Fight­ing poverty in Amer­ica

Financial Mirror (Cyprus) - - FRONT PAGE -

From 2005 to 2014, the real in­come of two-thirds of house­holds in 25 de­vel­oped economies was flat or fell. Only af­ter very ag­gres­sive gov­ern­ment in­ter­ven­tion in taxes and trans­fers have some coun­tries been able to hold fam­i­lies at least even.

This ex­pe­ri­ence holds lessons for coun­tries like the United States, where in­equal­ity and in­come dis­tri­bu­tion loom large in the run-up to Novem­ber’s pres­i­den­tial and con­gres­sional elec­tions. What can the US learn from what works?

The US is a global out­lier in ty­ing much of its so­cial safety net to em­ploy­ment. So­cial-wel­fare spend­ing aver­ages 23% of GDP in Europe, but only 16% in the US. And the US is an es­pe­cially dis­tant out­lier when it comes to fam­i­lies: only three other coun­tries – Tonga, Suri­name, and Pa­pua New Guinea – lack a na­tional pol­icy on paid fam­ily leave.

There are, how­ever, many suc­cess­ful pol­icy ini­tia­tives in the US. For ex­am­ple, Pete We­ber, a re­tired busi­ness ex­ec­u­tive from Fresno and a mem­ber of the Cal­i­for­nia Repub­li­can Party’s ex­ec­u­tive com­mit­tee, is at the fore­front of a na­tion­wide move­ment of ef­forts to think boldly about how to move fam­i­lies out of poverty and into self-suf­fi­ciency.

The Fresno Bridge Academy, founded by We­ber in 2010, has re­ceived statewide and na­tional ac­claim for its re­sults – not only its suc­cess with in­di­vid­u­als in need, but also its cost ef­fec­tive­ness. The pro­gramme is an 18-month em­ploy­ment­train­ing pro­gramme that also pro­vides sup­port ser­vices for fam­i­lies – in­clud­ing com­puter-lit­er­acy classes, ré­sumé as­sis­tance, par­ent­ing classes, and tu­tor­ing for chil­dren – through its non-profit um­brella agency, Read­ing and Be­yond.

Lo­cated in the poor­est postal code in Cal­i­for­nia, the pro­gramme has helped 1,200 fam­i­lies who en­rolled vol­un­tar­ily and is funded to serve an ad­di­tional 2,300 fam­i­lies over the next two years. To date, 80% of en­rolled fam­i­lies have gained em­ploy­ment or sig­nif­i­cant wage growth, and 80% of those that do, re­tain these gains a year later. Thirty per­cent have months.

The Fresno scheme, funded by an in­no­va­tion grant from the SNAP (for­merly food stamps) pro­gram, is rig­or­ously out­come-based and quan­ti­ta­tively as­sessed. It has gen­er­ated $22 of ben­e­fit for ev­ery dol­lar in­vested, with $16 go­ing to the fam­i­lies and $5 go­ing to tax­pay­ers (mainly in the form of higher rev­enues and re­duced out­lays for food stamps).

While the cir­cum­stances in Fresno are par­tic­u­lar to the agri­cul­tural econ­omy there, We­ber be­lieves the pro­gramme is scal­able and is al­ready ex­tend­ing it to two other Cal­i­for­nia coun­ties (San Joaquin and Napa). Through a broader ef­fort with Cal­i­for­nia For­ward’s Eco­nomic Sum­mit, We­ber is em­bed­ding the lessons from Fresno in an ef­fort to move a mil­lion fam­i­lies out of poverty in the state by 2025.

New ap­proaches such as that taken by the Fresno Bridge Academy come at a time when both the left and the right are ques­tion­ing cur­rent anti-poverty pro­grammes. By some es­ti­mates, since Pres­i­dent Lyn­don B. John­son launched his “War on Poverty” in 1964, to­tal spend­ing on the fight has ex­ceeded $22 trln. Yet the front isn’t mov­ing. The of­fi­cial poverty rate in the US seems stuck at roughly 15%.

