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September 12, 2016

Why cash assistance is essential to moving Americans out of poverty

September 12, 2016

Cash assistance for people in poverty came under fire during the run-up to welfare reform for causing “welfare dependency.” Twenty years later, cash benefits have declined so deeply that they are all but dead. But the evidence shows that cash is actually an important piece of the mobility puzzle.

In the 20 years since welfare reform was enacted, we’ve learned a lot about the role of cash and near-cash (e.g., food stamps) in protecting families from poverty’s deepest deprivations, helping parents prepare for and find new work, and supporting children’s development. A recent report, of which I am a coauthor, from the US Partnership on Mobility from Poverty discusses cash and asset formation as one of 13 “building blocks” for moving people out of poverty. The report also features solutions in other areas, like family formation, early learning, housing, and employment. As the report shows, it’s hard to assign priority to any one building block because it’s how they stack together that may matter most to mobility. That said, here’s why I think we should view cash as the building block at the base of the tower when moving Americans out of poverty:

First, as Kathy Edin and Luke Shaefer document in $2.00 a Day: Living on Almost Nothing in America, the road out of poverty for families without sufficient cash resources is often a dead end, fraught with terrible suffering and job setbacks. These setbacks, often as simple as needing to fill an empty gas tank to get to or find work, could be addressed by even just a modest amount of extra cash. We need to look again at how two of the most common outcomes targeted by our safety net programs—reductions in public assistance (e.g., cash transfers) and increases in employment—may be at odds with each other when providing impoverished families a stable platform for moving out of poverty.

Second, programs and benefits offered by federal and state human services and workforce systems operate in funding and regulatory “silos.” Our compartmentalized approach to meeting the needs of low-income people often leaves gaps and produces cliff effects for families as they try to move out of poverty. Gaps in child care benefits often prevent low-income parents from accessing the education and training they need to enter or move up in the workforce. And limited transportation access can prevent low-income people from reaching work opportunities. While it’s always worth trying to fix these systemic problems by silo, cash assistance is potentially more efficient and flexible in helping families knock down their particular barriers to mobility.  

Third, since welfare reform was enacted, research has produced evidence that even modest boosts in parental income during a child’s first years have striking associations with that child’s future school and employment success. For example, the earned income tax credit (EITC), a cash supplement for low-wage workers, has been remarkably good for kids’ school achievement, college attendance, and future earnings. Cash assistance that is not attached to parental work can also produce robust effects for moving children permanently out of poverty. One excellent example is the impact of a longtime casino profit-sharing initiative on mobility-relevant outcomes for low-income Cherokee children.   

The simplest way to get more cash into the hands of low-income families is by expanding the EITC and the Child Tax Credit—the latter being particularly important to advancing the economic prospects of young children in very low income families who face steep barriers to work. For those who prefer to use cash to leverage antipoverty outcomes more directly, there are numerous “conditional cash” models being tested in the United States and overseas. There’s also plenty of room for innovation. In the mobility report, we profile cutting-edge strategies that work directly with low-income families to navigate personal pathways out of poverty; these approaches cry out to be paired with more flexible forms of support for families. 

As is true about most things in life, balance is everything. The emphasis welfare reform has placed on work as one of the best ways out of poverty is not wrong, but the movement’s almost total dismissal of cash assistance has been misguided, especially when it comes to young children and families in deepest poverty. It’s time for a fresh look at the important role cash can play in moving more low-income Americans out of poverty.  

Tomorrow at noon, tune in to our Reducing Poverty and Increasing Opportunity: Envisioning the Next 20 Years event where experts will discuss the evidence on successful strategies for reducing poverty and increasing opportunity.

Michigan state Department of Human Services caseworker Sandy Satchel, foreground, works at the Family Independence Agency in Detroit, Nov. 13, 2009. Photo by Carlos Osorio/AP

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