There has been lots of consternation in Congress and among pundits that pandemic unemployment benefits are greater than what many people were earning from work. It is time for Congress, and for us all, to recognize why that is: What many people earn from work is not enough to live on.
For those of us who study working Americans, it is not surprising that unemployment benefits designed to provide a lifeline to households turn out to be higher than many working people’s previous earnings, because for many working people, their earnings couldn’t cover the basic needs of their household to begin with. In 2019, about 25 million filers received the earned income tax credit, or EITC — which provides a cash supplement to working people with low incomes. The amount of the benefit is adjusted according to the level of earnings and household size with the goal of encouraging the heads of poor households to work and reducing dependence on cash welfare.
In 2018, when the economy employed about 155 million, about 1 in 6 employed persons earned the credit. Since the IRS estimates that only 4 out of 5 eligible workers claim and receive their EITC, that means 1 in 5 workers had earnings that were insufficient to meet the basic needs of their households at a time when the economy was much stronger than it is now.
Congress has access to this basic information. A Congressional Research Service study notes that since the EITC was first enacted in 1975, lawmakers have shown a growing preference for using these refundable tax credits to help working families afford childcare, health care, education and have the income to cover the basics of life; Congress likes these refundable credits as they are thought to encourage work.
The Center on Budget and Policy Priorities notes that in 2018, the EITC lifted over 10 million people out of poverty, while making over 17 million less poor. This statistic shows both how important the EITC has been to improving the health and well being of families — but it also shows the extent to which our economy has come to rely on the working poor.
It is also important to note that lifting a household out of poverty does not mean that a household has enough to afford a minimally decent standard of living and various recent “living wage calculators” have estimated how much a household needs to afford a basic standard of living without government support. There is variation in results, but the common theme is that the estimates are much higher than the poverty threshold.
So, if Congress really wants to encourage work, then it needs open its eyes to what the barriers to work are.
First, with schools and child care centers closed, people have no way to ensure their children are safe if they leave them to go to work. Second, many workplaces present a risk of exposure to the virus, which is a concern for all workers and is a particular concern for workers who have underlying health issues or live with family members who are at risk. Third, and most crucially, there is really not much work to be had.
We are in the midst of an economic collapse with over 32 million people receiving unemployment benefits. The most recent report (as of end of May) from the Bureau of Labor Statistics showed only 5.4 million jobs open — not nearly enough for 30 million-plus people in need of work. Moreover, the report indicated that 6.5 million hires happened in May, indicating that employers are filling their job openings.
Encouraging work is one thing but encouraging work that allows people to support themselves without public assistance is quite another. If Congress wants people to be able to support themselves on their work, then they need to encourage better jobs.
There are many options to choose from here. The first obvious choice is wage and hour rules, notably raising the minimum wage, addressing overtime rules and addressing the inequities of the tipped minimum wage. Another approach is to leverage the power of the public purse to preference companies that offer higher quality jobs, encouraging competition to improve jobs instead of a singular focus on reducing labor compensation (which does not necessarily even lead to a reduction of labor costs).
There are so many more options. Congress could also encourage more profit sharing and shared equity among companies as a strategy to improve the quality of jobs. And of course, in areas such as child care and health care, Congress could build much more robust public systems, lessening the burdens on companies to somehow ensure their workers have access to these vital services.
Over the decades I have interviewed thousands of people who are trying to find work or better work — women leaving welfare in New York, displaced coal miners in Kentucky, laid off manufacturing workers in Michigan, low-wage service workers in Texas, white workers, Black workers, native-born workers and immigrant workers, old workers and young workers — what they all have in common is they want to work. They don’t want to stay home and live on unemployment benefits just because it’s a few dollars more than their previous wages. They don’t want returning to work to be unaffordable, since work means additional expenses like child care and commuting. What they want is to earn their living and live a decent life. They want to support themselves and their families through their work and earn the respect of their communities.
Congress should do all it can to make their aspirations achievable. Congress needs to open its eyes to the pandemic of poverty wage work, stop abetting it and start promoting the kind of work that makes a good life possible.
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August 17, 2020 at 09:42PM
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Opinion | Unemployment Isn’t Too High — Regular Wages Are Too Low - Politico
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