On the right, Speaker of the US House of Rep­re­sen­ta­tives Paul Ryan’s Ex­pand­ing Op­por­tu­nity in Amer­ica an­chors the view that Amer­ica al­ready spends enough and just needs to spend it bet­ter. Ryan’s plan fo­cuses on in­te­grat­ing pro­grams into an “op­por­tu­nity grant,” ex­pand­ing the earned in­come tax credit (EITC), and crim­i­nal jus­tice re­form – all while en­cour­ag­ing eco­nomic growth, so that job cre­ation does the heavy lift­ing.

On the left, or­gan­i­sa­tions like the Op­por­tu­nity In­sti­tute (full dis­clo­sure: we both sit on its board of di­rec­tors) ar­gue for tar­geted spend­ing, par­tic­u­larly in early ed­u­ca­tion; link­ing col­lege to ca­reers; and re­duc­ing crim­i­nal re­cidi­vism. Demo­cratic pres­i­den­tial nom­i­nee Hillary Clin­ton’s pol­icy plat­form pro­poses new pro­grams to ad­dress these is­sues, with a par­tic­u­lar fo­cus on fam­ily leave and early child­hood and col­lege ed­u­ca­tion.

Many if not most schol­ars who have ex­plored the topic, such as a joint ef­fort by the Brook­ings In­sti­tu­tion and the Amer­i­can En­ter­prise In­sti­tute, in­clude el­e­ments from the left and the right – par­tic­u­larly strate­gies aimed at strength­en­ing fam­i­lies, i mprov­ing the qual­ity and quan­tity of work



self-reliance within


18 avail­able, and break­ing the cy­cle of re­cidi­vism. The EITC also has broad back­ing (more than three-quar­ters of econ­o­mists sur­veyed by the Amer­i­can Eco­nomic As­so­ci­a­tion sup­port ex­pand­ing it). There is also broad con­sen­sus on the need for bet­ter quan­ti­ta­tive as­sess­ment of what works.

Oth­ers, es­pe­cially many in Sil­i­con Val­ley’s tech­nol­ogy world and some in the labour move­ment, are con­cerned that tech­nol­ogy will out­pace job cre­ation and leave many out of work. They would pre­fer a univer­sal ba­sic in­come (UBI), which would sever the link be­tween em­ploy­ment and in­come. Swiss cit­i­zens roundly re­jected that ap­proach in a re­cent ref­er­en­dum, but the en­ergy de­voted to more radical ap­proaches to help those who need it is wel­come, even if the specifics of UBI and its cost have yet to proven.

Ex­am­ples like the Bridge Academy – and oth­ers, such as the Fed­eral Home Visit­ing Pro­gram– show that ini­tia­tives that are deeply rooted in and tai­lored to the needs of the com­mu­ni­ties they serve, and that are driven by ev­i­dence of ef­fec­tive out­comes, can work. Un­for­tu­nately, we too of­ten em­brace the op­po­site ap­proach: broad-brush na­tional pro­grams with no fo­cus on out­comes.

Con­sider the US Depart­ment of Agri­cul­ture’s Food and Nu­tri­tion Ser­vice. Ap­prox­i­mately 88% of its $82 bln in an­nual spend­ing goes to di­rect aid (SNAP, or “food stamps”) while only 0.33% goes to pro­vid­ing peo­ple the skills they need to avoid gov­ern­ment as­sis­tance. Even worse, none of the skills­fo­cused pro­grammes have data to eval­u­ate them.

A “pro­gres­sive fed­er­al­ist” pro­gram would sub­stan­tially in­crease this type of spend­ing and rig­or­ously eval­u­ate it. Such a pro­gram would set high fed­eral stan­dards but al­low cities and states to in­no­vate, then fund what works. It’s time to think dif­fer­ently and align our think­ing – and our spend­ing – with what ac­tu­ally works.

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