Those states that practice more free-market capitalism with limited government tend to have better economic performance, providing an economy and civil society with opportunities to help the neediest among us achieve long-lasting prosperity.
– Comparing institutional frameworks in states and their outcomes provides key factors that encourage thriving states, families, and entrepreneurs.
– Measures of economic freedom and government burden are useful indicators of which states have growing economies and more jobs over time.
– The results for these states demonstrate how institutions that encourage individual liberty, free enterprise, and civil society support prosperous outcomes, particularly in relieving poverty.
– States ought to pursue policies that advance more of these lessons to provide a robust economy and flourishing civil society that will best help the neediest among us.
Original post at TPPF.
Frankie Johnson, a college-educated single mother from Washington, D.C., moved to Atlanta to distance herself and daughter from an abusive husband. Without a job or place to live, she sought government assistance for childcare and transitional housing. While she waited for this assistance, she was offered a job paying $70,000.
She turned it down.
Why? Because as much as Frankie needed work, she didn’t want to lose the benefits of housing and childcare when she took the job.
Too often government safety-net programs don’t lift people out of poverty for long because they provide specific resources without growth opportunities or flexibility for recipients. In many cases, individuals struggle without the dignity and stable income of work and the cost of “benefit cliffs,” whereby recipients lose more in assistance than they do in income gained from work, due to varying income thresholds across existing safety-net programs.
Unfortunately, Frankie’s story is all too common. Many people choose to keep the guaranteed payments from taxpayers over the uncertainty of working and losing those payments.
But this tradeoff isn’t the only problem with the current safety-net system.
Safety-net recipients often lack the financial literacy necessary to get out—and stay out—of poverty. Additionally, while many recipients are enrolled in multiple safety-net programs, each program is managed separately, burdening the taxpayer with costly administrative costs. And for a recipient, it can seem like a full-time job keeping up with the paperwork to remain enrolled.
Making matters worse, too many people in poverty, and working families, are struggling from the highest inflation in 40 years. And the handouts of taxpayer funds by the federal government over the last two years artificially drove up savings and kept people not working longer than necessary thereby changing the calculus of whether to work or stay on safety nets.
This is evident in the latest U.S. jobs report for August 2022 which showed that the reported unemployment rate rose slightly to 3.7%, which remains low, but it’s actually much higher as the labor-force participation rate remains well below the pandemic-related shutdowns in 2020. Considering the same pre-shutdown labor-force participation rate, America’s labor force is missing approximately three million workers. Many aren’t looking for work because of generous handouts contributing to the labor shortage problem and reducing their gains from the dignity of work.
With these challenges in the labor market and the effects that the current recession will have on people over time, we must improve our safety-net system for recipients and taxpayers alike.
Americans have already spent about $25 trillion (adjusted for inflation) on more than 80 federal safety-net programs since 1965. While there have been some successes in helping people out of poverty, there is a need for a more effective program that doesn’t just give people fish but teaches them to fish. This is what our new, holistic approach called empowerment accounts (EAs) would do.
EAs would condense and replace overstretched, wasteful safety-net programs (excluding Social Security, Medicare, and Medicaid, for now) into one consolidated, effective program with funding provided monthly via a debit card tied to a financial app and time-limited to a maximum of one year. To qualify, people would work at least part-time while meeting regularly with a community navigator.
The program also helps teach the Success Sequence, whereby 97% of people aren’t in poverty if they graduate high school, get a full-time job, and marry before having kids. And savings are incentivized by the recipient being able to keep extra funds after the limited program period, which will help to reduce the benefits cliff.
By helping reduce bureaucratic bloat and streamlining payments to recipients instead of waste and other programs, EA recipients would have more flexibility to spend the money on approved items across the current safety-net items and foster financial independence. When implemented, EAs will provide a crucial 21st century reform to our troubled safety-net system and help rein in governmental budgets as people have less need for safety nets because they find a well-paid job and ways to provide for their families.
The improvements to recipients using EAs—incentivizing financial literacy, finding dignity through work, building social capital, and mitigating benefits cliffs—will help Frankie Johnson and others achieve long-term self-sufficiency.
