The only alternative offered by the Centre for American Progress is send them on a course. This response, which is the standard policy response to any labour market crisis, will not solve poverty, mush less inequality.
Source: Ron Haskins (2015).
Jess Berentson-Shaw’s series on child poverty in the Dominion Post on child poverty had two major flaws. She argues that the solution to child poverty is to give more families more money.
The first flaw is she does not discuss previous failed attempts to solve poverty with more money. For example, Bob Hawke promised in the 1987 election that no child need live in poverty by 1990. Raising the family allowance to $1 above the family poverty line did not fix child poverty. That promise was the one Hawke later said he regretted most in his public life.
During the 1987 Australian Federal election campaign, Labour Party Prime Minister Bob Hawke announced a Family Allowance Supplement that would ensure no Australian child need live in poverty by 1990. These changes in social welfare benefits and family allowance supplements would ensure that every family would be paid one per week dollar more than the poverty threshold applicable to their family situation. I know child poverty was to be done in this way because I worked in the Prime Minister’s Department at this time.
About 580,000 Australian children lived in poverty in 1987. In 2007, at least 13 per cent of children, or 730,000 people, were poor. This was after social welfare benefits and family allowance supplements were increased to $1 above the child poverty threshold.
There is an infallible test of the practicality of Left over Left dreams such as the abolition of child poverty by writing bigger and bigger cheques to those currently poor.
If you could abolish child poverty simply by increasing welfare benefits and family allowances, the centre-right parties would be all over it like flies to the proverbial as a way of camping over the middle ground and winning the votes of socially conscious swinging voters for decades to come. Many people who would naturally vote for the centre-right parties on all other issues vote for centre-left parties out of a concern for poverty and a belief that centre-left parties will give a better deal to the poor.
The notion that poverty is simply the result of a lack of money and giving people more money will abolish child poverty has never worked. As the OECD (2009, p. 171) observed:
It would be naïve to promote increasing the family income for children through the tax-transfer system as a cure-all to problems of child well-being.
Berentson-Shaw’s second major flaw is she does not discuss the success of the 1996 US federal welfare reforms. Any serious participant in discussions of child poverty must address those 1996 US reforms.
These reforms cut Hispanic and black child poverty rates by 1/3rd in a few years by moving single mothers into employment. Time limits on welfare for single parents reduced caseloads by two thirds, 90% in some states.
After the 1996 US Federal welfare reforms, the subsequent declines in welfare participation rates and gains in employment were largest among the single mothers previously thought to be most disadvantaged: young (ages 18-29), mothers with children aged under seven, high school drop-outs, and black and Hispanic mothers. These low-skilled single mothers were thought to face the greatest barriers to employment. Blank (2002) found that:
…nobody of any political persuasion predicted or would have believed possible the magnitude of change that occurred in the behaviour of low-income single-parent families.
Employment are never married mothers increased by 50% after the US well for a reforms: employment of single mothers with less than a high school education increased by two-thirds; and employment of single mothers aged 18 to 24 approximately doubled.
With the enactment of welfare reform in 1996, black child poverty fell by more than a quarter to 30% in 2001. Over a six-year period after welfare reform, 1.2 million black children were lifted out of poverty. In 2001, despite a recession, the poverty rate for black children was at the lowest point in national history.
The only modern welfare reforms to significantly cut child poverty were the US federal welfare reforms. They emphasised helping those who helped themselves, which is the classic Samaritans’ dilemma.
Countless studies show that when comparing the carrot and the stick in welfare reform, the stick is always more effective in reducing poverty and increasing employment.
The best solution to child poverty is to move their parents into a job. Simon Chapple is clear in his book last year with Jonathan Boston:
Sustained full-time employment of sole parents and the fulltime and part-time employment of two parents, even at low wages, are sufficient to pull the majority of children above most poverty lines, given the various existing tax credits and family supports.
The best available analysis, the most credible analysis, the most independent analysis in New Zealand or anywhere else in the world that having a job and marrying the father of your child is the secret to the leaving poverty is recently by the Living Wage movement in New Zealand.
According to the calculations of the Living Wage movement, earning only $19.25 per hour with a second earner working only 20 hours affords their two children, including a teenager, Sky TV, pets, annual international travel, video games and 10-hours childcare.
This analysis of the Living Wage movement shows that finishing school so your job pays something reasonable and marrying the father of your child affords a comfortable family life. In the USA this is called the success sequence.
There was a step increase in the employment rate of single parents and in particular high school dropouts straight after the implementation of the 1996 US federal welfare reforms.
These single mothers who dropped out of high school were thought to be least employable and most at risk to the 1996 US welfare reform. There was a large increase in their employment and this massive improvement in their rates of employment is enduring to this day.
The interesting part of this chart is the white child poverty rate didn’t change much after the US 1996 federal welfare reforms. It was black and Hispanic child poverty rates that dropped by 1/3rd.
The big drop .in both child poverty and poverty in general was after the 1996 welfare reforms.
The share of single mothers without a high school degree with earnings rose from 49 percent to 64 percent between 1995 and 2000 but has since fallen or remained constant almost every year since then. At 55 percent, it’s now just slightly above its level in 1997, the first full year of welfare reform (see first graph).
TANF now serves only 25 of every 100 families with children that live below the poverty line, down from AFDC’s 68 of every 100 such families before the welfare law
Over the last 18 years, the national TANF average monthly caseload has fallen by almost two-thirds — from 4.7 million families in 1996 to 1.7 million families in 2013 — even as poverty and deep poverty have worsened.
The number of families with children in poverty hit a low of 5.2 million in 2000, but has since increased to more than 7 million. Similarly, the number of families with children in deep poverty (with incomes below half of the poverty line) hit a low of about 2 million in 2000, but is now above 3 million.
The employment situation for never-married mothers with a high school or less education — the group of mothers most affected by welfare reform — has changed dramatically over the last several decades.
In the early 1990’s, when states first made major changes to their cash welfare programs, only about half of these mothers worked.
Importantly, there was a very large employment gap between the share of these never-married mothers and single women without children with similar levels of education, suggesting that there was substantial room for these never-married mothers to increase their participation in the labour force.
By 2000, the employment gap between these two groups of women closed, and it has remained so. But in the years since, the employment rate for both groups has fallen considerably.
The employment rate for never-married mothers is now about the same as when welfare reform was enacted 18 years ago. This suggests that the economy and low education levels are now the causes of limited employment among never-married mothers — not the availability of public benefits or anything particular to never-married mothers.
The Centre on Budget and Policy Priorities, who hail clearly from the Left of American politics, scrupulously documented the following:
- Big gains in the employment of single mothers until a setback in the Great Recession but is still much better than in 1996;
- Welfare dependency dropped by two thirds;
- Despite this two third drop in welfare dependency, and earnest predictions of acute poverty and deprivation made in 1996, the number of families in deep poverty has not changed, and the number of families in poverty fell significantly and only rose again with the Great Recession; and
- There was a dramatic increase in the percentage of never married mothers in employment, so much so that there is no difference in the employment rate of single women with no children and never married mothers!
Welfare dependency down by two thirds, employment of never married mothers up to levels no one thought possible, family poverty down, and economic independence is much more widespread and all because of the 1996 US Federal welfare reforms. That sounds like success to me – a great success.