GCO Testifies Before U.S. House On Benefits Cliffs

GCO Testifies Before U.S. House On Benefits Cliffs

GCO Testifies Before U.S. House On Benefits Cliffs

Examining the SNAP Benefit Cliff

On July 12, 2021, Eric Randolph, GCO’s Director of Research, testified before the U.S. House Agriculture Subcommittee on Nutrition, Oversight, and Department Operations about how welfare programs often hurt the very people they are supposed to help.

In this video, you will see how benefits cliffs are complicated and often have unintended consequences that harm families, inhibit upward mobility, and dehumanize people trapped in generational poverty. And you will learn more about GCO’s Benefits Cliff Model helps hard-working individuals improve their circumstances with better opportunities to thrive and become productive members of their communities.

 

On July 12, 2021, GCO’s Director of Research, Erik Randolph, joined 3 others in providing testimony and answering questions on Benefit Cliffs.

Promote Purchasing Power—Not the Minimum Wage

Promote Purchasing Power—Not the Minimum Wage

Promote Purchasing Power—Not the Minimum Wage

sad girl and mom

How to help working families the most

During a focus group session on working class families we recently conducted at the Georgia Center for Opportunity, Jazmine* made an observation more perceptive than most experts.

Our focus group consisted of working-class African-Americans who did not have a college degree and who were not employed in a managerial position nor on track to become a manager. 

Knowing financial stress up close, Jazmine essentially said that either the minimum wage should be increased or the cost of living should be lowered.

Her observation is a perfect segue from my prior blogs on:

 

The Success Sequence provides an outline of how to reverse the cycle of poverty in our communities. GCO uses this as a framework for much of our work.

Promoting Purchasing Power 

The Employment Act of 1946 declared it is the policy and responsibility of the federal government to:

         “promote maximum employment, production, and purchasing power.”

Promoting purchasing power means lowering the cost of living, as Jazmine suggested. 

Solidified in the 1951 Accord with the Treasury Department, the responsibility ultimately fell to the Federal Reserve to conduct monetary policy as we know it today.

How well has the Fed done with promoting purchasing power? Horribly, quite frankly.

Since 1951, prices have increased 3.4% annually on average, as measured by the geometric mean. In other words, the price level was tenfold higher in 2020 than in 1951. Prices doubled each generation.

It is widely accepted that the poor suffer most from inflation because they spend a higher portion of their income on necessities, and their income growth typically lags others. 

For example, according to the most recent mid-year consumer expenditure report from the Bureau of Labor Statistics, consumers in the lowest income quintile spend 82.2 percent of their income on housing, transportation, food, and healthcare, compared to 64.4 percent for the highest quintile. A five percent inflation rate would cost those in the lowest quintile an additional $1,156 for these items on a budget that is already tight, averaging $28,141. A 10% inflation rate would double those costs to $2,312.

Worse, those in the lowest quintile are unable to save for their future, and inflation erodes away the value of the little savings they do have. Consider that on average, those in the lowest quintile purchased only $563 in personal insurance or toward their pensions, compared to $19,736 for those in the highest quintile. This disparity guarantees the poor will be inadequately prepared for retirement or unforeseen loss or tragedy.

 

inflation

Prior to the federal government taking on the responsibility of promoting purchasing power, prices not only remained fairly stable but actually decreased during times of relative peace. Typically, they only increased dramatically during times of war. 

This pattern can be seen visually in the accompanying chart using the Consumer Price Index and related data from the Federal Reserve Bank of Minneapolis. For example, the price level increased 24% due to the War of 1812 but then deflated 57% over 47 years until the start of the Civil War, even after accounting for a slight bump up due to the Mexican War. 

The pattern was similar for the remainder of the century. Prices increased 74% during the Civil War but then deflated 47% to its pre-Civil War level until the start of the 20th Century.*  Although the price level rose somewhat during the progressive era, it was still 30% lower at the start of World War I than at the close of the Civil War.

