave Helps the Economy

April 15, 2017

“Pawternity leave” is on the rise around the world. At the very least, several companies in the UK and India now provide “paid parental leave” for pets! That’s paid time off to employees when a new pet becomes part of the family.

“Pets are like babies nowadays,” according to the owner of a UK tech company. “So why shouldn’t staff have some time off when they arrive?”

Which begs the question: If puppy parents are reaping the benefits of paid parental leave, can’t the United States provide comparable benefits to ensure human babies receive the same support?

Perhaps it’s a bit more complicated than an optional company program to let people stay home to house-train the dog. And it’s not that Americans don’t care about new parents or babies. (A Pew Research survey from last month reveals Americans overwhelmingly support paid leave access following the birth or adoption of a new child.) Many Americans just disagree about who should foot the bill – private employers or taxpayers.

Well, how about both? Many in the private sector already enjoy weeks or months of paid leave as part of their company’s benefit package and they have no need for government assistance.  And those company policies can stay right where they are.

But many companies don’t offer assistance to new parents, especially when its too expensive to sustain an employee who is not actively contributing to the company’s bottom line for weeks at a time.

A new paper studying the paid leave system shows that parent workers who are least likely to be offered paid parental leave as a company benefit are the ones who need it most — they are at the lower-end of the economic ladder, and the ones whose families are least able to sustain themselves during a pause in earnings. The end result is that lower-income parents who choose (or need) to stay home with a new child often are forced to quit their jobs or are given no guarantee their job will be there when they come back. And they are least likely to have resources to support themselves during the break from work.

First-time parents, particularly low-income mothers, often find no other option than to quit their jobs to care for newborn children, even though work is their most effective path to self-sufficiency.”

That becomes a larger problem for the economy as a whole, according to the study’s co-authors Angela Rachidi and Ben Gitis. Their solution?

A better approach is to offer a modest, well-targeted government paid parental leave program to supplement what is already provided in the private market. …

An income-tested paid parental leave program would effectively target these workers so they can raise healthy children and remain attached to the labor force.”

Their program would include:

… a reasonable benefit ($300-$500 per week, depending on family size and income) to low- and lower-middle-income households. We suggest phasing it in and out in a way that targets those who are the least likely to already have it, as well as the least likely to handle an income loss from time away from work.”

What does that translate into on a national scale? An estimated $4.3 billion per year by taking into account the number of families who would qualify — 2 million qualified workers who add a child to their family each year.

Rachidi and Gitis recognize that many are hesitant to support new government programs, since they often result in higher taxes or potentially an increase in national debt.

But it turns out, there is a financial upside to providing paid parental leave.

Research shows that paid parental leave has positive effects on employment and job continuity, both of which support economic growth.”

More so, the overall cost of not providing paid parental leave could be substantially higher — and not just in short-term annualized dollar output. Returning to work too soon has been shown to negatively affect children, especially those from disadvantaged backgrounds.

Rachidi and Gitis look at other proposed models on the table and find they are much more expensive. They also note the potential risk that employers may stop providing paid leave benefits to workers if there’s a federal program, but their study attempts to mitigate that risk by limiting the number of workers who would be eligible for the program to those who don’t already receive benefits.

Ultimately, self-reliance is important at every stage of life. Sustaining employment – especially as the number of dependents increase inside American households – is as critical to the stability of the family as it is to the government providing benefits to unemployed parents.  It is in the interest of the country at the family level and the national economic level to assist vulnerable parents who need to retain income during the early weeks of a new child’s life, and to keep their jobs in the long-term.

Filed Under: Front-Page Feature, Happiness Tagged With: , ,

How Trump Can Improve Antipoverty Programs

November 18, 2016

With the presidential election in the rear view mirror, Washington and the rest of the country are now turning attention to what President Trump will mean for public policy. What would Trump do for antipoverty programs? Given Trump’s early focus on relieving child care costs for working mothers, that could be an early achievement for his administration.

A Trump administration may also be willing to require more labor force participation among SNAP and disability program recipients and could expand work-based tax credits.

After an election that showed the country is unsatisfied with the status quo, if Congress and the next administration are willing to put in a little work of their own, reforms to antipoverty programs could help more Americans get back to work.

Poverty studies researcher Angela Rachidi sketches an outline of a potential Trump antipoverty agenda.

Included should be a top-to-bottom review of existing safety net and job training programs. Ripe for reform are food, disability, and housing assistance programs — all of which could do more to support work among recipients. Additionally, workforce development programs, many of which have limited evidence of success, expansions to work-support programs, such as the Earned Income Tax Credit and child care assistance, and efforts to improve the quality of education from birth to college, all deserve a serious look.

