Welfare Cliffs Exist—Concludes Team of Economists

Welfare Cliffs Exist—Concludes Team of Economists

by | Sep 17, 2020

 

 

 

Welfare Cliffs Exist—Concludes Team of Economists 

 

 

 

 

 

 

By Erik Randolph

 

 

Since 2016, the Georgia Center for Opportunity (GCO) has demonstrated the existence of welfare cliffs. Now a team of five economists has come to the same conclusion.

Welfare cliffs are an unfortunate feature of the American welfare system. They occur when a family’s breadwinner, or an individual, discovers that his or her family will become worse off economically by earning more money. It sounds paradoxical, but it happens whenever the loss in welfare benefits exceeds the additional take-home pay.

Exactly when the cliffs occur, and how bad they are, depends on many factors, including the characteristics of the family, how much they earn, and where they live. And because of the haphazard way the welfare system is constructed, it turns out that there isn’t a single cliff but multiple cliffs that a family can encounter over the range of potential earnings.

For more information on GCO’s work on the cliffs, check out this website that shows cliffs in eight states by common family types.

New Study

Authored by economists at the Federal Reserve Bank of Atlanta, Boston University, and the University of California, Berkeley, a newly published study takes a sophisticated approach to identify disincentives in the U.S. tax and welfare structure. Published as a working paper by the National Bureau of Economic Research (NBER), the authors fed the results of the most recent Survey of Consumer Finances through a fiscal analyzer.

The Economic Team

David Altig, Federal Reserve Bank of Atlanta

Alan J. Auerbach, University of California, Berkeley and NBER

Laurence J. Kotlikoff, Boston University and NBER

Elias Ilin, Federal Reserve Bank of Atlanta and Boston University

Victor Ye, Boston University

 

 

The Survey of Consumer Finances is a project of the Board of Governors of the Federal Reserve System. It is the most comprehensive survey examining the personal finances of American individuals and families. Thus, the input data for their study represent a statistical picture of how families are faring economically.

In other words, the financial situations of a representative cross-section of families in America was fed through a fiscal analyzer. This particular fiscal analyzer was based on a personal financial planning tool developed by the software company of Laurence Kotlikoff, one of the study’s authors.

The fiscal analyzer estimates the likely future financial path that individuals or families will take over their remaining lifetime, along with the future taxes and benefits they will pay or receive. The study uses standard mortality rates to predict lifespans and gives a unique calculation on the degree and magnitude that incentives or disincentives exist over that likely path.

The study defined the future fiscal burdens, consisting as taxes and benefits, as marginal tax rates. If a person’s remaining marginal tax rate increases, then so does the tax burden. The greater the magnitude of the marginal tax rate, the greater the disincentive.

Study Results

Given our own work, the conclusion of the authors was not surprising. To quote from their study:

“Our findings are striking. One in four low-wage workers face marginal net tax rates above 70 percent, effectively locking them into poverty.”

“… one in four bottom-quintile households, regardless of age, face marginal tax rates above 65 percent. Thus, a major share of poor households are effectively locked into poverty by America’s fiscal system.”

The authors were careful to point out that this study looks at the structure of America’s fiscal system, meaning these disincentives are hardwired into the laws and rules of the system. This corroborates exactly with our research. The very rules themselves are what create the disincentives and the cliffs. The silver lining here is that rules can be changed.

This study did not attempt to measure how people react to the disincentives. Some might bite the bullet, take the hit, and still advance their earnings anyway. On the other hand, others may take a defeatist tact, backing off from earning more to draw down more government assistance. This is a ripe area for future research, to determine the proportion of people who forge ahead anyway versus those who give up and retreat.

In the meantime, we shouldn’t wait for future research on how many people accept defeat and remain poor. It makes more sense to fix the rules now so the question becomes moot.

Erik Randolph is Director of Research at the Georgia Center for Opportunity. This blog reflects his opinion and not necessarily that of the Georgia Center for Opportunity.

