poverty – Lone Candle

We’ve been fighting poverty all wrong

Posted on December 11, 2023 by ajk1311@gmail.com

“Since 1975, politicians have built huge portions of the American safety net — like the child tax credit (CTC) — around the idea that excluding the poorest Americans from government assistance will motivate them to climb out of deep poverty on their own and get a job.
This long-standing bipartisan consensus is manifest in the twin ideas of work and income requirements. Work requirements are simple: You either have a job or you don’t, and that binary is what determines whether you’re eligible for a handful of welfare programs.

Income requirements are a little wonkier. They stipulate that anyone without any income will receive no benefits. Only after earned income surpasses a specified level do benefits begin kicking in — which is where we get another dry name: “phase-ins.””

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“The consensus excluding the poorest Americans from some forms of government assistance through phase-ins held until President Joe Biden’s 2021 American Rescue Plan. Its anti-poverty centerpiece was to cut phase-ins from the existing CTC and crank up the payment, creating what’s known as the expanded CTC.
The results were historic. Over the course of 2021, child poverty was cut nearly in half, and the long-running fear at the heart of the American welfare system — that unconditional aid would discourage work — never came to pass.

Then, to the dismay of advocates and recipients alike, Sen. Joe Manchin (D-WV) blocked the Democratic Party’s effort to make the expansion permanent, fearing, among other familiar concerns like the cost, that recipients would just buy drugs (the data shows that recipients spent the money on food, clothes, utilities, rent, and education). Come 2022, phase-ins returned to the CTC, approximately 3.7 million children were immediately thrust back into poverty in January, and the rest of the year saw the sharpest rise in the history of recorded child poverty rates.”

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“Now that we have real-world evidence from a nationwide, year-long experiment, the expanded CTC’s success should ignite efforts to roll back phase-ins across the board. That also means cutting them from the CTC’s sister program, the earned income tax credit (EITC), which phases in as a supplement to wages for low-income Americans and helps about 31 million Americans.
The expanded CTC is estimated to have reduced child poverty rates anywhere from 29 percent to 43 percent, with the vast majority of that drop attributable to removing phase-ins. Extending that success to include the EITC would cut child poverty by an estimated 64 percent.”

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“Winship was unsurprised that his fears of parents choosing to work less didn’t show up during the expanded CTC. It only lasted for one year and was recognized all the while as a temporary program. “These kinds of behavioral effects take time to set in,” he writes. In the long-term, after a decade or a generation of the program being in place, that’s when he would expect to see, as Oren Cass, executive director of the conservative think-tank American Compass, put it, “communities in which labor-force dropout is widespread and widely accepted.””

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“Long-term speculation, however, can go both ways. The generational impacts of unconditional transfers could just as well lead to long-term investments in education and skills training, support entrepreneurship, and actually raise productivity and economic activity in the long run, all of which would boost, instead of wipe out, poverty reduction.

In 2018, researchers from Washington University in St. Louis estimated that childhood poverty costs the US $1.03 trillion per year, or 5.4 percent of the GDP. They found that every dollar spent on reducing child poverty would save the public 7 dollars from the economic costs of poverty.

Results from basic income pilots across the US also stand in contrast to Winship’s concern. “Our moms get the guaranteed income and not only do they continue to work, they level up their work,” Nyandoro, who runs the nation’s longest-running guaranteed income program, told me. “They’re able to move from jobs to careers. They’re able to go back to school. They’re able to get out of debt.”

The most recent evidence in favor of phase-ins Winship cites is a 2021 paper by a group of economists from the University of Chicago, led by Kevin Corinth and Bruce Meyer. It predicted that making the CTC expansion permanent would spark a 1.5-million-person exodus from the labor force. As analysts were quick to point out, however, the paper is based on a model that already assumes unconditional cash reduces work. Predicting work disincentives using a model that already assumes them tells us nothing about whether the assumption itself is tethered to reality.

Corinth and Meyer have since responded to criticism of their work disincentive assumptions, arguing that they fall well within the range used in other studies. These academic debates will continue, but in the meantime, where should the burden of proof lie?

Eliminating phase-ins from the CTC was a massive anti-poverty success and had no short-term negative employment effects. Recipients spent the extra few hundred bucks on necessities, from food and clothing to shelter and utilities. Even small businesses voiced their support on the grounds that it would boost spending and entrepreneurship.

On the other hand, a minority of skeptics retain speculative concerns that a few generations down the line, newfound consequences might overshadow these benefits.”

https://www.vox.com/future-perfect/23965898/child-poverty-expanded-child-tax-credit-economy-welfare-phase-ins

We cut child poverty to historic lows, then let it rebound faster than ever before

Posted on October 1, 2023 by ajk1311@gmail.com

“In 2021, the child poverty rate — as measured by the supplemental poverty measure that incorporates the value of government benefits — took a sharp drop to its lowest point on record: 5.2 percent, so that 3.8 million American children were living below the federal poverty line. Then, as a report just released by the Census Bureau found, it experienced the steepest rise in its history in 2022: a hike of 139 percent, or more than double, to 12.4 percent. Five million kids fell back into poverty, pushing the number of kids whose parents were struggling to meet their basic needs up to 9 million.
To anyone following the politics of poverty in America, the jagged rebound was entirely unsurprising. The child poverty rate was like a loaded spring being held down by pandemic-era welfare programs. Chief among them: the child allowance, which expanded on the existing child tax credit (CTC) and sent monthly payments to all parents in poverty, helping to cut child poverty by 46 percent in 2021. Release the spring — or let the expanded CTC expire, as Congress did — and of course it will shoot right back up. The child poverty rates settled right back around pre-pandemic 2019 levels.”