 

inflation 2

America’s inflationary policy 

Unfortunately, a 1978 law changed promoting purchasing power to become the lame “reasonable price stability,” which is not the same thing.

Over the years, the Fed has allowed inflation as a matter of policy. In 2012, Fed Chairman Ben Bernanke explicitly stated for the first time an inflation target of 2% per year. If the Fed can somehow hold to this target, which it has not been able to do historically, it equates to doubling the price level every 35 years. Last August, it backed away from this policy. Because of all the pandemic spending and monetary expansions, the Fed approved a policy to allow inflation to rise “modestly” above its 2% target. 

It is not just the Fed that has shied away from promoting purchasing power. In 1978, and in the midst of the stagflation years, Congress legislated the modest goal that inflation should be 3% or less, but the target rate was supposed to come down to zero percent by 1988 unless it might have impeded employment.  

The Fed is not alone to blame for the inability of the federal government to control inflation. Congress’s lack of fiscal discipline resulting in soaring budget deficits place the Fed in a tenuous position to keep interest rates low so federal debt service costs also remain low. Furthermore, recent Fed direct purchases of Treasury debt because of all that federal spending adds to the money supply, eroding—not promoting—purchasing power.

 

How Congress can better help the average working family

If economics has any immutable law, it must be that you can’t get something out of nothing. This explains why the Consumer Price Index increased 5.4% since last year, as announced today by the Bureau of Labor Statistics. And the rate of increase appears to be accelerating. The monthly rate was 0.6% in May but 0.9% in June. If this June inflation rate persists, and hopefully it does not, we will have double digit inflation. A 0.9% monthly rate equates to an 11.4 % annual rate.  

Considering all the recent deficit spending by Congress and expansionary policies by the Fed, expect more of the same, or worse. In fact, according to a survey of economists in yesterday’s Wall Street Journal, “Americans should brace themselves” because economists are waking up to the prospect of higher inflation, expecting “brisk price increases for a while.”

Economic history indicates deflation should be the norm. In fact, innovation spawns increased productivity that allows prices to fall, which should show up as deflation. We have the opposite: productivity gains with inflation. This outcome places the blame squarely on monetary and fiscal policy. 

In the meantime, Jazmine and other hard working Americans struggle to keep up with rising prices. Instead of pushing for increases in the minimum wage that help some at the expense of others, Congress needs to renew our nation’s purchasing power policy and get its fiscal house in order. 

 

 

 *Jazmine’s last name withheld for confidentiality.

 

*This is not intuitive. It takes a smaller percent decrease to offset a percent increase, such as a 43% reduction will offset a 74% increase. For example, suppose you receive a 20 percent pay raise this week, but next week you receive a 20 percent pay cut. Are you back where you started? The answer is no; you are worse off. If your weekly pay was $100, the increase took you to $120, but then your pay cut took you to $96, even lower than your starting point.

 

Erik Randolph is the Director of Research at the Georgia Center for Opportunity.

 

Gov’t. check can’t beat work’s dignity | AJC

Gov’t. check can’t beat work’s dignity | AJC

In The News

Gov’t. check can’t beat work’s dignity | AJC

The latest unemployment statistics are in and show trends continuing with millions of jobs across the nation going unfilled as unacceptably high numbers of Americans draw on generous unemployment benefits. On June 23, the U.S. Bureau of Labor Statistics reported its unrevised May 2021 figures, showing a drop in the unemployment rate for Georgia from 4.3% in April to 4.1% in May.

The good news is that our state has fared much better than many others in the COVID-19 pandemic recovery. States with more draconian restrictions — such as California — have had a much slower economic recovery.

Georgia’s rate is 16th-lowest in the country, beating out 34 other states. And the U.S. as a whole has a 5.9% unemployment rate, significantly higher than Georgia’s...