Originally posted at TPPF
Current safety-net programs too often discourage recipients from achieving long-term self-sufficiency, but a new holistic approach called empowerment accounts would help recipients achieve this with existing resources.
Also find at TPPF website.
When did it all start to go wrong? In the early 20th Century, Americans fighting poverty not only lost sight of the goal—lifting families up—but even of the problem itself, and instead sought to remake society through government intervention, often at the expense of the very people they were meant to help.
In 1920, Owen Lovejoy, president of the National Conference of Social Work, set a “new task” for the increasing number of social workers—they would become “social engineers,” who would create “a divine order on earth as it is in heaven.”
As Marvin Olasky writes in his book, “Renewing American Compassion,” such a goal is far too lofty for individual acts of charity; “As some leaders forgot that compassion means suffering with, they looked more and more to government. They combined power seeking (for the good of others, of course) with social universalistic faith.”
Who has time to worry about that man under the bridge when we’re remaking the world?
This helps to explain failures in the war on poverty. Even setting aside the Great Depression and World War II, our most concentrated efforts have failed to move the needle on the official poverty rate.
Nationally, about $25 trillion (adjusted for inflation) have been spent to combat poverty since 1964 when President Lyndon B. Johnson’s “war on poverty” engendered the Great Society. And the nation spends about $1 trillion per year on more than 80 federal safety-net programs. However, the country’s official poverty rate was declining before 1964, which was the primary measure available, but remained virtually unchanged between 10-15% since then, suggesting a failure of these redistributionist measures to substantially mitigate poverty.
In addition to losing sight of the goal, we’ve lost sight of the problem itself—poverty. We haven’t done a good job of defining it, much less fixing it.
To define the official poverty measure, the U.S. Census Bureau provides an estimated income threshold annually. When a family’s income falls below that threshold, they are considered to be in poverty, which the rate was 11.4% in 2020. There are flaws with this measure. So, if we merely look at it, we know a lot less about real poverty than we might think we do. While there are now better measures of poverty based on broader income levels or consumption, which tend to show much lower rates of poverty since 1964, these measures are focused primarily on material things rather than other important issues that influence poverty.
What can we know about other issues related to poverty? We can look at statistical correlations and learn a lot.
The strongest correlation we see with poverty is a job. Employment, in general, drives down poverty, irrespective of wages, although the effect is more pronounced with higher wages. The availability of jobs has a significant impact on poverty in both the present and a decade into the future.
Education matters, as those with a high school diploma have a 24.7% poverty rate. Graduating high school is vital to help stay out of poverty.
Demographics also matter. Perhaps the most powerful demographic structure, and the most powerful predictor of poverty in general, is single motherhood (25.6% poverty rate overall or 46.2% for those with children under 6 years old). Single motherhood is also a strong predictor of intergenerational poverty.
Location matters; for example, there are 41 Texas counties within 100 miles of the U.S.-Mexican border that have been considered “persistently poor,” meaning at least 20% of the residents have been living in poverty for the last 40 years.
Age is also a factor in poverty, but its impact varies depending on other group characteristics. Metro areas with a younger Black population have higher poverty rates, while areas with an older Black population have lower poverty rates.
What does this tell us? It tells us where we can focus our efforts—and it’s not a one-size-fits-all approach.
The path forward must consider these facts for increased opportunities for people to find financial self-sufficiency through a more holistic approach to poverty relief through an education, job, training, community, social capital, intact families with a mother and father, and other avenues provided by civil society whereby government provisions are available as a last resort.
This follows much of what’s in the success sequence which is a formula of at least graduating high school, working full-time, and marrying before having kids (in that order) to have a 97% chance of not being in poverty.
By connecting people to work, education, or training, enhancing community-based case management, streamlining safety-net programs, and getting resources to those who need it most, we can provide more opportunities for people to be self-sufficient.
Did you know there’s a state park in Arkansas where you can search for diamonds—real diamonds? And you get to keep what you find. In April, Adam Hardin was visiting Crater of Diamonds State Park and came across a 2.38 carat stone—the largest found so far this year.
Diamonds can be found in the 37-acre plowed field, but naturally, they’re rare. It’s a little like the successes that can be seen in our nearly 60-year-old War on Poverty: valuable, but rare.