 

 

 

 

DISINCENTIVES FOR WORK AND MARRIAGE IN GEORGIA’S WELFARE SYSTEM

Based on the most recent 2015 data, this report provides an in-depth look at the welfare cliffs across the state of Georgia. A computer model was created to demonstrate how welfare programs, alone or in combination with other programs, create multiple welfare cliffs for recipients that punish work. In addition to covering a dozen programs – more than any previous model – the tool used to produce the following report allows users to see how the welfare cliff affects individuals and families with very specific characteristics, including the age and sex of the parent, number of children, age of children, income, and other variables. Welfare reform conversations often lack a complete understanding of just how means-tested programs actually inflict harm on some of the neediest within our state’s communities.

DOWNLOAD WHITE PAPER
DOWNLOAD EXECUTIVE SUMMARY
VISIT BENEFITSCLIFFS.org

The Power of Second Chances

The Power of Second Chances

by | Aug 24, 2020

The Power of Second Chances

By David Bass

Imagine stepping from a life of homelessness characterized by desperation and deprivation to a full, rich life in which you can contribute and build a future.

That was Jonathan’s story of transformation. As a graduate of CKS Packaging’s Second Chance Program, Jonathan went from homeless to employed in an entry-level job with a solid upward trajectory, allowing him to support his family,  save money for the future, and continue job training and education.

“What the Second Chance Program did was provide discipline, provide structure, and provide a lifeline,” Jonathan shared.

We love stories like these because they demonstrate so vividly this truth: When people are desperate, they need a sense of control over their lives. Without it, they are more likely to fall back into old bad habits and ways of doing things, such as substance abuse, crime, and homelessness.

A job with an upward trajectory is a key way to restore control and confidence in someone’s life.

 

Find out our full analysis of this
Second Chance Program.

READ THE FULL REPORT

A second chance

CKS Packaging is an Atlanta-based company that manufactures plastic containers for such clients as Coca-Cola, Chick-fil-A, and Kroger. The company created the Second Chance Program in 2016 to partner with service organizations in the Atlanta area with the sole purpose of recruiting struggling individuals who need a second chance at employment. 

Georgia Center for Opportunity recently published a research report on the impressive results from the Second Chance Program.

According to Lloyd Martin, the VP of manufacturing and leader of the Second Chance Program at CKS Packaging, many service providers in the community deal with surface issues without addressing the root cause of a person’s problem. In contrast, the Second Chance Program recognizes that a job, and the stability it provides, is a vital plank in rebuilding a foundation for a fruitful life.

Another graduate of the program, Greg, shared that Second Chance provided him a job after hundreds of companies had rejected him due to his criminal record. “When so many other people have said no to you, and then someone steps up and gives you a chance and has faith in you, it makes you want to give it 150% every day,” Greg says. He now plans to stay with the company until retirement.

CKS Packaging didn’t just provide a second chance for Greg. It provided a career.

Doing good while making a profit

CKS Packaging and the Second Chance Program show that it’s possible to do good business while doing good for the community. In fact, they go hand in hand.

According to CKS Packaging, the Second Chance Program has allowed the company to fill the gap in labor they were facing with long-term, dependable employees who otherwise may have not gotten a chance to turn their lives around. In the last five years, the company has hired 473 people through the program.

That impact extends beyond a company’s bottom line and individual lives to enrich an entire community.

 

To learn more about what Georgia Center for Opportunity is doing to help get Georgians back to work check out our Hiring Well, Doing Good initiative.

How to help kids and teens cope mentally during the COVID-19 quarantine

How to help kids and teens cope mentally during the COVID-19 quarantine

by | Jul 16, 2020

How to help kids and teens cope mentally during the COVID-19 quarantine

By Healthy Families Initiative

Our Healthy Families Initiative (HFI) team recently spoke with LPC Rebecca Gibbons via our weekly Healthy @ Home series. She shared with us the five symptoms to look for in children as they battle mental wellness during the unstable time of COVID-19, plus coping mechanisms to help young people struggling through the pandemic.

 

The 5 symptoms of mental struggle in children and adolescents

 

  1. Increased levels of frustration: “I cannot complete my homework, I do not have the codes, I can’t get a hold of my teacher, I don’t know how to open another window on the internet.”