This is not a new concept for fans of TPOH. Indeed, apprentice training programs, gradual replacement of benefits as individuals climb the income ladder, and changes to disability programs have long been concepts discussed by TPOH to help the most vulnerable get on their own two feet.

For instance, the Earned Income Tax Credit (EITC) provides that if a household doesn’t bring in a lot of money, then the government can supplement its earnings to help people stay on their feet and in their homes. However, childless households receive only $500 for a credit, not much of an incentive to encourage people to aspire to greater levels of achievement. It may seem counter-intuitive, but if individuals don’t develop an aptitude toward work, they won’t work, and will become dependent on welfare, so it makes sense to encourage work until people can develop the skills and interest in participating in the job market. EITC has shown that it has a positive effect on workforce participation.

As for apprenticeship programs, the original job training, who better to encourage that then the host of the 14-yearlong show called, “The Apprentice”? If exempted from minimum wage requirements, apprenticeship programs could be an area where companies feel encouraged to pick up and train employees in the areas where they need help. While getting on-the-job training from real-life employers, the government could use existing job training and college aid budgets to subsidize salaries, making sure individuals in these programs have enough money to live on while they develop their skills.

Finally, as labor economist Michael Strain explains, Social Security Disability Insurance was originally designed to help people who could no longer work after spending years in physically demanding jobs. Automation has reduced the number of physically exhausting jobs, yet the number of working-age adults on SSDI doubled between 1989-2009. This program has effectively discouraged work when it need not do so.

In today’s services economy, disability is often more a continuum than a binary state — a person may be disabled in the sense that he can’t stock shelves, but not disabled in the sense that he can’t sit behind a desk for 25 hours per week. SSDI should be modified to reflect this, covering individuals who truly cannot work, as a just society should, while encouraging others to do what work they can.

In other words, the safety net is becoming a hammock, discouraging people from working when it would be better used and more economical to help those who truly need a lift. Individuals with limited mobility can work in jobs that require fewer physical demands. As Mike Zelley, founder and president of the Disability Network, states, a half-million people with disabilities, including the 43 percent of whom have a college degree, are disincentivized to work because of federal disability programs.

The reality is that, due to his lack of specific proposals or experience in government, it is unknown what President-elect Trump intends to do to fight poverty. Will he be a strong fiscal conservative who focuses on requiring work, reducing fraud, and holding the line on the size of government; a Rockefeller Republican content to increase spending; or something else entirely?

Hopefully, the “wait-and-see” mode will soon be over.

Filed Under: Front-Page Feature, Liberty Tagged With: , , , , , , ,

Official Poverty Rate Declines in 2015. Can Washington Do More?

September 16, 2016

Over the last two weeks, important new reports were released with good news for poverty fighters across the country: the official poverty rate dropped from 14.8 percent to 13.5 percent in 2015, and both food insecurity and very low food security significantly declined as well.

The fact that we are just now seeing progress, as caseloads for major assistance programs decrease, illustrates that a strengthening economy that gets more Americans working is the most essential ingredient for fighting poverty.

Still, a larger share of Americans remain poor than before the recession started in 2007, even when factoring in all non-cash and tax-based government transfers. This means turning to strategies than can further push down the poverty level.

That’s where Angela Rachidi comes in. Rachidi studies the effects of public policy and existing support programs on low-income families, and makes a convincing case that our focus throughout policy should be on getting more Americans working.

A small fraction of prime-working age people in poverty work full-time, full-year, which means that for most, the lack of a full-time job, not low wages, seems to be the primary driver of poverty.

In a study Rachidi conducted over the summer, she found that:

The vast majority of working-age adults in poverty, whether measured by the official rate or the supplemental rate, lack full-time work, and more than 60 percent in official poverty did not work for pay at all in 2014. In addition, the majority of children in official poverty were in a family without a full-time worker, and 31.3 percent were in a family with no working adult at all. …

As Rachidi explains, most working-age adults in poverty are not working for reasons unrelated to searching for work. They have to do with health issues and home and family responsibilities. In other words, Americans in poverty are frequently not able to look for work or take a job when one is offered. They are not actually resistant to doing work. Addressing those barriers could do more to pull those sitting on the sidelines back into the labor market. But government solutions to reducing poverty are addressing the wrong problem.

Antipoverty policies—such as minimum wage increases, wage subsidies, increasing job availability (including subsidized jobs), and workforce development efforts like education and training—often focus on the working poor or on those actively searching for work. Efforts like these are not well-suited to those who are not even looking for work.

From disability programs to child care assistance to apprenticeship programs, a host of changes could be made to increase employment among low-income Americans, Rachidi argues. Many of these can occur on the state level, where much of federal aid is doled out to be distributed as statewide officials see fit. This is useful in the sense that regional problems don’t need a top-down diktat from Washington.

