Work-support would help offset boom in poverty among Hoosiers

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Evansville Courier & Press (Evansville, IN)
By:  Derek Thomas
December 2, 2012

At the Indiana Institute for Working Families -- a nonprofit and nonpartisan policy institute -- we are increasingly concerned about the growing number of Hoosiers in poverty. Our work centers on data-driven research to promote policies that help Hoosiers achieve and maintain economic self-sufficiency -- the ability to care for their families without government support.

Our most recent report, "The Cliff Effect: One Step Forward, Two Steps Back," examines specific policy designs in Indiana that are instead acting as a barrier to economic mobility. This phenomenon occurs when even a 50-cent increase in hourly wages leads to the complete termination of a benefit. More simply, each dollar earned is offset by decreased benefits and higher taxes. This design provides disincentives to work, or leads to a situation in which a parent or guardian is working harder, but is financially worse off.

For example, in Vanderburgh County, a single mother of two children who earns a 50-cent raise from $15 per hour to $15.50 per hour immediately loses more than $6,500 in child care subsidies, a significant amount of her annual resources. The choice now becomes to either remain working, or to stay home with the children. With child care costs in Indiana ranking as the 10th highest in the nation as a percentage of income, the latter is often the most economical. Tens of thousands of Hoosier families are currently facing similar decisions.

Indiana could end this barrier to work by reforming our system so that a parent in that situation would retain some work supports -- such as child care benefits -- until that parent could support his or her household independently.

More efficient programs will provide a smoother, more gradual transition, and provide the most basic incentive for hard work -- a raise that increases net resources.

Freeing up access to quality child care will also provide a large number of parents or guardians an immediate avenue to the workforce.

These reforms are particularly important for Indiana. Like other rust belt states, Indiana has experienced a postindustrial decline in recent decades. However, the economic health of our families has deteriorated disproportionately.

In the last decade, Hoosiers experienced the second largest decrease in median household income in the nation and our poverty rates grew faster than all but 43 states. Indiana is among a decreasing list of states that continue to see increases in poverty rates. A record-breaking 1,011,017 Hoosiers -- and nearly 154,000 families with children -- are now living at or below the federal poverty line ($19,090 for a family of three). Nearly 2.24 million Hoosiers are at or below 200 percent of the federal poverty line, the level generally considered to be necessary for self-sufficiency.

Additionally, 71 percent of Indiana's workforce does not earn wages necessary for self-sufficiency; 28 percent do not earn more than poverty-level wages; and 6 percent earn minimum wage -- greater than all neighboring states, the Midwestern average and the U.S. average.

Work is and always will be the best ticket out of poverty. Everyone has a responsibility to find work and support themselves. At the same time, we have a responsibility to ensure that hard work and initiative are rewarded, and that ladders of opportunity exist to provide access into the middle-class.

These opportunities -- known as work-supports -- help transition families to self-sufficiency by bridging the gap between low-wage work and the increasing costs of basic necessities. Work-supports encourage workforce participation. They have also been proven to be good fiscal policy by putting money into the hands of consumers and have lifted millions out of poverty. Unfortunately, in Indiana, they are not working as intended.

Legislative efforts toward more efficient programs have enormous potential: encouraging financial security and promoting self-reliance; acting as a job creation measure; and restoring the promise of upward mobility for tens of thousands of Hoosier families.

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This page contains a single entry by CFED published on December 4, 2012 4:30 PM.

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