Nationally, about $25 trillion (adjusted for inflation) have been spent to combat poverty since 1964 when President Lyndon B. Johnson’s War on Poverty engendered the Great Society. However, the country’s poverty rate was declining before 1964 but remained virtually unchanged since then, suggesting a failure of these redistributionist measures.
But over the years, we’ve learned much. And we know what works in combatting poverty. We also know which key institutions and factors contribute to keeping people in poverty. With good policy—and clearer objectives—we can reverse this trend and truly lift people out of debilitating circumstances that lead to generational poverty.
But first, a little history. The 1920–21 recession was the last major economic downturn in American history that was not met with federal intervention designed to stabilize the economy and mitigate poverty. A decade later, Presidents Herbert Hoover and Franklin Delano Roosevelt presided over the first large-scale and nationwide anti-poverty measures during the 1930s and the Great Depression.
Despite these large-scale interventions, the unemployment rate remained in double digits for the remainder of the 1930s. More people were dependent on new government programs, and the costly economic effects of these and other government actions reduced both productivity and job creation.
A quarter century later, President Lyndon B. Johnson advocated his War on Poverty as part of domestic policy initiatives commonly called the Great Society. But again, poverty relief programs did not substantially accelerate the poverty rate’s reduction—in fact, the rate of decline slowed before essentially stalling.
Why? Because these efforts failed to address the real drivers of poverty—in many instances, they became drivers of poverty themselves.
There are several factors that are strongly linked with continued poverty and an inability to build income and wealth. The most powerful predictor of poverty in general is single motherhood. Another factor is where you live (including all 41 Texas counties within 100 miles of the U.S.-Mexican border, considered “persistently poor”). And age is also a factor in poverty, but its impact varies depending on other group characteristics. Metro areas with a younger Black population have higher poverty rates, while areas with an older Black population have lower poverty rates.
But possibly the most pertinent factor in keeping people trapped in poverty is an incentive not to work or to be more productive. For example, a “benefits cliff” occurs when a safety-net recipient goes back to work, increases their workload, or accepts a higher rate of pay, resulting in increased total earned income—which then triggers a greater loss of payments from government programs.
What works? Work. Employment, in general, drives down poverty.
By connecting people to work, education, or training, enhancing community-based case management, streamlining safety-net programs, and getting resources to those who need it most, we can create more opportunities for people to be self-sufficient—and thereby reduce the number of Americans experiencing poverty—so long as we have the will, perseverance, and right approach.
Finding diamonds in a field of dirt isn’t easy; nor is providing people with a real path out of poverty. But with diligence, and a keen eye, we can see more and more success.
Poverty is often misunderstood because most people do not know who qualifies as poor, how much governmental assistance is available to the poor, or what allows people to escape poverty. Understanding this is crucial to provide more opportunities for work-capable people to attain self-sufficiency with a flourishing civil society as a first resort and effective government programs as a last.
• Poverty has long been a public policy concern with roughly $25 trillion (adjusted for inflation) spent on it by governments in the U.S. just since the 1960s’ Great Society in an attempt to help people move out of poverty
• But this sort of primary financial assistance by governments has not substantially mitigated poverty and too often made it worse through dependency on government programs.
• Instead, there should be a more holistic approach to effectively mitigate poverty through work, community, and opportunity to provide people with long-term self-sufficiency.
• Texas and the U.S. can do this with a flourishing civil society and a robust economy as a first resort and effective government programs as a last resort instead of spending more on the current flawed approach.
In recent years, there’s been a growing consensus that the “Success Sequence” is a key pathway to avoiding poverty. Unfortunately, this prevailing theory doesn’t fully account for circumstances beyond one’s control. We need a more holistic approach to poverty prevention and alleviation.
Brookings Institution fellows Ron Haskins and Isabel Sawhill originally coined the “Success Sequence” in their book, Creating an Opportunity Society. The sequence notes that if you finish high school, get a full-time job, and marry before kids (in that order), you’re more likely to avoid poverty.
However, while research finds a strong correlation between this sequence and avoiding poverty (97% of Millennials), proof of causation has been more elusive, leaving gaps in how to achieve lasting poverty relief.
The Success Sequence doesn’t account for adverse situations beyond one’s control, such as the diminishing value of a high school diploma, availability of full-time jobs, accessibility to the workforce by the formerly incarcerated, and affordability of housing.