 

  1. Increased boredom: “I’m frustrated that I can’t hang out with friends, go out to the movies or eat out. I’m tired of playing video games.”

 

  1. Increased helplessness: “Do I still matter?”

 

  1. Increased fear of the unknown: “Will the coronavirus ever go away? Will I get sick? Will my parents get sick?”

 

  1. Increased levels of instability: “When will this end? When will I get to back to school and play or hang out with my friends?”

 

One way to cope: Introducing Dialectical Behavior Therapy

Dialectical behavior therapy (DBT) provides clients with new skills to manage painful emotions and decrease conflict in relationships. DBT specifically focuses on providing therapeutic skills in four key areas:

 

  1. Mindfulness: This focuses on improving a child or teen’s ability to accept and be present in the current moment. Be aware of our thoughts, feelings and senses: just focus on the present moment and the five senses of sight, smell, touch, hearing, and taste. For a practical example, “I Spy” is a great game where we use our five senses to keep us in the moment.

 

  1. Distress tolerance: This is geared toward increasing a child or teen’s tolerance of negative emotion, rather than trying to escape from it. Distress tolerance helps us get through tough situations without making things worse. It’s a way to practice how to relax and self-soothe. We can self-soothe by focusing on our five senses: Take deep breaths, observe your surroundings, and proceed mindfully.

 

  1. Emotion regulation: This covers strategies to manage and change intense emotions that are causing problems in a person’s life. Learning emotions to help express how we are feeling so we can control it. Here are five tips:
  • Describe the emotions you’re feeling.
  • Learn your triggers: What happened to make me feel mad or sad?
  • Learn how my body changed: Did I ball up a fist or did my body get hot?
  • Recognize how I reacted: Did I yell or say things I didn’t mean
  • What can I control: What am I in charge of and what can I change?

 

  1. Interpersonal effectiveness: This consists of techniques that allow a person to communicate with others in a way that is assertive, maintains self-respect, and strengthens relationships. This is our way of getting along with others, helping to build and improve relationships. To improve in this area, help teens and kids with the acronym GIVE:

 

G = Gentle – nice, respectful, calmly express your feelings, no judging, no attitude.

I = Interested – listen to what others say, show caring, do not interrupt others talking.

V = Validate – pay attention, show understanding through words or actions.

E = Easy manner (similar to gentle) truthful, talk nice, be silly, smile, no attitude.

 

We are driven by a belief – supported by experience and research- that people from all walks of life are more likely to flourish if they have an intact, healthy family and strong relationships. 

Visit our Healthy Families Initiative

Safeguarding the Economy is Paramount for Everyone’s Well-Being

Safeguarding the Economy is Paramount for Everyone’s Well-Being

by | Jul 13, 2020

Safeguarding the Economy is Paramount for Everyone’s Well-Being

By Erik Randolph

Recent numbers in confirmed COVID-19 cases have been nothing but discouraging, but is it logical to turn back? The resurgence in confirmed cases may tempt our political leadership to reimpose shelter-in-place mandates and business shutdowns, but at this stage it would be a mistake.

The Resurgence 

The recent data may be giving credence to those medical experts who have been arguing the lockdowns only delayed the inevitable. We must learn from the mistakes made and the impact the shutdowns have had on already heavily-impacted communities.

The official confirmed cases displayed on the Georgia Department of Health’s COVID-19 Daily Status Report webpage lags 14 days behind. Beyond that 14-day window at the time of this writing, the seven-day moving average of confirmed cases peaked at 763.1 on April 22 and began to decline. However, the average began rising again on May 10, and since May 25 the average has been steadily increasing. On June 24, the average reached nearly 2,000 cases, more than double its prior peak in April. There is good news on the Department’s webpage, reported deaths have been on a downward trajectory since the end of April. However, there is still much we do not know, including the unreported number of Georgians who successfully cleared the virus asymptomatically or otherwise.

Comparison to Other States

Compared to other states, Georgia does not look that bad. For example, deaths attributed to COVID-19 are far fewer in Georgia than in the Northeast. 