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“The concern is that giving out money to people in poverty without requiring them to work in exchange will ultimately create communities where dropping out of work is both widespread and accepted. Cash with no strings attached “gives up on work,” as one conservative analyst put it.

While there have always been disagreements about that view, increasingly, the evidence is against it. Unconditional cash transfers in low-income countries have been found to stimulate economic activity. In a pilot program for guaranteed income in Stockton, California, recipients of unconditional cash were quicker to find full-time employment than control groups.

Looking specifically at the impacts of the expanded CTC, there was no evidence that receiving the benefit reduced work, and economists at Columbia University estimated that making the program permanent would deliver a more than tenfold return on the investment of about $100 billion per year — a major boost to the economy. That means in addition to solidifying the massive drop in child poverty and giving millions of struggling American families continued support to pay for food, school supplies, utilities, and rent, taxpayers would also save money in the long run.”

https://www.vox.com/future-perfect/2023/9/21/23882353/child-poverty-expanded-child-tax-credit-census-welfare-inflation-economy-data

Child poverty in the US was stagnant — and then something changed

Posted on October 25, 2022 by ajk1311@gmail.com

“Most surprising is that declines in poverty, rather than stalling with the decline of the Covid-19 pandemic, accelerated. While economic conditions could have led to one of the largest increases in poverty on record, the federal government stepped in to support families as the economy ground to a halt. While the pandemic brought a new set of hardships, these federal relief efforts prompted child poverty to fall sharply: In 2020, according to the supplemental poverty measure, child poverty fell from 12.5 percent to 9.7 percent — by far the largest single-year drop over the previous half-century.

These declines continued in 2021. In figures released Tuesday, we learned that in 2021 child poverty fell even further, to just 5.2 percent, by far the lowest rate ever recorded. This means that, between 2020 and 2021, an additional 3.4 million children were pulled out of poverty, and over the past two years almost 5.5 million children were, as the child poverty rate fell by nearly 60 percent in just two years.”

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“it’s no great mystery how it happened. To stave off a recession and prevent a spike in material hardship amid widespread joblessness and economic uncertainty, the federal government temporarily reinvented the traditional US safety net, pushing cash into US households. There were three rounds of economic impact payments (stimulus checks), expanded unemployment assistance, and, in 2021, an expanded child tax credit, which sent modest monthly cash payments to most American households with children from July through December 2021.

While the traditional safety net targets poor families and relies heavily on in-kind benefits rather than money, the pandemic safety net was largely cash-based, unrestricted, and nearly universal.”

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“it worked.

Over the past two years, tens of millions of people lost work and had their lives disrupted by Covid-19. Yet amid this economic disruption, child poverty plummeted.”

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“An analysis from the Center on Budget and Policy Priorities found that, absent government intervention, poverty in 2020 would have experienced its second-largest increase on record, but as a result of the pandemic safety net, poverty in the US experienced the largest single-year decline in more than 50 years.”

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“these programs were long gone before inflation became more entrenched. Inflation began in the goods-producing sector, as supply chain problems and rising shipping costs, combined with increased demand for goods, led prices to soar. Inflation was further spurred by Russia’s invasion of Ukraine and its impact on global energy and food prices. More notably, as relief programs ended, growth in demand did not appreciably slow. A quick look across the globe reveals that inflation has hit most countries in the wake of the pandemic regardless of the share of children who go to bed hungry.

While government pandemic spending has certainly played some role in pushing prices upward, it is important to recognize the uncertainty around the economic recovery. These same policies were responsible for the economy’s rapid recovery and swift employment growth. Following the Great Recession, unemployment remained elevated for years, to devastating effect.”

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“in the last two years, labor force participation rates have steadily recovered as the economy adjusted to living with the pandemic and showed no sign of accelerating as income supports expired.”

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“One pandemic-era policy is permanent: a change to the way food assistance benefit levels are calculated. This will reduce hardship and poverty going forward and should be celebrated. But most of the new Covid-era safety net has already expired, and we should expect child poverty to rise in tandem in 2022.

The clearest avenue for action, to relieve the current rise in hardship and ensure the lessons of the pandemic safety net are not lost to history, is to revive the expanded child tax credit. Most wealthy Western nations use a universal child allowance or child benefit — money sent to families with children across the income spectrum — to help defray the big costs that come with raising children and better ensure the healthy development of that nation’s children.