Today, one might do everything “right” and still experience poverty. Ultimately, the path to long-term poverty relief includes—but is not limited to—the Success Sequence.
To maximize opportunities for success, policies should remove obstacles often imposed by governments. This includes ensuring abundant job opportunities, addressing workforce and affordability issues, and streamlining safety nets.
Doing so would allow safety nets to fulfill their purpose as a trampoline to quickly spring people back into self-sufficiency rather than as a hammock that traps recipients into a cycle of dependency on government.
Recently, the Texas Public Policy Foundation launched the Alliance for Opportunity initiative with our friends at the Georgia Center for Opportunity and the Pelican Institute in Louisiana. This initiative promotes a strategic policy roadmap for these states that in many ways supplements the Success Sequence. It does so by working to keep vulnerable Americans on track, ensure everyone has a right to earn a living, and address poverty through the justice system.
One way is to reform education systems so that career and technical education funding is individualized and institutional funding is tied to employment and wage outcomes. Doing so will ensure students are better prepared for today’s jobs.
Consider the return-value funding model for the Texas State Technical College, a two-year institution with an emphasis on technical programs geared toward post-graduation employment. They partner with businesses, government agencies, and other education institutions to coordinate career development routes for students.
Notably, the Texas Legislature established an outcomes-based funding model for TSTC based on the annual wages of its graduates five years after graduation. Legislators across the country should utilize similar competency-based models to improve employment outcomes.
Policymakers should also be looking for ways to reduce or to remove burdensome occupational licensing requirements and encourage paid apprenticeships throughout the education system in order to protect the right to work and maximize the skills for in-demand jobs.
Occupational licensing overall has been shown to restrict the labor market, presenting a significant cost of entry to work, even as there is limited evidence that licenses increase the quality of goods, services, or public safety. States should instead look to implement a systematic process of identifying and removing overburdensome licensing regulations through processes such as a sunset review, while expanding universal recognition of licenses obtained in other states with similar requirements.
Moreover, lawmakers should align education and workforce programs to ensure students are able to learn and earn wages as they work. By improving the availability of paid apprenticeships, states can maximize opportunities to find meaningful education and employment. The State of Georgia’s program recently had more than 60% of youth apprentices receive a full-time job offer from their employer upon completion.
Finally, for those workers who lose a job unexpectedly, as 22 million Americans did during the government-imposed shutdowns due to the COVID-19 pandemic, legislators should reduce disincentives to work by revamping and streamlining safety net programs.
One of the most common reasons recipients are discouraged from pursuing better employment outcomes is the “benefits cliff.” Because of the setup of safety-net programs, many recipients find that a small increase in earnings will result in a large loss of benefits. This creates a vicious cycle of dependency and despair.
States must flatten these “cliffs” by leveraging their flexibility with block grant programs and waivers in federal law while keeping the programs tied to work, training, or education, such as an empowerment accounts pilot program.
The Success Sequence is a noble, beneficial approach to help avoid poverty, but ultimately its application has gaps that should not be taken for granted. With the Alliance’s strategic policy roadmap, we hope to provide an improved situation with more opportunities in a flourishing civil society that helps those in need achieve financial self-sufficiency, dignity, and purpose faster and longer.
We think about poverty all wrong. And because we think about poverty all wrong, much of our approach to alleviating it is wrong. Thus, poverty stubbornly persists and the trillions of dollars we spend barely nudges the needle to long-term poverty relief.
The problem is the disconnect between what poverty really is and what our public policies are trying to solve. A clear understanding of poverty is offered by Steve Corbett and Brian Fikkert in their book, When Helping Hurts. “While poor people mention having a lack of material things, they tend to describe their condition in far more psychological and social terms…” the authors explain.
“Poor people typically talk in terms of shame, inferiority, powerlessness, humiliation, fear, hopelessness, depression, social isolation and voicelessness. Low-income people daily face a struggle to survive that creates feelings of helplessness, anxiety, suffocation and separation that are simply unparalleled in the lives of the rest of humanity.”