Help From Where You Least Expect It

Help From Where You Least Expect It

Help From Where You Least Expect It

depressed man

“I don’t know what I’m going to do if I don’t find a better job; I might have to go back [to prison].”

Two months out of prison, Ray (name changed for anonymity) was explaining to me that he had reached the end of his rope. He had been struggling to find work that paid enough so that he could simply afford the basics. His part-time, minimum-wage job, just wasn’t cutting it. But, at least it was something.

Ray had the added complication of having to take custody of his son shortly after being released, meaning another mouth to feed when he could barely feed himself.

During his most desperate days after leaving prison, Ray said he was blessed to have the help of local church ministries who provided temporary housing for him and his son at a local extended stay hotel. He called GCO because that assistance was running out. He needed more help so he could remain at the extended stay but, more than that, Ray knew he had to solve the job problem to have any hope of getting off the hamster wheel he was on.

“I’m “clean” and have no intention of going back to that life.”

With a record that included drug and property crimes, Ray worried he might not have a shot at a better job. “But I’m willing to do any job that pays enough,” he assured me.

With those details in hand, our team started looking for the resources Ray needed and found some great opportunities for him and his son. There was a local church ministry offering help with additional days in the extended stay motel, there was the local restaurant eager to interview Ray for a better-paying job.

In the end, help came from a place Ray least expected it: the extended stay motel owner himself.

After hearing Ray’s story and observing him on the motel property, he offered Ray a job as a maintenance technician, a position that also included room and board on the motel property – an answer to Ray’s prayer for better pay and housing stability for him and his son.

 

 

The Success Sequence provides an outline of how to reverse the cycle of poverty in our communities. GCO uses this as a framework for much of our work.

Like Ray, you might be surprised the motel owner stepped in to help the way he did, but you shouldn’t be. Many times, our local business owners bridge the gap for those in need in big and small ways – from helping support the nonprofits that serve emergency needs to, like the motel owner did for Ray, helping directly.

Too often, it’s business owners who get the negative press and little credit for the good they do. In reality, as Ray’s story reminds us, they are a huge part of the solution to poverty – both in the jobs they provide through their risk-taking and in their philanthropy made possible through the profits they generate.

Is this the end of Ray’s story? I don’t think so. Ray seems to have a drive that’s going to keep him reaching for better opportunities and, of course, if we can help him, we’ll be here to do that.

The point is that Ray’s story isn’t unique. For those reaching out and seeking help – for housing, for work, for food – there are often caring community members willing to help.

And sometimes that help comes from the place you least expect it.

If you or someone you know is struggling to find employment in Gwinnett or is looking for help to meet their basic needs, please visit www.betterworkgwinnett.org to find resources or to be connected to one of our “guaranteed-interview” employment partners.

 

Origins of the Georgia Center for Opportunity: Why we choose to focus on work

Origins of the Georgia Center for Opportunity: Why we choose to focus on work

Origins of the Georgia Center for Opportunity: Why we choose to focus on work

You’ve probably heard that if you give a man a fish, he’ll eat for a day—but if you teach him to fish, he’ll eat for a lifetime. And while the Georgia Center for Opportunity’s (GCO) mission to alleviate poverty by removing barriers to human flourishing is grounded in the three core areas of family, jobs, and education, we know from years of experience that helping people secure meaningful work—teaching them to fish—is key to breaking the chains of generational poverty and building thriving communities. Work is about more than a job. It’s a key pathway to human dignity.

How did we learn this?   

In our early years—even before we changed our name to GCO—we were working closely with Neighborhood Planning Unit 5 (NPU-V) in downtown Atlanta. Here, the initial focus was on reforming the criminal justice system because nearly one-in-three men in this community had been incarcerated. 

As returning citizens most of these men were wholly unprepared to return to their communities. And with few-to-no job skills, they faced enormous challenges in finding—and holding onto—work. Not surprisingly, this set them up to return to a life of crime, with a high likelihood of going back to prison.