For the final six months of 2021, the US finally joined this group, and the results, as we now know, were staggering. Child poverty, child food insecurity, and other measures of material hardship all fell sharply. Critics feared the payments would provide a disincentive to work, but the policy had no discernible impact on the labor force participation of recipients. The benefits of the policy were extraordinary, and the downsides were negligible. We can, and should, bring it back.”

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“But what about inflation? Can we really send more cash to households while the Fed is trying to rein in spending? Data shows that low- and middle-income families receiving child tax credit payments in 2021 largely spent the funds on necessities, like food and utilities — the same necessities that Americans are now paying higher prices for — so the payments would go a long way toward relieving rising material hardship.
At the same time, a number of economists have noted that the expanded child tax credit is “too small to meaningfully increase inflation across the whole economy.” Perhaps most importantly, the government can help the most vulnerable in our society, even if it means asking others to chip in more to offset those costs. The Inflation Reduction Act begins that process by ensuring that the IRS can collect the tax revenue that high-income Americans actually owe.”

What’s the best way to help extremely poor people? After 20 years, the evidence is in.

Posted on August 7, 2022 by ajk1311@gmail.com

“On a certain level, it seems intuitive that doing more for people — giving assets and training and cash — will produce better outcomes than just giving one thing, like cash. But the downside is that it takes more time, effort, and money to run a more complex intervention.

So a major question looms over the graduation program: Is it worth spending that money on the program or is it more efficient to just give all the money directly to people in need? In other words, is it really useful to teach the person to fish or should you just give them the damn fish already?”

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“In recent years, development experts have moved toward an important idea called “cash benchmarking,” which basically says that cash is the benchmark against which all other anti-poverty interventions should be judged. Since giving people cash is easy, efficient, and respectful of their autonomy, aid agencies should only run a different type of program if testing shows that it works better than cash would.
Nowadays, when studies come out showing positive results for graduation programs, there’s a tendency to think that this particular combination — cash plus assets plus training — does work better than simply giving cash. But just because the graduation approach works great in some scenarios doesn’t mean it’s always the most efficient approach.

For starters, though, let’s look at the evidence suggesting that cash-plus programs work better than simple cash programs. Three studies have run this sort of comparison.

In South Sudan, a study looked at what happened to 250 households that got a full graduation program, compared to 125 households that got only cash and 274 households that received neither. Both graduation and cash increased consumption, but only the graduation group saw a significant increase in assets, a sign of more durable wealth. Although the cash group shifted a bit from agriculture to other types of work, they didn’t set up their own lasting businesses that may have been higher-paying.

In Uganda, researchers evaluated a graduation-style program run by a group called Village Enterprise. It offered training and a capital grant to extremely poor people so they could start a small business. The researchers found that it worked well, increasing self-employment income and consumption. In fact, it outperformed cash on these measures. The authors speculate that, “left to themselves — without training and mentorship — beneficiaries [of cash transfers alone] struggled to make productive investments, maintain them, and derive sustained value from them.”

In Niger, a new randomized study has highlighted the benefits of taking a multifaceted approach to extreme poverty. The study evaluated women who were already enrolled in a government cash transfer program. The goal was to understand how psychosocial issues — like feeling depressed or disconnected from your community — might make it harder to seize economic opportunities. The study found that the women who got psychosocial support showed rates of returns that were higher than those who got only cash. Offering psychosocial support was the most cost-effective route 18 months after the intervention.”

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“while graduation programs appear to work great in some places, they’re dependent on the market — and they can run into problems in places where the market is either too dysfunctional or, ironically, too functional.

One randomized trial in India, published in 2012, is an example of the latter. It found that a graduation program yielded no net impact. Although it shifted participants away from agricultural jobs to other sorts of work, they could’ve earned just as much in their original agricultural jobs. While those original jobs were far from big money-makers, wages for agricultural labor had been improving in India, thanks to programs like the ambitious National Rural Employment Guarantee, so adding in a graduation program didn’t really help.

Dysfunctional markets produce their own obstacles. Abed told me about his experience trying to run a graduation program in Balochistan, an extremely dry, desert-like province in southwestern Pakistan, where participants were taught how to run a small business. One problem: There wasn’t a functional market for the businesses to thrive in. “Once they graduated, there wasn’t much to go to,” said Abed. “And there wasn’t microfinance available. So it was very, very difficult.””

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“Another way a graduation program can flop is if it fails to be cost-effective. In the huge 2015 randomized study that looked at graduation programs in six countries, Banerjee and his co-authors note that although the program proved extremely cost-effective in some places, easily paying for itself within 10 years, other countries don’t have such low costs and high benefits in the short run. In Peru, for example, such a program wouldn’t break even.”

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“Abed is convinced that graduation is the best approach for the ultra-poor, but he acknowledges that what makes the most sense for the moderate poor is a somewhat open question. Also, while graduation may be best for ultra-poor people who are young and healthy enough to go start businesses if given half a chance, it may not work for those who are elderly or disabled. For those groups, the answer may well be cash transfers.”