Book offers policies to reduce economic hardship for poor families

December 21, 1995
Bernie DeGroat

ANN ARBOR—Although the national debate on domestic priorities has focused mostly on welfare reform and cutting social spending, a University of Michigan researcher believes that public policies should instead focus on the economic environment that has lowered the standard of living for millions of families who do not receive welfare.

In the new book “America Unequal,” Sheldon Danziger, U- M professor of social work and public policy, says that supplementing the earnings of low-wage workers and increasing job prospects for the unemployed are the best ways to reduce poverty.

“Powerful economic forces have diminished the economic prospects of millions of Americans and caused rising hardship and poverty,” says Danziger, whose book is co-authored by Peter Gottschalk, professor of economics at Boston College.

“Employers have reduced their demand for less skilled workers and less experienced workers. As a result, and through no fault of their own, millions of workers have more difficulty finding jobs. And many of the available jobs offer lower real wages and benefits than similar jobs two decades ago.”

Danziger and Gottschalk contend that high poverty rates are not caused by the social policies of the Great Society era as critics of government have claimed.

Rather, slow economic growth and changes in labor markets that increased inequality of earnings are the main culprits, they say. These changes include technological innovations that increased demand for high-skilled workers, a shift away from manufacturing jobs, increased globalization of markets and declines in union membership.

The authors call for programs that address all workers adversely affected by economic changes, not just welfare recipients. Poverty remains high, they say, because of a failure of the economy to raise the living standards of average workers and the failure of government to adapt its policies to deal with the changing economic environment.

“In our view, labor market policies are needed to deal with these labor market problems,” Gottschalk says. “The main issue is not that more people have chosen not to work, but rather that demand by employers for less-skilled workers, even those who are willing to work at low wages, has declined.

“We find it paradoxical that so much attention has been focused on changing labor-supply behavior of welfare recipients and so little has been given to changing the demand side of a labor market that has been increasingly unable to employ less-skilled and less-experienced workers.”

Their policies, he adds, would ensure that a family with at least one full-time worker earning the minimum wage would have an income above the poverty line, after taxes and child care expenses.

Danziger and Gottschalk recommend extending the Earned Income Tax Credit, which supplements the earnings of low-income workers, to more single workers and childless couples; increasing federal subsidies for child care; providing more state income tax relief for the working poor; and reforming the child support system through more stringent enforcement and the provision of a minimum child support benefit.

In addition, for those who want to work but cannot find regular jobs, they advocate transitional public service employment (PSE), such as expanding summer job programs for inner-city youth and offering sub-minimum wage jobs of last resort to applicants from all poor families, regardless of welfare status.

The researchers contend that PSE is “the best tool for dealing with a labor market problem that has considerably worsened over the past two decades” high unemployment rates for low-skill workers who cannot find private employers who will hire them.”

In all, Danziger and Gottschalk realize that while their proposals would raise public spending, they would directly address the hardships that slow and uneven growth have imposed on our nation’s poorest citizens.

“If the patterns of the past two decades continue through the 1990s, then the policies we propose could provide vital aid to tens of millions of Americans,” Danziger says. “It is imperative that our society address the adverse consequences of slow growth and rising inequality.”

“America Unequal” is published by Harvard University Press and is now available at bookstores.

 

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