On the economic front, Georgia’s shelter-in-place orders were far less severe than in other states, such as Michigan, Massachusetts, and Washington State. Recent unemployment numbers suggest a possible negative correlation between the more harsh measures taken by states and employment. Georgia looks good with an unemployment rate better than 72 percent of all states. In some cases, Georgia’s unemployment rate is drastically better. Georgia’s rate is 36.4 percent of Michigan’s rate and less than half of Massachusetts’s rate.

 

 

The Economic Situation Overall is Not Good

When Congress first passed legislation addressing the pandemic, the discussion was shutting and locking down for 14 days that might extend to a month’s time. Recall the talk about a “V” shaped recession with the economy quickly rebounding? With the crisis dragging into its fourth month, this is no longer the discussion.

In my last blog, I argued that the official unemployment rates understate the seriousness of the unemployment problem. While Georgia’s rate measured 9.7 percent, I estimated that the real problem was closer to 25 percent . This was just one metric. There are plenty of other metrics indicating potential for some serious economic damage.

First, the economic impact is not shared equally. Some industries—such as restaurants, bars, tourism, live entertainment, and brick-and-mortar retail stores—have been hit especially hard. Many of these businesses are smaller, mom-and-pop operations with lesser capacity to withstand long periods of economic hardship. Workers, too, have been unevenly impacted, with lower income households bearing the brunt of the negative impact.

It’s also been bad financially. About 3,600 companies filed for bankruptcy in 2020 thus far, 26% higher than the first six months in 2019. Cash reserves is a major issue. A Federal Reserve Banks’ survey found that three in 10 small businesses were financially at risk or distressed at the beginning of the pandemic. 

We do not yet know the total loss in production due to our response to the coronavirus, but we know it will be bad. Production dropped 5 percent for the first quarter of 2020 nationally and 4.7 percent for Georgia. The loss for the second quarter will not be known until the end of the month when new numbers are released. Assuredly, the numbers will be worse.

Lost production is a great economic concern for all of us. It means lost societal wealth and hardships for many individuals and their families.

The Precarious Federal Fiscal Position

Since March, Congress has poured $3 trillion into the economy to help us sustain the hit. This is an enormous sum greater than the annual federal spending for social security benefits, Medicare, and all other mandatory spending programs. Additionally, the Federal Reserve is making trillions of dollars more available to help the public withstand the economic impact of the pandemic. 

In the meantime, U.S. total debt now exceeds $26 trillion and continues to grow. This is more than the total annual production of the United States when last measured. 

The temptation to reverse course in reopening the economy and looking to Congress and the Federal Reserve to bail us out with even more spending comes with enormous risks: high inflation, higher taxes, slower economic growth, and less wealth. Poorer communities and persons with lower income typically suffer more from these consequences.

These risks are based on fundamental principles in economics. We cannot spend money without someone, somewhere, at some time paying for it. With all the new money spent by Congress and created by the Federal Reserve, we will have one of two likely non-exclusive ways to pay for it: higher taxes in the future and/or inflation.

The much worse of the two is inflation. It is a hidden tax that everyone—rich and poor alike—must pay. It will erode wealth and opportunities for many.

An uptick in inflation will place the Federal Reserve in a precarious position. The standard tool is to increase interest rates. However, this can jeopardize any economic recovery from the pandemic. It will also exacerbate the federal budget deficit because of the extraordinarily high national debt, while potentially adding even more to the debt. In federal fiscal year 2019, the federal government spent $376 billion in interest payment to service the national debt—an amount equal to 28 percent of discretionary spending. This amount could easily double over the next few years.

The Best Course of Action

We cannot afford to wait for a vaccine. We must find our way to reopen the economy that is well managed and reduces risks to those most vulnerable to the virus.

Low-risk individuals, including almost all children, need to return to their routines as much as practically possible. This is the best way to extend opportunities for everyone and rebuild wealth so everyone can have fulfilling lives. 