Most Americans don’t define their self-worth based on material possessions (or lack thereof). But our public policies too often focus on stuff. American families below the poverty line have access to a plethora of programs, benefits, cash, and services that provide them with things, especially since the COVID-19 pandemic. But what they lack is a voice. Alleviating poverty means increasing opportunities to gain human dignity, purpose, and self-sufficiency.
Understanding that poverty encompasses more than just a dearth of disposable income is key to addressing the systemic issues at play. Those suffering from real poverty live a very different life and see their condition as something quite different from simply being “broke.” It’s more appropriate to say they lack the social capital—a buzz phrase, sure, but a useful one in this case—upon which to rely.
The poor lack many intangible things most of us take for granted, like having marketable skills and using them to contribute to our communities in a way society values. Absent a sense of their own dignity, purpose, and self-sufficiency, people are left with dependency to survive—a poison to the human soul. Any attempt to alleviate long-term poverty with little more than repeated handouts, without also connecting people with work, training, or education and building community connections, is not helping, it’s hurting.
If we truly intend to love our neighbor as God has commanded, we must recognize that the War on Poverty, fought LBJ-style with government programs, has been lost. A new approach must be charted—an approach that emphasizes keeping vulnerable Americans on track, developing valuable skills, individualizing plans that help people overcome their specific barriers to employment, and—most importantly—an exit strategy. With few exceptions, the goal should be to help people earn self-sufficiency through increased opportunity and work, not lock them into a lifetime of dependency and despair.
A good example of this approach is Bonton Farms, an inner-city Dallas urban farm that provides support for people to bridge the gap from poverty and prison and has helped hundreds of people gain a new sense of dignity and purpose. At Bonton Farms, it’s not about handouts. “This gives a lot of guys the opportunity to change,” one former inmate says.
“If they want to do better, they can. If they want to be more than just a street guy, a drug dealer, they can. If they want their kids to watch them be something more, it’s possible. That’s what we show them.”
Work is the key. Work means using one’s God-given talents and learned skills to provide a value to the community. Doing so confers on those suffering from poverty the very things they cry out for, such as hope, purpose, and a voice. They gain agency—the ability to make their own decisions—and learn skills necessary for them and their families to prosper. A job is the beginning of an exit strategy out of poverty.
This should be a bipartisan issue. Indeed, some of the greatest gains made in recent decades fighting poverty came via the Welfare Reform Act of 1996, passed by Republican majorities in the House and Senate and signed by Democrat President Bill Clinton. But even that was incomplete, and later presidents and governors dropped many of the work requirements that were its centerpiece.
These factors contributed to the recent launch of a multi-state poverty relief initiative called the Alliance for Opportunity. This includes three state-based think tanks, the Georgia Center for Opportunity, Pelican Institute in Louisiana, and Texas Public Policy Foundation. With a top-notch team and high-quality work that provides a toolkit for policymakers, we hope to help 1 million people out of poverty in these three states to show proof of what works for other states and for Congress to hopefully follow.
Our new efforts must begin with a full and fair assessment of how the current situation is helping keep vulnerable Americans on track. Existing programs, especially at the state levels, must be audited and made more transparent by improving data collection to evaluate desired outcomes. And we must partner with community groups closest to those in need—the real safety nets—while streamlining current programs with new ideas like empowerment accounts.
Additionally, we must remove barriers to ensure everyone has the right to earn a living. This includes removing obstacles like unreasonable occupational licensing, delay of a driver’s license for many who were formerly incarcerated, or simply instituting more apprenticeship programs to improve access to skills training.
And last, but certainly not least, we must address poverty through criminal justice reforms, which our new initiative aims to do. This includes restoration through diversion programs and specialty courts, life and work skills through rehabilitation and transition programs, and a productive path back into the community for the formerly incarcerated.
We must do more than send a check every month like the child tax credit payments sent by Congress in the second half of 2021. We must treat the poor like human beings, not just a number. We must meet them where they are and help them achieve their full potential.
If poverty was as simple as a lack of funds, then surely the money spent thus far would have made a bigger dent. But it’s not that simple. It never was. We’ve merely sought too long for easy answers. Now it’s time to roll up our sleeves and pursue a new path to eliminate dependency and restore the dignity of work so that more people can be financially self-sufficient.
Vance Ginn, Ph.D.