Check out Angela Rachidi’s suggestions on how to make work more attractive to Americans.

At the same time Rachidi focuses on solutions to address the reasons people are in poverty, Edward Conard argues in his new book, “The Upside of Inequality: How Good Intentions Undermine the Middle Class,” that Americans should be wary of relying on increased income redistribution to help the lower and middle classes move up.

He dismantles major myths about income inequality’s impact on the middle and working classes, including the following:

The myth that the rich get richer by making the poor poorer. No other high-wage economy has done more to help the world’s poor than the US economy. Regardless, advocates of redistribution press on. Rising income inequality is actually the byproduct of an economy that has deployed its talent and wealth more effectively than that of other economies — and not of the rich stealing from the middle and working classes.

The myth that incentives don’t matter. In an innovation-driven economy, there are large and compounding costs to dulling incentives for entrepreneurial risk-taking. As payoffs for success have risen, entrepreneurial risk-taking has accelerated US growth relative to other high-wage economies with more equally distributed incomes. Because of this growth, today, median US household incomes are 15 to 30 percent higher than those in Germany, France, and Japan.

The myth that mobility has declined. If the success of America’s 1 percent comes at the expense of the middle and working classes, we should see mobility declining. Yet, even with significant immigration, there is little evidence that mobility has declined or that mobility in Scandinavia, the supposed paradise of redistribution, is better than in the United States.

The myth that the success of the 1 percent hurts the middle class. Since the financial crisis, accusations that crony capitalism and the success of the 1 percent slow middle- and working-class income growth have only grown louder. The incomes of the very top of the 1 percent have soared, and the growth of middle-class and working-class incomes has remained slow. Many insist that this gap has increased because the wealthy are rigging a zero-sum game to take what rightly belongs to others. Conard addresses these accusations and explains how income redistribution is what hurts the middle and working classes.

Conard says income inequality is not a bad thing in and of itself. It drives competition and entrepreneurial risk-taking. Likewise, a heavy reliance on redistributing the income of those entrepreneurs undercuts those who are willing to invest in training and hiring lesser-skilled workers.

At the same time, Conard argues, reducing regulatory rules that create instability in the banking sector would encourage risk-averse institutions to reengage, compounding and growing the economy at a faster rate.

Filed Under: Front-Page Feature, Happiness Tagged With: , , , ,

The Working Poor: When a Job is a Chore

July 18, 2016

Too few poor Americans work. That may seem obvious, but maybe the reason is not.

The most common explanations given by nonworking, poor adults  for why they aren’t employed are family and home responsibilities and disability and illness, not inability to find a job.

The full-time working poor make up only 17 percent of the 46.7 million Americans in poverty in 2014. Meantime, most working-age adults in poverty — 61.7 percent — did not work at all in 2014.

Work is a central part of the American dream. Steady employment supplies income to households, provides opportunities to move up the income ladder, and minimizes the risk of being in poverty. Only 3 percent of adults who work full-time, year-round live in poverty.

More importantly, work is often a source of dignity and purpose and is an important way in which everyone can contribute to society.

While working for pay is something that enables families to thrive and fosters a sense of pride, labor economist Angela Rachidi asserted that “labor force participation rates among prime-age workers have declined over the past two decades, suggesting that America is facing a work problem.”

If not working is a choice, then it may be of little concern to public policy. But when a lack of employment leads to poverty, it raises important questions about the role for government. In many ways, government can make poverty less painful through income transfers, but the important question is whether government can encourage those who are not employed to work and provide for themselves. …

Notably, fewer than 10 percent of nonworkers in poverty reported inability to find work as their reason for not working. This suggests that current economic and workforce development policies, which primarily focus on people already working or looking for work, have limitations. With over 60 percent of poor working-age people not working at all, public policies aimed at increasing work may have stronger effects than these other policies.”

Rachidi looked at people in poverty as described by the federal government’s definition as well as the supplemental poverty measure, which includes government benefits in determining a poor person’s income.

“Ultimately,” she wrote, “the results related to work and nonwork for people in poverty according to both measures were similar, and the conclusions were the same.”

Rachidi suggested that anti-poverty efforts may have to focus on the larger variables that drive people from the workplace, including health issues and family responsibilities, as well as disincentives to work, like those seen in disability insurance programs, which TPOH has previously noted.

Otherwise, Rachidi said, “we can either accept the status quo, which would mean leaving millions of Americans in poverty, or continue funding large government programs that transfer income from working taxpayers to the nonworking poor.”

Neither of these seems like a good option.

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