Our fate lies not only with Congress but also with our governors. Reopening the economy is necessary to avoid greater economic damage. Everyone’s well-being depends on it.  

 

Erik Randolph is Director of Research at the Georgia Center for Opportunity. This article reflects his calculations, analysis and opinion and does not necessarily reflect that of the Georgia Center for Opportunity.

To learn more about what Georgia Center for Opportunity is doing to help get Georgians back to work check out our Hiring Well, Doing Good initiative. 

A Community Responds to Need (or Good News You’ll Never See in Mainstream Media)

A Community Responds to Need (or Good News You’ll Never See in Mainstream Media)

by | Jul 7, 2020

 

A Community Responds to Need (or Good News You’ll Never See in Mainstream Media)

 

 

 

By Eric Cochling

 

Just seven months in and it’s fair to say that 2020 has been one of the most disastrous years in modern American history. The very fabric of our country seems to be unravelling before our eyes. As a year that can’t avoid being remembered in infamy, 2020 will forever be known for its pandemic, mass unemployment, police shootings, riots, and autonomous zones. For many of us born after the tumultuous 1960s, this is the first time we’ve seen our country in so much real, existential trouble. 

 

Despite all the terrible things that have happened, and despite a media establishment that seems all in on an “if it bleeds, it leads” approach, you don’t have to look too far to find reasons to be hopeful. Granted, you do have to look in different places to find the good news—you’re unlikely to see it in news broadcasts or social media where anger and outrage are the fuel.

 

Instead, you have to read a local paper or sign up for newsletters and blogs (like this one) from ministries and nonprofits that you know. If you do, what you will find is that many Americans—and you’re likely one—are quietly at work responding to community needs and finding ways to bring people together. 

 

In fact, many more of us are responding in this way than participating in riots or joining Twitter mobs. But because it’s the good, right, and (dare I say) expected response, it’s relegated to the “human interest” section of the paper, the end of the news broadcast, and the unpromoted backwaters of social media where virtually no one goes. At GCO, we are privileged to be working with community partners in just one of those efforts to respond to need. 

 

Leading up to the COVID-19 pandemic, church, nonprofit, and community leaders in my hometown of Lawrenceville were already discussing ways we could partner to become better neighbors to those in poorer sections of the city. Unaware of what was coming, we prayed for guidance and started making initial plans for how best to work together. When COVID-19 struck and our state began shutting down, our group coalesced around a plan to serve those families living in extended stay hotels or rental properties in Lawrenceville who were on the verge of eviction. These were the families on the financial bubble pre-COVID and would be the first to be harmed as businesses shuttered. With funding from private philanthropy and the City of Lawrenceville, the Lawrenceville Response Center (LRC) was born. 

 

Through the partner organizations working through the LRC (organized and led by Impact46), our groups have provided case management (Village of Hope and St. Vincent de Paul), housing stability (the Lawrenceville Housing Authority), food security (the Lawrenceville Cooperative Ministry), mentoring and coaching (Lawrenceville Employee Assistance Program at First UMC Lawrenceville), and job search assistance (GCO’s Hiring Well, Doing Good program). To date, the LRC has helped more than 200 families avoid eviction, have sufficient nutrition, and get on the path back to a stable income.

 

It’s the biggest good news story in my community, but almost no one knows about it. It’s a story of people (with diversity of race, gender, income, political views, and faith) coming together to help alleviate and prevent suffering. As we enter into our third month of working together, we celebrate the successes we’ve seen:

 

  • The mom and daughter who now have a place of their own after spending many nights living in their car.
  • The couple who were unemployed and living under a bridge who are now in decent housing and working.
  • The mom and her two children who have been able to remain in an extended stay hotel while mom successfully found a new job.

 

There are other stories like this and there will be more. And our experience in Lawrenceville is certainly being replicated in other cities and states around the country. Even though you’ll almost never hear it from a 24-hour news channel or see it in your Twitter feed, this is how the vast majority of Americans respond in a crisis: They roll up their sleeves and help.

