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Journal Issue: The Next Generation of Antipoverty Policies Volume 17 Number 2 Fall 2007

Rewarding the Work of Individuals: A Counterintuitive Approach to Reducing Poverty and Strengthening Families
Gordon L. Berlin

Conclusion

As technological change, globalization, and other forces continue to roil labor markets in what Alan Blinder has referred to as the dawn of the Third Industrial Revolution and Frank Levy and Dick Murnane have called the New Division of Labor, all American workers face a difficult period of transition.62 Through no fault of their own, low-wage workers have been especially hard hit over the past thirty years and appear destined to bear an even greater future burden. A decision to simply let global market forces work will likely exacerbate already high rates of inequality. Indeed, the case for growth-promoting free trade is predicated on the pledge that winners will compensate losers from a larger economic pie. Similarly, as baby boomers retire, slowing the rate of growth in the size of the labor force, economic growth may also slow, a development that adds urgency to the need to create strategies that increase labor force participation rates among men.

An earnings supplement for individuals offers a potentially promising alternative to persistent poverty, low wages, and declining employment rates among men. It is a strategy designed to tackle, in whole or in part, three interrelated issues. The first is three decades of stagnant and declining wages at the low end of the economic ladder, which have hit low-income men especially hard. The second is an enduring crisis in the share of children raised in single-parent, low-income households. And the third is a tax and transfer system that ignores men, while penalizing marriage and work on the margin.

Solid and reliable evidence demonstrates that earnings supplements have encouraged work and reduced poverty among unemployed and underemployed single parents. A strategy that redesigned EITC eligibility to give equivalency to individuals might have a similar effect on second earners and childless, low-income women and men. Indeed, the New Hope program had just such an effect on its tiny sample of single men. And by treating two-parent earnings separately rather than jointly when establishing EITC eligibility and when filing taxes, a new EITC for individuals could also be expected to increase the work effort of second earners in two-parent households, and in turn to raise the income of two-parent, two-earner families. In fact, it would immediately and substantially end poverty among individuals who are now working full time. At issue is how many nonworkers and part-time workers would be induced to find full-time work.

Moreover, if survey data and ethnographic evidence are right in suggesting that the poor share mainstream values about parenting and marriage but that the economics simply do not work for them, then equitably supplementing the earnings of individuals could also affect men’s and women’s decisions about childbearing, co-parenting, cohabiting, and even whether to marry. Indeed, studies simulating large increases in men’s earnings predict small increases in marriage.63

But no matter how promising the idea, questions remain—primarily about cost and the magnitude of any behavioral changes. Would a work incentive of this size really induce second earners and single men to work more than they do now? Would single men be more likely to live with the mothers of their children, assume co-parenting roles, and even marry? Of special concern would be how an earnings supplement would affect African American men, particularly whether it would increase their employment rates and make them less likely to become involved with the criminal justice system. How would it affect single women’s employment, childbearing, and marriage decisions? Would the resulting poverty reductions measurably affect the well-being of children? Would the supplement unintentionally lower college-going among young people or reduce work effort among eligible higher earners who work more than thirty hours a week? What would it really cost to implement? And would the benefits justify the cost?

Because finding answers to these questions is vital, a prudent next step would be to rigorously test this strategy in several states over several years—preferably using a random assignment design and sample recruitment strategies like those used in the New Hope and similar studies.64

If you could do one thing to end poverty in America, what would it be? Any serious effort would have to tackle more than thirty years of falling wages, particularly for single men. An enhanced EITC for individuals, predicated on full-time work, would effectively end poverty for individuals and families who are able to work full time, while at the same time minimizing the distortions in incentives to work, co-parent, and marry that exacerbate poverty and ensure its persistence.