Given this devastating cycle of recidivism, GCO saw the need to work with community leaders, criminal reform experts, and state legislators to help former prisoners successfully re-enter society and learn how to become productive members of society. We also worked on public policy reforms to make it easier for returning citizens to obtain work:

    • Access to a driver’s license
    • Access to occupational licensing despite a felony conviction
    • Rehabilitation certification
    • Protections for employers who hire returning citizens

We modeled our approach off a sister organization in the United Kingdom called the Centre for Social Justice. Led by former Member of Parliament Iain Duncan Smith, this award-winning organization worked with gangs and achieved success with legislators to enact social welfare policy reforms to help people reach their full potential. 

And since research showed that holding a job for at least six months reduced the rate of recidivism by more than two-thirds, we developed relationships with key leaders in the executive, legislative and judicial branches of state government—as well as with local nonprofit, business and community leaders—to reduce recidivism by developing our ground-breaking BETTER WORK program in Gwinnett County and in Columbus.

The Success Sequence provides an outline of how to reverse the cycle of poverty in our communities. GCO uses this as a framework for much of our work.

The heart of BETTER WORK is collaborating closely with local businesses to hire ex-prisoners, offer job training and employment support, and do something good not only for the company, but the community as well. And since our first event in Atlanta in 2017—involving leading employers like Georgia Pacific, Uber and Tip Top Poultry—BETTER WORK events have expanded to other communities in Gwinnett County, Columbus, and beyond.

Beyond helping people find good jobs with employers in local communities, we continue to advocate on policy issues that keep people out of the legitimate job market, including child support challenges, relief from fees and penalties incurred while incarcerated, occupational licensing hurdles, and civil asset forfeiture.

And we continue to build coalitions of nonprofits, faith groups, and businesses to teach folks how to fish so that they are not reliant on government handouts. As always, our mission is to help people support themselves—and provide for their families in ways that break the cycle of poverty and create new trajectories that lead to individual and community transformation.

 

BETTER WORK adds direct-to-business job applications

BETTER WORK adds direct-to-business job applications

BETTER WORK adds direct-to-business job applications

Working to more quickly connect our communities to work.

In efforts to better address the needs of the unemployed in our communities, we have taken an evolving learning approach to how we support those in need. Not only are we looking to learn from those in need, but we also listen to the business and service providers that are vital to the success of programs like BETTER WORK (formerly Hiring Well, Doing Good). This has led to the rebranding of the project (you can learn more about that here) but has also helped us as we create tools and align resources.

We are excited because this week we launched our job application resource in the Gwinnett County and Columbus areas that we serve. Through this resource, we are able to help remove many of the obstacles that people may face to finding employment and connect them directly to businesses hiring people in their situation.

 

BETTER WORK is helping people connect more quickly and directly into jobs and providing additional resources to help those who are motivated prepare for better work opportunities in the future. When everyone is able to find the right resources, attain safe housing, and find gainful employment, we will experience less poverty, less crime, and greater prosperity across our communities.”

Kristin Barker
BETTER WORK Columbus

Through the job application resource, users will be able to quickly answer a few questions and apply for multiple jobs in their area. Local businesses also benefit because they have helped us craft the questions on the application itself. This means they know that each applicant meets their specific criteria to start working.

A great example is someone coming out of the prison system. Oftentimes returning citizens looking for work may only be able to work nights and weekends due to family and child needs. With our new resource, we can connect these individuals directly to an employer willing to hire returning citizens that offer nights and weekend work. Thus we alleviate the barriers workers face trying to find the right work. And we support our local economies through local businesses.

Work is a vital step in helping people feel a sense of purpose, belonging, and responsibility to themselves, their family, and their communities. It is why we constantly say that work is “more than a job”. This new tool will help remove another barrier faced by workers and will drive more people to independent and flourishing lives.

Learn More About Our
BETTER WORK Project

Through BETTER WORK we are able to connect local resources with local needs and restore dignity through work.