 

HWDG brings together community resources and technology to help un- and under-employed individuals achieve economic independence in three ways:

 

  • Offering support: Individuals can easily search for local service providers who can help them overcome barriers to employment.
  • Helping people find their strengths: Job seekers can identify their strengths and opportunities for employment through a soft skills assessment, a library of training programs, and a career pathway generator.
  • Linking people directly with job opportunities: Job seekers can then connect with jobs relevant to their skill sets and personal preferences and geographic area.

 

Visit www.hiiringwelldoinggood.com

Highlighting Legislation Passed in the 2020 Georgia Legislative Session

Highlighting Legislation Passed in the 2020 Georgia Legislative Session

by | Jun 30, 2020

Highlighting Legislation Passed in the 2020 Georgia Legislative Session

By Buzz Brockway

 Ordinarily, the Georgia Legislature would have wrapped up its 40-day legislative session by the end of March. But 2020 is no ordinary year. As the pandemic spread, the Legislature suspended its session in mid-March with no return date announced. Eventually, lawmakers reconvened with 11 legislative days left to address a plethora of issues.

 

Looming large was the fiscal year 2021 budget, and as you can imagine, the budget outlook was much different in June than in March. State revenues plunged due to the shutdown and budget writers scrambled to decide the best path forward. After tapping into the state’s rainy-day fund, lawmakers passed a budget with 10 percent  cuts, approximately $2.2 billion smaller than originally proposed. No state department was spared, but some departments—like education—received smaller cuts than other departments. 

 

Apart from the budget, perhaps the issue that garnered the most attention was a hate crimes bill, HB 426. The murder of Ahmuad Arbery in Brunswick, GA, as well as the deaths of George Floyd and Breonna Taylor at the hands of police, created a political situation where ignoring this issue was impossible. Georgia previously had a hate crimes law that was declared unconstitutional by the State Supreme Court. HB 426, now signed into law by Governor Kemp, provides sentence enhancements after a person has been convicted of certain crimes motivated by bias against defined groups of people.

 

Two pieces of legislation we at the Georgia Center of Opportunity actively supported passed both houses and await the Governor’s signature. SB 288 allows a person convicted of certain non-violent misdemeanors, who have kept a clean record for a specific length of time, to seek to have those records restricted. This will allow these folks to have a better chance of employment. Another bill meant to assist people obtaining a job is HB 914. This bill will provide a temporary occupational license to spouses of members of the armed forces who move to Georgia. Georgia has a large number of military installations, so many people will benefit from this bill.

 

Other legislation of interest includes HB 888, which seeks to prevent “surprise billing.” A “surprise bill” occurs when an out-of-network physician treats a patient. These bills can become quite large. It is hoped this legislation will prevent this situation from occurring again. 

 

More progress was made in the fight against human trafficking as HB 823 and SB 435 passed.  HB 823 would prevent a truckdriver convicted of human trafficking of ever holding a commercial driver’s license again in Georgia. SB 435, known as the “Debbie Vance Act,” would allow a person convicted of trafficking to have their conviction vacated if they can prove they were a victim of human trafficking. 

 

Foster parents will be allowed to arrange for short-term babysitting under HB 912, which awaits the Governor’s signature. 

 

Government transparency and accountability got a boost with the passage of HB 1037. This bill would require audits on production companies seeking to take advantage of Georgia’s film tax credit. An audit earlier in the year revealed oversite problems in this very large tax credit. Price transparency for non-emergency medical services is the subject of SB 303, which was sent to the Governor’s desk. Empowering patients with pricing information can help lower costs for shopping of these non-emergency services. 

 

Despite the strange nature of the 2020 Legislative Session, many things were accomplished. The Georgia Center for Opportunity will continue to work hard to advance legislation to increase educational opportunity, knock down barriers to employment, and strengthen families. We look forward to continuing this effort in the next legislative session. 

 

 

 

We are driven by a belief – supported by experience and research- that people from all walks of life are more likely to flourish if they have an access to quality eduction, fulfilling employment, and live within healthy families. See what policy issues we’re working on to break down barriers and create pathways for all Georgians to flourish. 

Visit our Policy Solutions Initiative