A New Safety Net for Low-Income Families

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Abstract

During the 1990s, the federal government promised low-income families that work would pay. Parents moved into jobs in response to new welfare rules requiring work, tax credits and other work supports that boosted take-home pay. Unfortunately, the record shows that low-income families have not progressed much. Many don't bring home enough to cover the everyday costs of living. This paper synthesizes the current status of low-income families along with the findings from a set of essays that address key shortcomings in the safety net. The paper summarizes ideas for policies that would make work pay in today's economy.

Introduction

During the 1990s, the federal government promised low-income families that work would pay. Parents moved into jobs in droves in response to new welfare rules requiring work, tax credits, and other work supports that boosted take-home pay. These policy changes were enacted during one of the strongest labor markets on record. A decade later, the labor market is tepid, and policies have to be re-evaluated keeping in mind the circumstances of today's families.

Unfortunately, the record shows that low-income families have not progressed much. One-third of America's families with children are low income, meaning their incomes fall below twice the federal poverty level (about $40,000 for a family of four in 2006). Many don't bring home enough to cover the everyday costs of living. Yet, four in five of these families work. Some receive help from government work supports, notably tax credits, food stamps, and child care subsidies, but these supports either offer too little or go to too few families that need them to reliably close the gap between earnings and basic expenses. Headway against child poverty halted after 2001, and the rate has hovered around 17 percent since 2003 (DeNavas-Walt, Proctor, and Smith 2007).

Low-income working families face the greatest risks in today's unpredictable economy. The loss of a job, a cut in work hours, a serious health problem, or a rise in housing costs can quickly push these families into greater debt, bankruptcy's brink, or even homelessness. Few have an economic ladder to climb because the wages of less-skilled workers have on balance either stagnated or fallen over the past two decades. Most cannot save for a rainy day when earnings can't be stretched to cover even the everyday basics. Most do not receive group health insurance coverage from their employers or qualify for unem-ployment insurance if they lose their jobs. Neither employers nor the government gives them much of a safety net.

With so many so vulnerable, the nation needs new policies that make work pay in today's economy. Training or retraining can help parents advance to better-paying jobs. Other services can help parents struggling to get a secure foothold in the labor market find and keep employment. This essay synthesizes an integrated set of policy proposals designed to fulfill these goals and based on four principles:

• Work should pay enough to cover the basic costs of everyday family living. When hard work fails to cover the costs of housing, medical care, and child care, these expenses should be subsidized in ways that also promote greater work effort.
• Young children in low-income working families require quality day care, and their parents must be able to combine a job with parenting so their children develop fully.
• Parents need access to training to move up the career ladder and access to specialized supports when their underdeveloped or outdated skills, their health problems, or other factors put even the first rung of the ladder out of reach.
• Families that work hard should be able to bridge employment gaps through unemployment insurance and accumulated savings.

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